File No. 33-63481
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: THE FIRST TRUST COMBINED
SERIES 257
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of 1001 Warrenville Road
Depositor's Principal Lisle, Illinois 60532
Offices:
D. Name and Complete Address NIKE SECURITIES L.P.
of Agents for Service: Attention: James A. Bowen
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN AND CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title and Amount of Securities An indefinite number
Being Registered: of units pursuant to Rule
24f-2 promulgated under
the Investment Company
Act of 1940, as amended.
F. Proposed Maximum Offering
Price to the Public of the
Securities being Registered: Indefinite.
G. Amount of Filing Fee $500.00*
(as required by Rule 24f-2):
H. Approximate Date of Proposed
Sale to the Public: As soon as practicable
after the effective date
of the Registration
Statement.
:XXX: Check box if it is proposed that this filing will
become effective on January 17, 1996 at 1:30 p.m.
pursuant to Rule 487.
________________________
*Previously paid
THE FIRST TRUST COMBINED
SERIES 257
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C Under the Securities Act
of 1933
(Form N-8B-2 Items Required by Instruction 1 as to Prospectus on
Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of Trust
(b) Title of securities issued Prospectus Part I -
Front Cover Page
2. Name and address of Depositor Summary of Essential
Information;
Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of Trustee Summary of Essential
Information
Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
5. Organization of Trust What is the First
Trust Combined
Series?
6. Execution and termination of What is the First
Trust Agreement Trust Combined
Series?; Other
Information
7. Changes of name *
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE
TRUST
10. General information regarding What is the First
Trust's securities Trust Combined
Series?; Public
Offering; Rights of
Unit Holders;
Information as to
Sponsor, Trustee and
Evaluator; Other
Information
11. Type of securities comprising Prospectus Front Cover
units Page; What is the
First Trust Combined
Series?; Portfolio
12. Certain information regarding *
periodic payment certificates
13. (a) Load, fees, expenses, etc. Prospectus Front Cover
Page; Special Trust
Information; What is
the First Trust
Combined Series?;
Rights of Unit
Holders; What are the
Expenses and Charges?
(b) Certain information regard- *
ing periodic payment
certificates
(c) Certain percentages Prospectus Front Cover
Page
Summary of Essential
Information; What is
the First Trust
Combined Series?;
Public Offering
(d) Certain other fees, etc. Rights of Unit Holders
payable by holders
(e) Certain profits receivable Public Offering;
by depositor, principal Portfolio
underwriter, trustee or
affiliated persons
(f) Ratio of annual charges to *
income
14. Issuance of Trust's securities Rights of Unit Holders
15. Receipt and handling of payments *
from purchasers
16. Acquisition and disposition of What is the First
underlying securities Trust Combined
Series?; Information
as Sponsor, Trustee
and Evaluator
17. Withdrawal or redemption Public Offering;
Rights of Unit
Holders
18. (a) Receipt and disposition Prospectus Front Cover
of income Page; Rights of Unit
Holders
(b) Reinvestment of Rights of Unit Holders
distributions
(c) Reserves or special funds What is the First
Trust Combined
Series?; Rights of
Unit Holders
(d) Schedule of distributions *
19. Records, accounts and reports Rights of Unit Holders
20. Certain miscellaneous provisions Information as to
of Trust Agreement Sponsor, Trustee and
Evaluator; Other
Information
21. Loans to security holders *
22. Limitations on liability What is the First
Trust Combined
Series?; Information
as to Sponsor,
Trustee and Evaluator
23. Bonding arrangements Contents of
Registration
Statement
24. Other material provisions of *
Trust Agreement.
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF
DEPOSITOR
25. Organization of Depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by Depositor *
27. Business of Depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to offi- *
cials and affiliated persons
of Depositor
29. Voting securities of Depositor *
30. Person controlling Depositor *
31. Payments by Depositor for *
certain services rendered to
Trust
32. Payments by Depositor for *
certain services rendered
to Trust
33. Remuneration of employees of *
Depositor for certain services
rendered to Trust
34. Remuneration of other persons *
for certain services rendered
to Trust
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of Trust's securi- Public Offering
ties by states
36. Suspension of sales of Trust's *
securities
37. Revocation of authority to *
distribute
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
(b) NASD membership of princi- Information as to
pal underwriter Sponsor, Trustee and
Evaluator
40. Certain fees received by *
principal underwriter
41. (a) Business of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
(b) Branch offices of principal *
underwriter
(c) Salesmen of principal *
underwriter
42. Ownership of Trust's securities *
by certain persons
43 Certain brokerage commissions *
received by principal under-
writer
44. (a) Method of valuation Prospectus Front Cover
Summary of Essential Page; What is the
Information First Trust
Combined Series?;
Public Offering
(b) Schedule as to offering *
price
(c) Variation in offering Public Offering
price to certain
persons
45. Suspension of redemption rights *
46. (a) Redemption valuation Rights of Unit Holders
(b) Schedule as to redemption *
price
47. Maintenance of position in Public Offering
underlying securities Rights of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as to
Trustee Sponsor, Trustee and
Evaluator
49. Fees and expenses of Trustee What is the First
Trust Combined
Series?
50. Trustee's lien What is the First
Trust Combined
Series?
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of Trust's *
securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agree- Rights of Unit Holders
ment with respect to selec-
tion or elimination of
underlying securities
(b) Transactions involving *
elimination of underlying
securities
(c) Policy regarding substitu- Rights of Unit Holders
tion or elimination of
underlying securities
(d) Fundamental policy not *
otherwise covered
53. Tax status of Trust What is the First
Trust Combined
Series?
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during *
last ten years
55.
56. Certain information regarding *
periodic payment plan certificates
57.
58.
59. Financial statements (Instruc- Opinion of Independent
tions 1(c) to Form S-6) Auditors; Statement of
Net Assets of the
Trusts
* Inapplicable, answer negative or not required.
NATIONAL INSURED TRUST, SERIES 236
(The First Trust (registered trademark) Combined Series 257)
Prospectus - Part I
THIS PART I OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY THE PART II OF THE PROSPECTUS DATED SEPTEMBER 7, 1995. BOTH PARTS I
AND II OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
National Insured Trust, Series 236 (the National Insured Trust"),
consists of a portfolio of interest-bearing obligations issued by or
on behalf of certain states or United States Territories which, in the
opinion of recognized bond counsel to the issuing authorities, provide
income which is exempt from Federal income tax as detailed in Part II
of this prospectus.
The objectives of the Trust are conservation of capital and income
exempt from Federal income taxes. The objectives are, of course,
dependent upon the continuing ability of the issuers, obligors and/or
insurers to meet their respective obligations.
The National Insured Trust consists of twelve obligations of issuers
located in eight states. Two Bond issues aggregating approximately
20% of the aggregate principal amount of the Bonds in the Trust are
obligations of issuers located in Indiana.
The Bond issues in the Trust are either general obligations of
governmental entities or are revenue bonds payable from the income of a
specific project or authority. The Bonds in the Trust are divided by
purpose of issue and represent the percentage of aggregate principal
amount of the Bonds as indicated by the following table:
Number Portfolio
of Issues Purpose of Issue Percentage
_________ ________________ __________
2 General Obligation 10.75%
3 Health Care 29.74%
1 Sewer 9.92%
1 University and School 9.92%
1 Water 9.92%
1 Water & Sewer 9.92%
3 Miscellaneous 19.83%
The eight largest bond issues each represent approximately 10% of the
aggregate principal amount of the Bonds in the Trust, or a total of
approximately 79%. None of the Bonds in the Trust are subject to call
within five years of the Initial Date of Deposit, although certain Bonds
may be subject to an extraordinary call. Approximately 18% of the
aggregate principal amount (approximately 18% of the aggregate offering
price) of the Bonds in the Trust were purchased at a premium over par
value. Certain of these Bonds are subject to redemption pursuant to call
provisions in approximately seven to nine years after the Initial Date
of Deposit. See "National Insured Trust, Series 236-Portfolio"
contained herein and "Description of Bond Ratings" in the Information
Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is January 17, 1996
Page 1 of 12
All of the Bonds included in the Trust are insured. The insurance
guarantees the timely payment of principal and interest of the Bonds,
but does not guarantee the value of the Bonds or the Units. As a result
of the insurance, the Bonds in the Trust have received a rating of "AAA"
by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"). The percentage of the aggregate
face amount insured by each insurance company is:
Insurance Company Portfolio Percentage
_________________ ____________________
Financial Security Assurance, Inc. 29.75%
Financial Guaranty Insurance Company 27.61%
AMBAC Indemnity Corporation 19.83%
MBIA Insurance Corporation 12.89%
Capital Guaranty Insurance Company 9.92%
_________
100% Insured
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE
INVESTMENT RISK INCLUDING LOSS OF PRINCIPAL.
Page 2 of 12
SUMMARY OF ESSENTIAL INFORMATION
At the Opening of Business on the Initial Date of Deposit
of the Bonds-January 17, 1996
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Bonds in the Trust $10,085,000
Number of Units 10,302
Fractional Undivided Interest in the Trust per Unit 1/10,302
Principal Amount (Par Value) of Bonds per Unit (1) $ 978.94
Public Offering Price
Aggregate Offering Price Evaluation of Bonds in the Portfolio $ 9,797,203
Aggregate Offering Price Evaluation per Unit $ 951.00
Sales Charge 4.9% (5.152% of the Aggregate Price Evaluation per Unit) (2) $ 49.00
Public Offering Price per Unit (3) $ 1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 951.00
Redemption Price per Unit (4) $ 946.17
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 53.83
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption
Price per Unit $ 4.83
</TABLE>
First Settlement Date January 22, 1996
Discretionary Liquidation Amount The Trust may be terminated if the value
of the Trust is less than 20% of the
aggregate principal amount of the
Bonds deposited in such Trust during
the primary offering period.
Mandatory Termination Date December 31, 2045
Evaluations for purposes of sale, purchase or redemption of Units are
made as of the close of trading
(4:00 p.m. Eastern time) on the New York Stock Exchange on each day on
which it is open.
[FN]
_______________
(1) Many unit investment trusts comprised of municipal securities issue
a number of Units such that each Unit represents approximately $1,000
principal amount of underlying securities. For the National Insured Trust,
the Sponsor has elected to provide that number of Units which will
establish as close as possible as of the opening of business on the
Initial Date of Deposit a Public Offering Price per Unit of $1,000.
Because certain of the Bonds in the Trust may from time to time under
certain circumstances be sold or redeemed or will be called or will
mature in accordance with their terms, there is no guarantee that the
value of each Unit at the Trust's termination will be equal to the
Principal Amount (Par Value) of Bonds per Unit stated above.
(2) The sales charge is reduced by a discount of $7.50 per Unit for
purchases between $500,000 and $999,999 and $15.00 per Unit for
purchases in excess of $1,000,000. Such reductions for volume purchases
are not applicable to sales made pursuant to a "wrap fee account" or
similar arrangement as discussed in "Public Offering" in Part II of this
Prospectus.
(3) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be added
to the Public Offering Price. After the initial offering period, the
Sponsor's Repurchase Price per Unit will be determined as described
under the caption "Will There Be a Secondary Market?" in Part II of this
Prospectus.
(4) See "How May Units be Redeemed?" in Part II of this Prospectus.
Page 3 of 12
<TABLE>
<CAPTION>
Underwriting
Number
Name Address of Units
____ _______ ________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 7,402
Underwriters*
B.C. Christopher Division 4717 Grand Ave., Suite 700, Kansas City, MO 64112 250
McLaughlin, Piven, Vogel 30 Wall Street, Fifth Floor, New York, NY 10005 250
Securities, Inc.
Advest, Inc. 90 State House Square, Hartford, CT 06103 100
Robert W. Baird & Co. Incorporated Firstar Center, 777 East Wisconsin Avenue, 100
Milwaukee, WI 53202
Bear Stearns & Co., Inc. 245 Park Avenue, 4th Floor, New York, NY 10167 100
of Fahnestock Inc.
Dain Bosworth Incorporated Dain Bosworth Plaza, 60 S. 6th Street, 14th Floor, 100
Minneapolis, MN 55402-4422
Everen Securities, Inc. UIT Retail Division, 77 West Wacker Drive, 100
28th Floor, Chicago, IL 60601
Fidelity Capital Markets, A division World Trade Center, 164 Northern Avenue, ZT3, 100
of National Financial Services Boston, MA 02210
Corporation
First of Michigan Corporation 100 Renaissance Center, 26th Floor,
Detroit, MI 48243 100
Gruntal & Co., Incorporated 14 Wall Street, 20th Floor, New York, NY 10005 100
Huntleigh Securities Corporation 222 South Central, Suite 300, St. Louis, MO 63105 100
Janney Montgomery Scott Inc. 1801 Market Street, 11th Floor,
Philadelphia, PA 19103 100
McDonald & Company Securities, Inc. 800 Superior Street, Suite 2100,
Cleveland, OH 44114100
Nathan & Lewis Securities, Inc. 1140 Avenue of the Americas, New York, NY 10036 100
David A. Noyes & Co. 208 South LaSalle Street, Chicago, IL 60604 100
The Ohio Company 155 East Broad Street, Columbus, OH 43215 100
Oppenheimer & Co., Inc. Oppenheimer Tower, One World Financial Center, 100
8th Floor, New York, NY 10281
Pershing, Division of Donaldson, One Pershing Plaza, Jersey City, NJ 07399 100
Lufkin & Jenrette
Securities Corporation
Piper Jaffrey, Inc. 222 South Ninth Street, Minneapolis, MN 55440 100
Principal Financial Services Fountain Place, 1445 Ross Avenue, Suite 2300, 100
Dallas, TX 75202-2786
Rauscher Pierce Refsnes, Inc. CityPlace, 2711 N. Haskell Avenue, Suite 2400 100
Dallas, TX 75204-2936
Roney & Co. One Griswold Street, Detroit, MI 48226 100
Roosevelt & Cross Incorporated 20 Exchange Place, 47th Floor, New York, NY 10005 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, TX 75270 100
Stephens Inc. 111 Center Street, Little Rock, AR 72201 100
Stifel, Nicolaus 500 North Broadway, 16th Floor, St. Louis, MO 63102 100
& Company, Incorporated
______
10,302
======
</TABLE>
[FN]
__________
* Underwriters who underwrite at least $100,000 of the
Trust will receive credit for the dollar amount underwritten of
the Trust for purposes of computing the amount of breakpoint dealer
concessions or agency commissions available for The First Trust
Special Situations Trust, Series 136 or The First Trust Special
Situations Trust, Series 138.
Page 4 of 12
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income (1)
Estimated Annual Interest Income per Unit $ 52.80 $ 52.80
Estimated Annual Trust Expense per Unit:
Trustee's Fees (1) $ 1.40 $ .95
Evaluator's Fees ($.30 per $1,000 principal amount of Bonds
at the Initial Date of Deposit) $ .29 $ .29
Supervisory and Administrative Fees (2) $ .49 $ .49
Other Expenses $ .40 $ .35
________ ________
Less: Estimated Annual Expense per Unit $ 2.58 $ 2.08
________ ________
Estimated Net Annual Interest Income per Unit $ 50.22 $ 50.72
Calculation of Interest Distribution per Unit
Divided by 12 and 2, respectively $ 4.18 $ 25.36
Estimated Daily Rate of Net Interest Accrual per Unit $.139497 $.140886
Initial Distribution - February 29, 1996 (3) $ 3.21 $ 3.24
Partial Distribution - June 30, 1996 (3) $ - $ 16.91
Regular Distribution (3) $ 4.18 $ 25.36
(Commencing) 3/31/96 12/31/96
Estimated Current Return Based on Public Offering Price (4) 5.02% 5.07%
Estimated Long-Term Return Based on Public Offering Price (4) 5.05% 5.11%
CUSIP 33734D 592 600
</TABLE>
[FN]
______________
(1) During the first year only, the Trustee has agreed to reduce its fee
and pay expenses of the Trust in an amount (approximately $.24) equal to
the interest that would have accrued prior to the expected delivery
dates of Bonds included in the Portfolio that were purchased on a "when,
as and if issued" or delayed delivery basis. During the first year,
Estimated Annual Interest Income per Unit would be $52.56. Estimated Net
Annual Interest Income per Unit, Estimated Current Return Based on
Public Offering Price and Estimated Long-Term Return Based on Public
Offering Price would be as indicated above. See "What are Certain
General Matters Relating to the Trusts?" and "What are the Expenses and
Charges?"
(2) Supervisory Fees are payable to an affiliate of the Sponsor.
Bookkeeping and Administrative Fees are payable to the Sponsor.
(3) Additional information concerning distributions of interest and
principal can be found in "How are Interest and Principal Distributed?"
in Part II of this Prospectus.
(4) See "What are Estimated Long-Term Return and Estimated Current
Return?" in Part II of this Prospectus for a description of how these
returns are calculated. The above figures are based on estimated per
Unit cash flows. Estimated cash flows will vary with changes in fees and
expenses, with changes in current interest rates, and with the principal
prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. The estimated cash flows for this Trust may be
obtained from the Trustee at no charge by calling the Trustee at the
number listed in Part II of this Prospectus.
Page 5 of 12
Tax Status
For information with respect to the Federal income tax status and other
tax matters, see "What is the Federal Tax Status of Unit Holders?"
Tax Exempt vs. Taxable Income
The following table shows the approximate marginal taxable yields for
individuals that are equivalent to tax-exempt yields under published
Federal tax rates scheduled to be in effect in 1996. The table
incorporates increased tax rates for higher-income taxpayers that were
included in the Revenue Reconciliation Act of 1993. The table
illustrates what you would have to earn on taxable investments to equal
the tax-exempt yield for your income tax bracket. The taxable equivalent
yields may be somewhat higher than the equivalent yields indicated in
the following table for those individuals who have adjusted gross
incomes in excess of $117,950. The table does not reflect the effect of
the limitations (if any) on the amount of allowable itemized deductions
and the deduction for personal or dependent exemptions or any other
credits. These limitations were designed to phase out certain benefits
of these deductions for higher income taxpayers. These limitations, in
effect, raise the maximum marginal Federal tax rate to approximately 44%
for taxpayers filing a joint return and entitled to four personal
exemptions and to approximately 41% for taxpayers filing a single return
entitled to only one personal exemption. These limitations are subject
to certain maximums, which depend on the number of exemptions claimed
and the total amount of the taxpayer's itemized deductions. For example,
the limitation on itemized deductions will not cause a taxpayer to lose
more than 80% of his allowable itemized deductions, with certain
exceptions.
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________ _____________________________________
Single Joint Tax 5.00% 5.50% 6.00%
Return Return Rate Taxable Equivalent Yield
_______________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 24.00 $ 0 - 40.10 15.0% 5.88 6.47 7.06
24.00 - 58.15 40.10 - 96.90 28.0 6.94 7.64 8.33
58.15 - 121.30 96.90 - 147.70 31.0 7.25 7.97 8.70
121.30 - 263.75 147.70 - 263.75 36.0 7.81 8.59 9.38
Over 263.75 Over 263.75 39.6 8.28 9.11 9.93
</TABLE>
Page 6 of 12
National Insured Trust, Series 236
Portfolio
Units Rated "AAA"/ at the Opening of Business
On the Initial Date of Deposit of the Bonds-January 17, 1996
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
_________ _______________________________ __________ ______________ __________
<C> <S> <C> <C> <C>
$ 1,000,000 ^ City of Chicago (Illinois), Wastewater Transmission AAA 2006 @ 102 $ 945,960
Revenue, Series 1995 (FGIC Insured), 5.125%,
Due 01/01/2025
1,000,000 ^ Indiana State Office Building Commission, AAA 2005 @ 102 993,060
Correctional Facilities Program Revenue, 2017 @ 100 S.F.
Series 1995A (AMBAC Insured), 5.50%,
Due 07/01/2020
1,000,000 ^ Maine Health and Higher Educational Facilities AAA 2002 @ 102 979,490
Authority, Revenue, Series 1992B (FSA Insured), 2013 @ 100 S.F.
5.50%, Due 07/01/2022
200,000 ^^Metropolitan Pier and Exposition Authority (Illinois), AAA 60,082
McCormick Place Expansion Project, Series 1992A
(FGIC Insured), Zero Coupon, Due 06/15/2017
1,000,000 ^*Michigan State Hospital Finance Authority, AAA 2006 @ 102 949,130
Hospital Revenue (St. John's Hospital and Medical 2014 @ 100 S.F.
Center), Series 1996A (AMBAC Insured), 5.25%,
Due 05/15/2026
1,000,000 New Prairie United School Building Corporation AAA 2005 @ 101 986,730
(LaPorte and St. Joseph Counties, Indiana), First 2016 @ 100 S.F.
Mortgage Refunding, Series 1995 (Capital Guaranty
Insured), 5.50%, Due 07/05/2020
800,000 Pennsylvania Intergovernmental Cooperation AAA 2003 @ 100 802,344
Authority, Special Tax Revenue (City of 2010 @ 100 S.F.
Philadelphia Funding Program), Series of 1993
(MBIA Insured), 5.60%, Due 06/15/2015
1,000,000 The Pittsburgh (Pennsylvania), Water and Sewer AAA 2005 @ 100 1,007,300
Authority, Water and Sewer System First Lien 2023 @ 100 S.F.
Revenue, Series A of 1995 (FGIC Insured), 5.65%,
Due 09/01/2025
500,000 * Regional Transportation Authority, Cook, DuPage, AAA 2002 @ 102 499,960
Kane, Lake, McHenry and Will Counties, Illinois,
General Obligation Refunding, Series 1996
(MBIA Insured), 5.60%, Due 06/01/2025
585,000 * Salida (California), Union School District, AAA 2005 @ 102 577,237
1996 General Obligation Refunding (Bank Qualified) 2015 @ 100 S.F.
(FGIC Insured), 5.50%, Due 08/01/2020
1,000,000 West Virginia Water Development Authority, AAA 2005 @ 102 996,010
Water Development Revenue Refunding (Loan 2026 @ 100 S.F.
Program II), 1995 Series A (FSA Insured), 5.625%,
Due 11/01/2033
</TABLE>
Page 7 of 12
National Insured Trust, Series 236
Portfolio (continued)
Units Rated "AAA"/ at the Opening of Business
On the Initial Date of Deposit of the Bonds-January 17, 1996
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
_________ _______________________________ __________ ______________ __________
<C> <S> <C> <C> <C>
$ 1,000,000 * Wisconsin Health and Educational Facilities AAA 2006 @ 102 $ 999,900
Authority, Revenue, Series 1995 (Aurora Medical
Group, Inc. Project) (FSA Insured), 5.75%,
Due 11/15/2025
___________ __________
$10,085,000 $9,797,203
=========== ==========
</TABLE>
[FN]
____________
/ Units are rated "AAA" as a result of insurance. Such rating, as
issued by Standard & Poor's, will be in effect for a period of thirteen
months from the Initial Date of Deposit and will, unless renewed,
terminate at the end of the period. See "Why and How are the Insured
Trusts Insured?"
^ These Bonds were issued at an original issue discount on the
following dates and at the following percentages of their original
principal amount:
<TABLE>
<CAPTION>
Date %
________ ______
<S> <C> <C>
City of Chicago, Illinois Wastewater Transmission 12/1/95 94.938
Indiana State Office Building Commission 7/1/95 94.183
Maine Health and Higher Educational Facilities Authority 9/15/92 86.622
Michigan State Hospital Finance Authority 12/28/95 94.219
</TABLE>
^^ These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on January 5, 1993 at a price of 19.735% of their original
principal amount.*
* Sponsor's contracts for the purchase of all or a portion of these
Bonds (approximately 31% of the aggregate principal amount of the Bonds
in the Trust) are either on a "when, as and if issued" basis or are
delayed delivery Bonds and are expected to be settled on or before
January 30, 1996.
For industry concentrations of the Bonds in the Trust, see page 1.
See "Notes to Portfolio" on page 9.
Page 8 of 12
NOTES TO PORTFOLIO
(1) Sponsor's contracts to purchase Bonds were entered into during the
period from January 9, 1996 to January 16, 1996. All contracts to
purchase Bonds are expected to be settled on or prior to January 22,
1996 unless otherwise indicated.
Other information regarding the Bonds in the Trust on the Initial Date
of Deposit is as follows:
<TABLE>
<CAPTION>
Aggregate Annual Annual
Offering Cost of Profit or Insurance Interest
Price of Bonds to (Loss) to Bid Price Cost to Income
Trust Bonds Sponsor Sponsor of Bonds Trust to Trust
_____ ________ ________ _________ ________ ________ __________
<S> <C> <C> <C> <C> <C> <C>
National Insured Trust,
Series 236 $9,797,203 $9,721,205 $75,998 $9,747,478 $- $543,975
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor
reflects underwriting profits or losses received or incurred by the
Sponsor through its participation in underwriting syndicates but such
amounts reflect the cost of insurance obtained by the Sponsor prior to
the Initial Date of Deposit for individual Bonds. The Offering and Bid
Prices of Bonds were determined by Securities Evaluation Service, Inc.,
certain shareholders of which are officers of the Sponsor.
(2) All ratings are by Standard & Poor's unless otherwise indicated.
Such ratings were obtained from a municipal bond information reporting
service. The "AAA" rating on each Bond is a result of insurance.
Insurance, however, does not cover certain market risks associated with
fixed income securities such as accelerated payments of principal,
mandatory redemptions prior to maturity or interest rate risks. See "Why
and How are the Insured Trusts Insured?" in Part II of this Prospectus
and "Description of Bond Ratings" in the Information Supplement.
(3) There is shown under this heading the year in which each issue of
Bonds initially is redeemable and the redemption price for that year or,
if currently redeemable, the redemption price in effect on the Initial
Date of Deposit. Issues of Bonds are redeemable at declining prices (but
not below par value) in subsequent years except for original issue
discount Bonds which are redeemable at prices based on the issue price
plus the amount of original issue discount accreted to the redemption
date plus, if applicable, some premium, the amount of which will decline
in subsequent years. "S.F." indicates a sinking fund is established with
respect to an issue of Bonds. In addition, certain Bonds in the
portfolio may be redeemed in whole or in part other than by operation of
the stated redemption or sinking fund provisions under certain unusual
or extraordinary circumstances specified in the instruments setting
forth the terms and provisions of such Bonds. See "What are Certain
General Matters Relating to the Trusts?-Risk Factors" in Part II of this
Prospectus for a discussion of Bond redemptions and a description of
certain of such unusual or extraordinary circumstances under which Bonds
may be redeemed. 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 (except to
the extent the proceeds of the redeemed Bonds are used to pay for Unit
redemptions). The estimated current return and the estimated long-term
return in this event may be affected by such redemptions. For the
Federal tax effect on Unit holders of such redemptions and resultant
distributions, see "Rights of Unit Holders-What is the Federal Tax
Status of Unit Holders?" in Part II of this Prospectus.
Page 9 of 12
National Insured Trust, Series 236
Statement of Net Assets
(The First Trust Combined Series 257)
At the Opening of Business on the Initial Date of Deposit
January 17, 1996
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $ 9,797,203
Accrued interest on underlying bonds (2)(3)(4) 58,769
___________
9,855,972
Less distributions payable (4) 58,769
___________
Net assets $ 9,797,203
===========
Outstanding Units 10,302
ANALYSIS OF NET ASSETS
Cost to investors (5) $10,302,001
Less gross underwriting commissions (5) 504,798
___________
Net assets $ 9,797,203
===========
</TABLE>
(1) The aggregate offering price of the bonds for the Trust at the
opening of business on the Initial Date of Deposit and the cost to the
Trust are the same. The offering price is determined by the Evaluator.
(2) Pursuant to delivery statements relating to contracts to purchase
bonds, an irrevocable letter of credit has been deposited in the Trust
as collateral. The amount of available letter of credit and the amount
expected to be utilized as collateral for the Trust is shown below. The
amount expected to be utilized is (a) the cost to the Trust of the
principal amount of the bonds to be purchased, (b) accrued interest on
those bonds to the Initial Date of Deposit, and (c) accrued interest on
those bonds from the Initial Date of Deposit to the expected dates of
delivery of the bonds, which is exclusive of the amount by which the
Trustee has agreed to reduce its fees during the first year ($2,460).
<TABLE>
<CAPTION>
Accrued
Aggregate Accrued Interest to
Letter of Credit Offering Interest to Expected
To be Price of Date of Dates of
Trust Available Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
National Insured Trust,
Series 236 $10,100,000 $9,859,096 $9,797,203 $58,769 $3,124
</TABLE>
(3) Insurance coverage providing for the scheduled payment of principal
and interest on all Bonds deposited in the Trust and delivered to the
Trustee has been obtained directly by the Bond issuer, the underwriters,
the Sponsor or others prior to the Initial Date of Deposit.
(4) The Trustee will advance to the Trust the amount of net interest
accrued to January 22, 1996, the First Settlement Date, for distribution
to the Sponsor as the Unit holder of record.
(5) The aggregate cost to investors and the aggregate gross
underwriting commissions of 4.9% are computed assuming no reduction of
sales charge for quantity purchases.
Page 10 of 12
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust Combined Series 257
National Insured Trust, Series 236
We have audited the accompanying statement of net assets, including the
portfolio, of National Insured Trust, Series 236 ("the Trust"), included
in The First Trust Combined Series 257, as of the opening of business on
January 17, 1996. This statement of net assets is the responsibility of
the Trust's Sponsor. Our responsibility is to express an opinion on this
statement of net assets 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 statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on January 17,
1996. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of National
Insured Trust, Series 236, included in The First Trust Combined Series
257, at the opening of business on January 17, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 17, 1996
Page 11 of 12
FIRST TRUST (registered trademark)
NATIONAL INSURED TRUST
Series 236
Prospectus
Part I
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
This Part One Must Be
Accompanied by Part Two.
January 17, 1996
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
The First Trust (registered trademark) Combined Series
Prospectus Part II
Dated September 7, 1995
This Part II of the Prospectus may not be distributed unless accompanied
by Part I. Both Parts of this Prospectus should be retained for
future reference.
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN
THE PROSPECTUS IN THE FORM OF AN "INFORMATION SUPPLEMENT" MAY
BE OBTAINED WITHIN FIVE BUSINESS DAYS BY CALLING THE TRUSTEE AT
1-800-682-7520.
IN THE OPINION OF COUNSEL, INTEREST INCOME TO THE TRUSTS AND TO
UNIT HOLDERS, WITH CERTAIN EXCEPTIONS, IS EXEMPT UNDER EXISTING
LAW FROM ALL FEDERAL INCOME TAXES. IN ADDITION, THE INTEREST INCOME
TO THE TRUSTS IS, IN THE OPINION OF SPECIAL COUNSEL, EXEMPT TO
THE EXTENT INDICATED FROM STATE AND LOCAL TAXES WHEN HELD BY RESIDENTS
OF THE STATE IN WHICH THE ISSUERS OF THE BONDS IN SUCH TRUST ARE
LOCATED. CAPITAL GAINS, IF ANY, ARE SUBJECT TO TAX.
What is the First Trust Combined Series?
The First Trust Combined Series is one of a series of investment
companies created by the Sponsor, all of which are generally similar
but each of which is separate and is designated by a different
series number. This Series consists of underlying separate unit
investment trusts set forth in each Part I of this Prospectus
(such Trusts being collectively referred to herein as the "Fund").
This Series was created under the laws of the State of New York
pursuant to a Trust Agreement (the "Indenture"), dated the Initial
Date of Deposit, with Nike Securities L.P., as Sponsor, The Chase
Manhattan Bank (National Association), as Trustee, Securities Evaluation
Service, Inc., as Evaluator and First Trust Advisors L.P., as
Portfolio Supervisor. On the Initial Date of Deposit, the Sponsor
deposited with the Trustee interest-bearing obligations, including
delivery statements relating to contracts for the purchase of
certain such obligations and an irrevocable letter of credit issued
by a financial institution in the amount required for such purchases
(the "Bonds"). The Trustee thereafter credited the account of
the Sponsor for Units of each Trust representing the entire ownership
of the Fund which Units are being offered hereby. The various
trusts are collectively referred to herein as the "Trusts" while
all Trusts that are not designated as "The First Trust Advantage"
are sometimes collectively referred to herein as the "Insured
Trusts" and a Trust with the name designation of "The First Trust
of Insured Municipal Bonds, Discount Trust" or "The First Trust
Advantage: Discount Trust" is sometimes referred to herein as
a "Discount Trust."
The objectives of the Fund are Federal tax-exempt income and state
and local tax-exempt income and conservation of capital through
investment in portfolios of interest-bearing obligations issued
by or on behalf of the state for which such Trust is named (collectively,
the "State Trusts"), and counties, municipalities, authorities
and political subdivisions thereof, territories or municipalities
of the United States, or authorities or political subdivisions
thereof, the interest on which obligations is, in the opinion
of recognized bond counsel to the issuing governmental authorities,
exempt from all Federal income tax and, where applicable, state
and local taxes under existing law although interest on certain
Bonds in certain Trusts as indicated in Part I of this Prospectus
will be a preference item for purposes of the Alternative Minimum
Tax. Insurance guaranteeing the scheduled payment of all principal
and interest on Bonds in the Trusts with the name designation
of "The First Trust of Insured Municipal Bonds," "The First Trust
of Insured Municipal Bonds-Intermediate" or "The First Trust of
Insured Municipal Bonds-Multi-State" (the "Insured Trusts") has
been obtained by such
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
Trusts from Financial Guaranty Insurance Company ("FGIC") and/or
AMBAC Indemnity Corporation ("AMBAC") or was obtained directly
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit from FGIC, AMBAC or other insurers
(the "Preinsured Bonds"). NO PORTFOLIO INSURANCE POLICY HAS BEEN
OBTAINED BY THE TRUSTS WITH THE NAME DESIGNATION OF "THE FIRST
TRUST ADVANTAGE" (THE "ADVANTAGE TRUSTS"). The portfolio insurance
obtained by the Insured Trusts is effective only while the Bonds
thus insured are held in such Trusts, while insurance on Preinsured
Bonds is effective so long as such Bonds are outstanding. See
"Why and How are the Insured Trusts Insured?"
On the Initial Date of Deposit, the Sponsor established a percentage
relationship between the amounts of Bonds in each Trust's portfolio.
From time to time following the Initial Date of Deposit, the Sponsor,
pursuant to the Indenture, may deposit additional Bonds in a Trust
and Units may be continuously offered for sale to the public by
means of this Prospectus, resulting in a potential increase in
the outstanding number of Units of a Trust. Any deposit of additional
Bonds will duplicate, as nearly as is practicable, the original
proportionate relationship and not the actual proportionate relationship
on the subsequent date of deposit. The actual proportionate relationship
may differ from the original proportionate relationship due to
the sale, redemption or liquidation of any of the Bonds deposited
in a Trust on the Initial Date of Deposit, or any subsequent date
of deposit. See "How May Bonds be Removed from the Fund?" Since
the prices of the underlying Bonds will fluctuate daily, the ratio,
on a market value basis, will also change daily. The portion of
Bonds represented by each Unit will not change as a result of
the deposit of additional Bonds in a Trust.
On the Initial Date of Deposit, each Unit of a Trust represented
the undivided fractional interest in the Bonds deposited in a
Trust set forth under "Summary of Essential Information" appearing
in each Part I of this Prospectus. To the extent that Units of
a Trust are redeemed, the aggregate value of the Bonds in a Trust
will be reduced and the undivided fractional interest represented
by each outstanding Unit of a Trust will increase, although the
actual interest in such Trust represented by such fraction will
remain substantially unchanged. Units will remain outstanding
until redeemed upon tender to the Trustee by any Unit holder,
which may include the Sponsor, or until the termination of the
Trust Agreement. However, if additional Units are issued by a
Trust in connection with the deposit of additional Bonds by the
Sponsor, the aggregate value of the Bonds in a Trust will be increased
by amounts allocable to additional Units, and the fractional undivided
interest represented by each Unit of a Trust will be decreased
proportionately. See "How May Units be Redeemed?" Each Trust has
a Mandatory Termination Date as set forth under "Summary of Essential
Information" appearing in each Part I of this Prospectus.
Risk Factors. An investment in the Trusts should be made with
an understanding of the risks associated therewith, including,
among other factors, the inability of the issuer or an insurer
to pay the principal of or interest on a bond when due, volatile
interest rates, early call provisions, and changes to the tax
status of the Bonds. There is, of course, no guarantee that the
Trusts' objectives will be achieved. See "What are Certain General
Matters Relating to the Trusts?-Risk Factors."
What are Certain General Matters Relating to the Trusts?
In selecting Bonds, the following facts, among others, were considered:
(i) the Standard & Poor's rating or Fitch Investors Service, Inc.'s
rating of the Bonds was in no case less than "BBB" in the case
of an Insured Trust and "A-" in the case of an Advantage Trust,
or the Moody's rating of the Bonds was in no case less than "Baa"
in the case of an Insured Trust and "A" in the case of an Advantage
Trust, including provisional or conditional ratings, respectively,
or, if not rated, the Bonds had, in the opinion of the Sponsor,
credit characteristics sufficiently similar to the credit characteristics
of interest-bearing tax-exempt obligations that were so rated
as to be acceptable for acquisition by the Fund (see "Description
of Bond Ratings"); (ii) the prices of the Bonds relative to other
bonds of comparable quality and maturity; (iii) with respect to
the Insured Trusts, the availability and cost of insurance of
the principal and interest on the Bonds and (iv) the diversification
of Bonds as to purpose of issue and location of issuer. Subsequent
to the Initial Date of Deposit, a Bond may cease to be rated or
its rating may be reduced below the minimum required as of the
Initial Date of Deposit. Neither event requires elimination of
such Bond from the portfolio, but may be considered in the Sponsor's
determination as to whether or not to direct the Trustee to dispose
of the Bond. See "Rights of
Page 2
Unit Holders-How May Bonds be Removed from the Fund?" For additional
risks specific to the individual State Trusts see "Risk Factors"
appearing in Part I for each State Trust.
Risk Factors
The following paragraphs briefly discuss certain circumstances
which may adversely affect the ability of issuers of Bonds held
in the portfolio of a Trust to make payment of principal and interest
thereon, and which also therefore may adversely affect the ratings
of such Bonds. With respect to the Insured Trusts, however, because
of the insurance on the Bonds, such changes should not adversely
affect either (i) an Insured Trust's receipt of principal and
interest on any individual Bonds, or (ii) the Units' triple-A
rating. For economic risks specific to the individual State Trusts,
see each Part I of this Prospectus and the Information Supplement
to this Prospectus. Certain of the Trusts may contain some of
the following types of Bonds:
Discount Bonds are Bonds which have been acquired at a market
discount from par value at maturity. The coupon interest rates
on the discount bonds at the time they were purchased and deposited
in the Trusts were lower than the current market interest rates
for newly issued bonds of comparable rating and type. The market
discount on previously issued bonds will increase when interest
rates for newly issued comparable bonds increase and decrease
when such interest rates fall, other things being equal. A discount
bond held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less
in the form of tax-exempt interest income than a comparable bond
newly issued at current market rates. See "What is the Federal
Tax Status of Unit Holders?"
Original Issue Discount Bonds are Bonds which are originally issued
at a price which represents a discount from the Bonds' stated
redemption price at maturity. Under current law, the original
issue discount is deemed to accrue on a daily basis and the accrued
portion is treated as tax-exempt interest income for Federal income
tax purposes. On sale or redemption, any gain realized in excess
of the earned portion of original issue discount will be taxable
as capital gain unless the gain is attributable to market discount
in which case the accretion of market discount is taxable as ordinary
income. See "What is the Federal Tax Status of Unit Holders?"
The current value of an original issue discount bond reflects
the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the
Bonds approach maturity.
Zero Coupon Bonds represent a certain type of original issue discount
bonds which do not provide for the payment of any current interest
and generally provide for payment at maturity at face value unless
sooner sold or redeemed. Zero Coupon Bonds may be subject to greater
price volatility than conventional bonds. Zero Coupon Bond features
include (1) not paying interest on a semi-annual basis and (2)
providing for the reinvestment of the bond's semi-annual earnings
at the bond's stated yield to maturity. While Zero Coupon Bonds
are frequently marketed on the basis that their fixed rate of
return minimizes reinvestment risk, this benefit can be negated
in large part by weak call protection.
Premium Bonds are Bonds which have been acquired at a market premium
from par value at maturity. The coupon interest rates on the premium
bonds at the time they were purchased and deposited in the Trusts
were higher than the current market interest rates for newly issued
bonds of comparable rating and type. The current returns of such
bonds are initially higher than the current returns of comparable
bonds issued at currently prevailing interest rates because premium
bonds tend to decrease in market value as they approach maturity
when the face amount becomes payable. Because part of the purchase
price is thus returned not at maturity but through current income
payments, early redemption of a premium bond at par or early prepayments
of principal will result in a reduction in yield. Redemptions
are more likely to occur at times when the Bonds have an offering
side valuation which represents a premium over par, or for original
issue discount Bonds, a premium over the accreted value. To the
extent that the Bonds were deposited in the Fund at a price higher
than the price at which they are redeemed, this will represent
a loss of capital when compared to the original Public Offering
Price of the Units. The Trust may be required to sell Zero Coupon
Bonds prior to maturity (at their current market price which is
likely to be less than their par value) in order to pay expenses
of the Trust or in case the Trust is terminated. See "Rights of
Unit Holders: How May Bonds be Removed from the Fund?" and "Other
Information: How May the Indenture be Amended or Terminated?"
Page 3
General Obligation Bonds are general obligations of a governmental
entity that are backed by the taxing power of such entity. All
other Bonds in the Trusts are revenue bonds payable from the income
of a specific project or authority and are not supported by the
issuer's power to levy taxes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for
the payment of principal and interest. Revenue bonds, on the other
hand, are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. There
are, of course, variations in the security of the different Bonds,
both within a particular classification and between classifications,
depending on numerous factors.
Healthcare Revenue Bonds are obligations of issuers whose revenues
are primarily derived from services provided by hospitals or other
health care facilities, including nursing homes. A health care
issuer's ability to make debt service payments on these obligations
is dependent on various factors, including occupancy levels of
the facility, demand, government regulations, wages of employees,
overhead expenses, competition from other similar providers, malpractice
insurance costs and the degree of governmental financial assistance,
including Medicare and Medicaid and other similar third-party
payer programs.
Housing Revenue Bonds are obligations of issuers whose revenues
are primarily derived from mortgage loans on single family residences
or housing projects for low to moderate income families. Housing
Revenue Bonds are generally payable at any time and therefore
their average life will ordinarily be less than their stated maturities.
The ability of such issuers to make debt service payments on these
obligations is dependent on various factors, including interest rates,
occupancy levels, rental income, mortgage default rates, taxes,
operating expenses, governmental regulations and the appropriation of
subsidies.
Water and Sewerage Revenue Bonds are obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services.
Such Bonds are generally payable from user fees. Problems faced
by such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user
fees, the difficulty of financing large construction programs,
the limitations on operations and increased costs and delays attributable
to environmental considerations, the increasing difficulty of
obtaining or discovering new supplies of fresh water, the effect
of conservation programs and the impact of "no-growth" zoning
ordinances.
Electric Utility Revenue Bonds are obligations of issuers whose
revenues are primarily derived from the sale of electric energy.
Utilities are generally subject to extensive regulation by state
utility commissions which, among other things, establish the rates
which may be charged and the appropriate rate of return. The problems
faced by such issuers include the difficulty in obtaining approval
for timely and adequate rate increases from the governing public
utility commission, the difficulty in financing large construction
programs, increased Federal, state and municipal government regulations,
the limitations on operations and increased costs and delays attributable
to environmental considerations, increased competition, recent
reductions in estimates of future demand for electricity in certain
areas of the country, the difficulty in obtaining fuel at reasonable
prices and the effect of energy conservation.
Lease Obligation Revenue Bonds are obligations issued primarily
by governmental authorities that have no taxing power or other
means of directly raising revenues. Rather, the governmental authorities
are financing vehicles created solely for the construction of
buildings (i.e., schools, administrative offices, convention centers
and prisons) or the purchase of equipment (i.e., police cars and
computer systems) that will be used by a state or local government
(the "lessee"). These obligations are subject to the ability and
willingness of the lessee government to meet its lease rental
payments which include debt service on the obligations. Lease
obligations are subject, in almost all cases, to annual appropriation
risk, i.e., the lessee government is not legally obligated to
budget and appropriate for the rental payments beyond the current
fiscal year, or construction and abatement risk-rental obligations
cease in the event that delays in building, damage, destruction
or condemnation of the project prevents its use by the lessee.
Industrial Revenue Bonds ("IRBs") are tax-exempt securities issued
by states, municipalities, public authorities or similar entities
to finance the cost of acquiring, constructing or improving various
industrial projects. Debt service payments on IRBs is dependent
upon various factors, including the creditworthiness of the corporate
operator of the project and, if applicable, corporate guarantor,
revenues generated from the project, expenses associated with
the project and regulatory and environmental restrictions.
Page 4
Transportation Facility Revenue Bonds are obligations payable
from and secured by revenues derived from the ownership and operation
of facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. The ability of issuers to make
debt service payments on airport obligations is dependent on the
capability of airlines to meet their obligations under use agreements.
Due to increased competition, deregulation, increased fuel costs
and other factors, many airlines may have difficulty meeting their
obligations under these use agreements. Similarly, payment on
Bonds related to other facilities is dependent on revenues from
the projects, such as user fees from ports, tolls on turnpikes
and bridges and rents from buildings. Therefore, payment may be
adversely affected by reduction in revenues due to such factors
as increased cost of maintenance, decreased use of a facility,
lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Educational Obligation Revenue Bonds are obligations of issuers
which govern the operation of, schools, colleges and universities
and whose revenues are derived mainly from ad valorem taxes, or
for higher education systems, from tuition, dormitory revenues,
grants and endowments. General problems relating to school bonds
include litigation contesting the state constitutionality of financing
public education in part from ad valorem taxes. General problems
relating to college and university obligations include the prospect
of a declining percentage of "college" age individuals, possible
inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal
grants and state funding and new government legislation or regulations
which may adversely affect the revenues or costs of such issuers.
Resource Recovery Facility Revenue Bonds are obligations which
are payable from and secured by revenues derived from the operation
of facilities designed to process solid waste, generate steam
and convert steam to electricity. Resource recovery bonds may
be subject to extraordinary optional redemption at par upon the
occurrence of certain circumstances, including but not limited
to: destruction or condemnation of a project; contracts relating
to a project becoming void, unenforceable or impossible to perform;
changes in the economic availability of raw materials, operating
supplies or facilities necessary for the operation of a project
or technological or other unavoidable changes adversely affecting
the operation of a project; administrative or judicial actions
which render contracts relating to the projects void, unenforceable
or impossible to perform; or impose unreasonable burdens or excessive
liabilities.
Bonds of Issuers Located in the Commonwealth of Puerto Rico. Certain
Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Page 5
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of the Bonds are
subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not
within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of Puerto Rico
and various agencies and political subdivisions located in Puerto
Rico. The Sponsor is unable to predict whether or to what extent
such factors or other factors may affect the issuers of Bonds,
the market value or marketability of the Bonds or the ability
of the respective issuers of the Bonds acquired by the Trusts
to pay interest on or principal of the Bonds.
Investors should be aware that many of the Bonds in the Trusts
are subject to continuing requirements such as the actual use
of Bond proceeds or manner of operation of the project financed
from Bond proceeds that may affect the exemption of interest on
such Bonds from Federal income taxation. Although at the time
of issuance of each of the Bonds in the Trusts an opinion of bond
counsel was rendered as to the exemption of interest on such obligations
from Federal income taxation, there can be no assurance that the
respective issuers or other obligors on such obligations will
fulfill the various continuing requirements established upon issuance
of the Bonds. A failure to comply with such requirements may cause
a determination that interest on such obligations is subject to
Federal income taxation, perhaps even retroactively from the date
of issuance of such Bonds, thereby reducing the value of the Bonds
and subjecting Unit holders to unanticipated tax liabilities.
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 because the proceeds from such events will
be distributed to Unit holders and will not be reinvested, no
assurance can be given that a Trust will retain for any length
of time its present size and composition. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure
or defect in any Bond. Certain of the Bonds contained in the Trusts
may be subject to being called or redeemed in whole or in part
prior to their stated maturities pursuant to optional redemption
provisions, sinking fund provisions, special or extraordinary
redemption provisions or otherwise. See "Portfolio" in each Part
I of this Prospectus for the earliest scheduled call date and
the initial redemption price for each Bond. A bond subject to
optional call is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A bond subject
to sinking fund redemption is one which is subject to partial
call from time to time at par or, in the case of a zero coupon
bond, at the accreted value from a fund accumulated for the scheduled
retirement of a portion of an issue prior to maturity. Special
or extraordinary redemption provisions may provide for redemption
at par (or for original issue discount bonds at issue price plus
the amount of original issue discount accreted to redemption date
plus, if applicable, some premium) of all or a portion of an issue
upon the occurrence of certain circumstances specified in a Bond's
"Official Statement." The exercise of redemption or call provisions
will (except to the extent the proceeds of the called Bonds are
used to pay for Unit redemptions) result in the distribution of
principal and may result in a reduction in the amount of subsequent
interest distributions; it may also affect the long-term return
and the current return on Units of each Trust. Redemption pursuant
to call provisions is more likely to occur, and redemption pursuant
to sinking fund provisions may occur, when the Bonds have an offering
side valuation which represents a premium over par or for original
issue discount bonds a premium over the accreted value. Unit holders
may recognize capital gain or loss upon any redemption or call.
The contracts to purchase Bonds delivered to the Trustee represent
an obligation by issuers or dealers to deliver Bonds to the Sponsor
for deposit in each Trust. Contracts are typically settled and
the Bonds delivered within a few business days subsequent to the
Initial Date of Deposit. The percentage of the aggregate principal
amount of the Bonds of each Trust relating to "when, as and if
issued" Bonds or other Bonds with delivery dates after the date
of settlement for a purchase made on the Initial Date of Deposit,
if any, is indicated in "Portfolio" appearing in each Part I of
this Prospectus. Interest on "when, as and if issued" and delayed
delivery Bonds begins accruing to the benefit of Unit holders
on their dates of delivery. Because "when, as and if issued" Bonds
have not yet been issued, as of the Initial Date of Deposit each
Trust is subject to the risk that the issuers thereof might decide
not to proceed with the offering of such Bonds or that the delivery
of such Bonds or the delayed delivery Bonds may be delayed. If
such Bonds, or replacement bonds described
Page 6
below, are not acquired by a Trust or if their delivery is delayed,
the Estimated Long-Term Return and the Estimated Current Return
(if applicable) shown in "Special Trust Information" appearing
in each Part I of this Prospectus for that Trust may be reduced.
In the event of a failure to deliver any Bond that has been purchased
for a Trust under a contract, including those Bonds purchased
on a "when, as and if issued" basis ("Failed Bonds"), the Sponsor
is authorized under the Indenture to direct the Trustee to acquire
other specified bonds ("New Bonds") to make up the original corpus
of such Trust. The New Bonds must be purchased within twenty days
after delivery of the notice of the failed contract and the purchase
price (exclusive of accrued interest) may not exceed the amount
of funds reserved for the purchase of the Failed Bonds. The New
Bonds (i) must satisfy the criteria previously described for Bonds
originally included in the Trust, (ii) must have a fixed maturity
date of at least ten years or, in the case of a shorter term Trust,
within the range of maturities of the Bonds initially deposited
in such Trust, but not exceeding the maturity date of the Failed
Bonds, (iii) must be purchased at a price that results in a yield
to maturity and in a current return, in each case as of the Initial
Date of Deposit, at least equal to that of the Failed Bonds, (iv)
shall not be "when, as and if issued" bonds, (v) with respect
to an Insured Trust, at the time of acquisition must be insured
under either the insurance policy obtained by such Insured Trust
or an insurance policy obtained by the Bond issuer, the underwriters,
the Sponsor or others and (vi) shall have the benefit of exemption
from Federal and state taxation on interest to an equal or greater
extent than the Failed Bonds they replace. Whenever a New Bond
has been acquired for a Trust, the Trustee shall, within five
days thereafter, notify all Unit holders of such Trust of the
acquisition of the New Bond and shall, on the next monthly distribution
date which is more than 30 days thereafter, make a pro rata distribution
of the amount, if any, by which the cost to such Trust of the
Failed Bond exceeded the cost of the New Bond plus accrued interest.
Once the original corpus of a Trust is acquired, the Trustee will
have no power to vary the investment of such Trust, i.e., the
Trustee will have no managerial power to take advantage of market
variations to improve a Unit holder's investment.
If New Bonds are not acquired in the event of a failed contract,
the Sponsor shall refund the sales charge attributable to such
failed contract to all Unit holders of the affected Trust, and
the principal and accrued interest (at the coupon rate of the
relevant Bond to the date the Sponsor is notified of the failure)
attributable to such failed contract shall be distributed not
more than thirty days after the determination of such failure
or at such earlier time as the Trustee in its sole discretion
deems to be in the interest of the Unit holders of the affected
Trust. 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 Sponsor and accordingly will not
be treated as tax-exempt income.
To the best knowledge of the Sponsor, there is no litigation pending
as of the Initial Date of Deposit in respect of any Bonds which
might reasonably be expected to have a material adverse effect
upon the Trusts. At any time after the Initial Date of Deposit,
litigation may be initiated on a variety of grounds with respect
to Bonds in a Trust. Such litigation may affect the validity of
such Bonds or the tax-free nature of the interest thereon. While
the outcome of litigation of such nature can never be entirely
predicted, the Fund has received opinions of bond counsel to the
issuing authority of each Bond on the date of issuance to the
effect that such Bonds have been validly issued and that the interest
thereon is exempt from Federal income taxes and state and local
taxes, except that interest income of certain Bonds in certain
Trusts may be included as an item of tax preference in calculating
the Alternative Minimum Tax applicable to both individuals and
corporations. In addition, other factors may arise from time to
time which potentially may impair the ability of issuers to meet
obligations undertaken with respect to the Bonds.
What are Estimated Long-Term Return and Estimated Current Return?
At the opening of business on the Initial Date of Deposit, the
Estimated Current Return (if applicable) and the Estimated Long-Term
Return under the monthly and semi-annual distribution plans are
as set forth in "Special Trust Information" appearing in Part
I of this Prospectus for each Trust. Estimated Current Return
is computed by dividing the Estimated Net Annual Interest Income
per Unit by the Public Offering Price. Any change in either amount
will result in a change in the Estimated Current Return. For each
Trust, the Public Offering Price will vary in accordance with
fluctuations in the prices of the underlying Bonds and the
Page 7
Net Annual Interest Income per Unit will change as Bonds are redeemed,
paid, sold or exchanged in certain refundings or as the expenses
of each Trust change. Therefore, there is no assurance that the
Estimated Current Return (if applicable) appearing in Part I of
this Prospectus will be realized in the future. Estimated Long-Term
Return is calculated using a formula which (1) takes into consideration
and determines and factors in the relative weightings of the market
values, yields (which takes into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all
of the Bonds in the Trust and (2) takes into account the expenses
and sales charge associated with each Unit of a Trust. Since the
market values and estimated retirements of the Bonds and the expenses
of the Trust will change, there is no assurance that the Estimated
Long-Term Return indicated in Part I of this Prospectus will be
realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation
of Estimated Long-Term Return reflects the estimated date and
amount of principal returned while Estimated Current Return calculations
include only Net Annual Interest Income and Public Offering Price
as of the Initial Date of Deposit. Neither rate reflects the true
return to Unit holders, which is lower, because neither includes
the effect of certain delays in distributions to Unit holders.
In order to acquire certain of the Bonds contracted for by the
Sponsor for deposit in a Trust, it may be necessary to pay on
the settlement dates for delivery of such Bonds amounts covering
accrued interest on such Bonds which exceed the amounts furnished
by the Sponsor. 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 Bonds with respect to which such payments have
been made. Also, since interest on the Bonds in a Trust does not
begin accruing as tax-exempt interest income to the benefit of
Unit holders until their respective dates of delivery, the Trustee
will, in order to obtain for the Unit holders the estimated net
annual interest income during the first year of each Trust's operations
as is indicated in the "Special Trust Information" appearing in
each Part I of this Prospectus, reduce its fee and, to the extent
necessary, pay expenses of each Trust in an amount equal to the
amount of interest that would have so accrued on such Bonds between
the settlement date of units purchased on the Initial Date of
Deposit and such dates of delivery.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising
and sales materials compare the then current estimated returns
on the Trust and returns over specified periods on other similar
Trusts sponsored by Nike Securities L.P. with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs
and money market accounts or money market funds, each of which
has investment characteristics that may differ from those of the Trust.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest
on Bonds generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an
amount of interest earned but not yet collected by the Trustee.
For this reason, with respect to sales settling subsequent to
the First Settlement Date, the Public Offering Price of Units
will have added to it the proportionate share of accrued interest
to the date of settlement. Unit holders will receive on the next
distribution date of the Trust the amount, if any, of accrued
interest paid on their Units.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price
in the sale of Units to the public, the Trustee will advance the
amount of accrued interest as of the First Settlement Date and
the same will be distributed to the Sponsor as the Unit holder
of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of
Units will include only accrued interest from the First Settlement
Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See
"Rights of Unit Holders-How are Interest and Principal Distributed?"
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount
of interest actually received by the Trust and distributed to
Unit holders. Therefore, there
Page 8
will always remain an item of accrued interest that is added to
the value of the Units. If a Unit holder sells or redeems 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. Since the Trustee has the use of the funds held
in the Interest Account for distributions to Unit holders and
since such Account is non-interest-bearing to Unit holders, the
Trustee benefits thereby.
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to the Trusts, for which the Sponsor will be reimbursed
in amounts as set forth under "Special Trust Information" in each
Part I of this Prospectus, the Sponsor will not receive any fees
in connection with its activities relating to the Trusts. Such
bookkeeping and administrative charges may be increased without
approval of the Unit holders by amounts not exceeding proportionate
increases under the category "All Services Less Rent of Shelter"
in the Consumer Price Index published by the United States Department
of Labor. First Trust Advisors L.P., an affiliate of the Sponsor,
will receive an annual supervisory fee, which is not to exceed
the amount set forth under "Special Trust Information" in each
Part I of this Prospectus, for providing portfolio supervisory
services for the Trust. Such fee is based on the number of Units
outstanding in each Trust on January 1 of each year except for
Trusts which were established subsequent to the last January 1,
in which case the fee will be based on the number of Units outstanding
in such Trusts as of the respective Dates of Deposit. While the
bookkeeping and administrative charges and the supervisory services
fees may exceed the actual costs of providing such services for
this Fund, at no time will the total amount received for such
services rendered to unit investment trusts of which Nike Securities
L.P. is the Sponsor in any calendar year exceed the aggregate
cost to the Sponsor or First Trust Advisors L.P. of supplying
such services in such year.
For each valuation of the Bonds in a Trust after the initial public
offering period, the Evaluator will receive a fee as indicated
in the "Special Trust Information" in each Part I of this Prospectus.
The Trustee pays certain expenses of the Trusts for which it is
reimbursed by the Trust or Trusts. The Trustee will receive for
its ordinary recurring services to a Trust a fee as indicated
in the "Special Trust Information" appearing in each Part I of
this Prospectus. For a discussion of the services performed by
the Trustee pursuant to its obligations under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
Bankers Trust Company issued the irrevocable letter of credit
for the Fund and provides a line of credit which the Sponsor may
utilize to acquire securities (which may include certain of the
Bonds deposited in the Fund). The Trustee's and Evaluator's fees
are payable monthly on or before each Distribution Date from the
Interest Account of each Trust to the extent funds are available
and then from the Principal Account of such Trust. Since the Trustee
has the use of the funds being held in the Principal and Interest
Accounts for future distributions, payment of expenses and redemptions
and since such Accounts are non-interest-bearing to Unit holders,
the Trustee benefits thereby. Part of the Trustee's compensation
for its services to the Fund is expected to result from the use
of these funds. Both fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases
under the category "All Services Less Rent of Shelter" in the
Consumer Price Index published by the United States Department of Labor.
The aggregate cost of the portfolio insurance obtained by an Insured
Trust is indicated in Note 1 of "Notes to Portfolio" appearing
in each Part I of this Prospectus. The portfolio insurance continues
so long as such Trust retains the Bonds thus insured. Premiums
are payable monthly in advance by the Trustee on behalf of such
Trust. The Trustee will advance the initial premium for the portfolio
insurance obtained by an Insured Trust and will recover its advancement
without interest or other costs to such Trust from interest received
on Bonds in such Trust. As Bonds in the portfolio are redeemed
by their respective issuers or are sold by the Trustee, the amount
of premium will be reduced in respect of those Bonds no longer
owned by and held in the Trust which were insured by insurance
obtained by such Trust. Preinsured Bonds in an Insured Trust are
not insured by such Trust. The premium payable for Permanent Insurance
will be paid solely from the proceeds of the sale of such Bond
in the event the Trustee exercises the right to obtain Permanent
Insurance on a Bond. The premiums for such Permanent Insurance
with respect to each Bond will decline over the life of the Bond.
An Advantage Trust is not insured; accordingly, there are no premiums
for insurance payable by such Trust.
Page 9
Expenses incurred in establishing the Trusts, including costs
of preparing the registration statement, the trust indenture and
other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of each
Trust portfolio, legal fees, the initial fees and expenses of
the Trustee and any other out-of-pocket expenses, will be paid
by the Trusts and amortized over the first five years of such
Trusts. The following additional charges are or may be incurred
by a Trust: all expenses (including legal and annual auditing
expenses) of the Trustee incurred by or in connection with its
responsibilities under the Indenture, except in the event of negligence,
bad faith or willful misconduct on its part; 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 Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct
on its part, arising out of or in connection with its acceptance
or administration of the Trust; indemnification of the Sponsor
for any loss, liability or expense incurred without gross negligence,
bad faith or willful misconduct in acting as Depositor of the
Trust; all taxes and other government charges imposed upon the
Bonds or any part of the Trust (no such taxes or charges are being
levied or made or, to the knowledge of the Sponsor contemplated);
and expenditures incurred in contacting Unit holders upon termination
of the Trust. The above expenses and the Trustee's annual fee,
when paid or owing to the Trustee, are secured by a lien on the
Trust. In addition, the Trustee is empowered to sell Bonds of
a Trust in order to make funds available to pay all these amounts
if funds are not otherwise available in the Interest and Principal
Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required,
the Indenture requires that the accounts of each Trust shall be
audited on an annual basis at the expense of the Trust by independent
auditors selected by the Sponsor. So long as the Sponsor is making
a secondary market for Units, the Sponsor shall bear the cost
of such annual audits to the extent such cost exceeds $.50 per
Unit. Unit holders of a Trust covered by an audit may obtain a
copy of the audited financial statements from the Trustee upon request.
Why and How are the Insured Trusts Insured?
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS.
THE BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED
BY INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as
to the scheduled payment of interest and principal by policies
obtained by each Insured Trust from FGIC or AMBAC, or obtained
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit directly from one of the insurers
listed below or other insurers (the "Preinsured Bonds"). The claims-paying
ability of each of these insurers was rated AAA by Standard &
Poor's or another nationally recognized rating organizaiton at
the time the insured Bonds were purchased for the Trust. The insurance
policy obtained by each Insured Trust is noncancellable and will
continue in force for such Trust so long as such Trust is in existence
and the Bonds described in the policy continue to be held by such
Trust (see "Portfolio" in Part I of the Prospectus for each Insured
Trust). Nonpayment of premiums on the policy obtained by each
Insured Trust will not result in the cancellation of insurance,
but will permit FGIC and/or AMBAC to take action against the Trustee
to recover premium payments due it. Premium rates for each issue
of Bonds protected by the policy obtained by each Insured Trust
are fixed for the life of such Trust. The premium for any Preinsured
Bonds has been paid in advance by the Bond issuer, the underwriters,
the Sponsor or others and any such policy or policies are noncancellable
and will continue in force so long as the Bonds so insured are
outstanding and the insurer and/or insurers thereof remain in
business. If the provider of an original issuance insurance policy
is unable to meet its obligations under such policy, or if the
rating assigned to the claims-paying ability of such insurer deteriorates,
FGIC and/or AMBAC has no obligation to insure any issue adversely
affected by either of the above described events. A monthly premium
is paid by each Insured Trust for the insurance obtained by such
Trust, which is payable from the interest income received by such
Trust. In the case of Preinsured Bonds, no premiums for insurance
are paid by the Insured Trust. Further information concerning
the individual insurers can be found in the Information Supplement
to this Prospectus.
Insurance obtained by each Insured Trust or by the Bond issuer,
the underwriters, the Sponsor or others does not guarantee the
market value of the Bonds or the value of the Units of such Trust.
The insurance obtained
Page 10
by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by
the Trustee, the insurance terminates as to such Bond on the date
of sale. In the event of a sale of a Bond insured by an Insured
Trust, the Trustee has the right to obtain Permanent Insurance
upon the payment of an insurance premium from the proceeds of
the sale of such Bond. Except as indicated below, insurance obtained
by an Insured Trust has no effect on the price or redemption value
of Units. It is the present intention of the Evaluator to attribute
a value to such insurance obtained by an Insured Trust (including
the right to obtain Permanent Insurance) for the purpose of computing
the price or redemption value of Units only if the Bonds covered
by such insurance are in default in payment of principal or interest
or, in the Sponsor's 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 (ii) the market value of such Bonds not covered
by Permanent Insurance. See "Public Offering-How is the Public
Offering Price Determined?" herein for a more complete description
of the Evaluator's method of valuing defaulted Bonds and Bonds
which have a significant risk of default. Insurance on a Preinsured
Bond is effective as long as such Bond is outstanding. Therefore,
any such insurance 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.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE>
<CAPTION>
Financial Information
as of December 31, 1994
(in millions of dollars)
____________________________________________
Date Admitted Policyholders'
Name Established Assets Surplus
_____ ___________ _________ ______________
<S> <C> <C> <C>
AMBAC Indemnity Corporation 1970 $2,145 $ 782
Capital Guaranty Insurance Company 1986 304 168
Capital Markets Assurance Corporation 1987 199 140
Connie Lee Insurance Company 1987 194 106
Financial Guaranty Insurance Company 1984 2,131 894
Financial Security Assurance, Inc. 1984 804 344
MBIA Insurance Corporation 1986 3,401 1,110
</TABLE>
Because the Bonds in each Insured Trust are insured as to the
scheduled payment of principal and interest and on the basis of
the financial condition of the insurance companies referred to
above, Standard & Poor's has assigned to units of each Insured
Trust its "AAA" investment rating. This is the highest rating
assigned to securities by Standard & Poor's. See "Description
of Bond Ratings." The obtaining of this rating by each Insured
Trust should not be construed as an approval of the offering of
the Units by Standard & Poor's or as a guarantee of the market
value of each Insured Trust or the Units of such Trust. Standard
& Poor's has indicated that this rating is not a recommendation
to buy, hold or sell Units nor does it take into account the extent
to which expenses of each Trust or sales by each Trust of Bonds
for less than the purchase price paid by such Trust will reduce
payment to Unit holders of the interest and principal required
to be paid on such Bonds. There is no guarantee that the "AAA"
investment rating with respect to the Units of an Insured Trust
will be maintained.
An objective of portfolio insurance obtained by such Insured Trust
is to obtain a higher yield on the Bonds in the portfolio of such
Trust than would be available if all the Bonds in such portfolio
had the Standard & Poor's "AAA" and/or Moody's Investors Service,
Inc. "Aaa" rating(s) and at the same time to have the protection
of insurance of scheduled payment of interest and principal on
the Bonds. There is, of course, no certainty that this result
will be achieved. Bonds in a Trust for which insurance has been
obtained by the Bond issuer, the underwriters, the Sponsor or
others (all of which were rated "AAA" by Standard & Poor's and/or
"Aaa" by Moody's Investors Service, Inc.) may or may not have
a higher yield than uninsured bonds rated
Page 11
"AAA" by Standard & Poor's or "Aaa" by Moody's Investors Service,
Inc. In selecting Bonds for the portfolio of each Insured Trust,
the Sponsor has applied the criteria herein before described.
Chapman and Cutler, Counsel for the Sponsor, has given an opinion
(with respect to insured Bonds) to the effect that the payment
of insurance proceeds representing maturing interest on defaulted
municipal obligations paid by an insurer would be excludable from
Federal gross income if, and to the same extent as, such interest
would have been so excludable if paid by the issuer of the defaulted
obligations provided that, at the time such policies are purchased,
the amounts paid for such policies are reasonable, customary and
consistent with the reasonable expectation that the issuer of
the obligations, rather than the insurer, will pay debt service
on the obligations. See "What is the Federal Tax Status of Unit Holders?"
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, such price is determined by adding to the Evaluator's
determination of the aggregate offering price of the Bonds in
each Trust, an amount as indicated in the following table. During
the initial offering period, the Sponsor's Repurchase Price is
equal to the Evaluator's determination of the aggregate offering
price of the Bonds in a Trust. A National Trust consists of The
First Trust of Insured Municipal Bonds. A State Trust consists
of The First Trust of Insured Municipal Bonds-Multi-State and/or
The First Trust Advantage other than an Intermediate, Long Intermediate,
Short Intermediate or Discount Trust. An Intermediate, Long Intermediate,
Short Intermediate or Discount Trust consists of trusts so designated.
Initial Offering Period (1)
Sales Charge
_____________________________
Percentage Percentage
of Public of Net
Offering Amount
Series of the Fund Price Invested
__________________ _________ _________
National Trust and certain State Trusts 4.9% 5.152%
Other State Trusts 5.5 5.820
Long Intermediate Trust 4.4 4.603
Intermediate Trust 3.9 4.058
Short Intermediate Trust 3.0 3.093
_____________________
(1) The Public Offering Price includes a proportionate share
of interest accrued but unpaid on the Bonds after the First Settlement
Date to the date of settlement. See "General Trust Information-How
is Accrued Interest Treated?"
The applicable sales charge is reduced by a discount as indicated
in "Summary of Essential Information" in each Part 1 of this Prospectus
(except for sales made pursuant to a "wrap fee account" or similar
arrangements as set forth below) for volume purchases.
The Public Offering Price of Units for secondary market purchases
will be determined by adding to the Evaluator's determination
of the aggregate bid price of the Bonds in a Trust, the appropriate
sales charge determined in accordance with the schedule set forth
in the Information Supplement to this Prospectus, based upon the
number of years remaining to the maturity of each Bond in the
portfolio of the Trust, adjusting the total to reflect the amount
of any cash held in or advanced to the principal account of the
Trust and dividing the result by the number of Units of such Trust
then outstanding. The minimum sales charge on Units will be 3%
of the Public Offering Price (equivalent to 3.093% of the net
amount invested). For purposes of computation, Bonds will be deemed
to mature on their expressed maturity dates unless: (a) the Bonds
have been called for redemption or funds or securities have been
placed in escrow to redeem them on an earlier call date, in which
case such call date will be deemed to be the date upon which they
mature; or (b) such Bonds are subject to a "mandatory tender,"
in which case such mandatory tender will be deemed to be the date
upon which they mature. The offering price of Bonds in the Trust
may be expected to be greater than the bid price of such Bonds
by approximately 1-2% of the aggregate principal amount of such Bonds.
Page 12
An investor may aggregate purchases of Units of two or more consecutive
series of a particular State, National, Discount, Intermediate,
Long Intermediate or Short Intermediate Trust for purposes of
calculating the discount for volume purchases listed above. The
purchaser must inform the Underwriter or dealer of any such combined
purchase prior to the sale in order to obtain the indicated discount.
In addition, with respect to the employees, officers and directors
(including their immediate family members, defined as spouses,
children, grandchildren, parents, grandparents, mothers-in-law,
fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of
the Sponsor and the Underwriters and their subsidiaries, the sales
charge is reduced by 2.0% of the Public Offering Price for purchases
of Units during the primary and secondary public offering periods.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer except that with respect to purchases
of Units of $500,000 or more, the Sponsor will reimburse the selling
Underwriter or dealer in an amount equal to $2.50 per Unit (in
the case of a Discount Trust, .25% of the Public Offering Price).
The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any
one Underwriter or dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from such
Underwriter or dealer of Units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser will be deemed, for the
purpose of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also
be applicable to a trustee or other fiduciary purchasing securities
for a single trust estate or single fiduciary account.
Units may be purchased in the primary or secondary market at the
Public Offering Price less the concession the Sponsor typically
allows to dealers and other selling agents for purchases (see
"Public Offering-How are Units Distributed?") by investors who
purchase Units through registered investment advisers, certified
financial planners and registered broker-dealers who in each case
either charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services
in connection with the establishment of an investment account
for which a comprehensive "wrap fee" charge is imposed.
On the Initial Date of Deposit, the Public Offering Price is as
indicated in the "Summary of Essential Information" appearing
in each Part I of this Prospectus. The Public Offering Price during
the initial offering period will vary from day-to-day due to fluctuations
in the amount of interest accrued but unpaid on Bonds in each
Trust of the Fund and/or fluctuations in the prices of the underlying
Bonds.
The aggregate price of the Bonds in each Trust is determined by
the evaluator (the "Evaluator"), on the basis of bid prices or
offering prices as is appropriate, (1) on the basis of current
market prices for the Bonds obtained from dealers or brokers who
customarily deal in bonds comparable to those held by the Trust;
(2) if such prices are not available for any of the Bonds, on
the basis of current market prices for comparable bonds; (3) by
determining the value of the Bonds by appraisal; or (4) by any
combination of the above. Unless Bonds are in default in payment
of principal or interest or, in the Sponsor's opinion, in significant
risk of such default, the Evaluator will not attribute any value
to the insurance obtained by an Insured Trust. On the other hand,
the value of insurance obtained by the issuer of Bonds in a Trust
is reflected and included in the market value of such Bonds.
The Evaluator will consider in its evaluation of Bonds which are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default (the "Defaulted Bonds")
and which are covered by insurance obtained by an Insured Trust,
the value of the insurance guaranteeing interest and principal
payments. The value of the insurance will be equal to the difference
between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance) and
(ii) the market value of such Defaulted Bonds not covered by Permanent
Insurance. In addition, the Evaluator will consider the ability
of FGIC and/or AMBAC to meet its commitments under the Insured
Trust's insurance policy, including the commitments to issue Permanent
Insurance. It is the position of the Sponsor that this is a fair
method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with
the provisions of the Investment Company Act of 1940.
Page 13
During the initial public offering period, a determination of
the aggregate price of the Bonds in a Trust is made by the Evaluator
on an offering price basis, as of the close of trading on the
New York Stock Exchange on each day on which it is open, effective
for all sales made subsequent to the last preceding determination.
For purposes of such determinations, the close of trading on the
New York Stock Exchange is 4:00 p.m. eastern standard time. For
secondary market purposes, the Evaluator will be requested to
make such a determination, on a bid price basis, as of the close
of trading on the New York Stock Exchange on each day on which
it is open, effective for all sales, purchases or redemptions
made subsequent to the last preceding determination.
Although payment is normally made three days following the order
for purchase (the date of settlement), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available
to the Sponsor prior to the date of settlement for the purchase
of Units may be used in the Sponsor's business and may be deemed
to be a benefit to the Sponsor, subject to the limitations of
the Securities Exchange Act of 1934. Delivery of Certificates
representing Units so ordered will be made three business days
following such order or shortly thereafter. See "Rights of Unit
Holders-How May Units Be Redeemed?" for information regarding
the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period, until the primary distribution
of the Units offered by this Prospectus is completed, Units will
be offered to the public at the Public Offering Price, computed
as described above, by the Underwriters, including the Sponsor
(see "What are the Underwriting Concessions?") and through dealers
and other selling agents. The initial offering period may be up
to approximately 360 days. During this period, the Sponsor may
deposit additional Bonds in each Trust and create additional Units.
Upon completion of the initial offering, Units repurchased in
the secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this Prospectus at the secondary market
public offering price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Fund
for sale in a number of states. Sales initially will be made to
dealers and other selling agents at prices which represent a concession
or agency commission of $32 per Unit for a National Trust and
certain State Trusts, $33 per Unit for other State Trusts, $28
per Unit for a Long Intermediate Trust, $25 per Unit for an Intermediate
Trust and $18 per Unit for a Short Intermediate Trust. However,
resales of Units of a Trust by such dealers and other selling
agents to the public will be made at the Public Offering Price
described in the Prospectus. The Sponsor reserves the right to
change the amount of the concession or agency commission from
time to time. Certain commercial banks are making Units of the
Trusts available to their customers on an agency basis. A portion
of the sales charge paid by these customers is retained by or
remitted to the banks in the amounts indicated above. Under the
Glass-Steagall Act, banks are prohibited from underwriting Units;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available
must be registered as broker/dealers under state law. Any broker/dealer
or bank will receive additional concessions for purchases made
from the Sponsor on the Initial Date of Deposit resulting in total
concessions as contained in the following table:
Page 14
<TABLE>
<CAPTION>
Total Concession per Unit(1)
____________________________________________
250-499 500-999 1,000 or more
Units Units Units
Series of the Fund Purchased Purchased Purchased
__________________ __________ __________ ____________
<S> <C> <C> <C>
National Trust and a State Trust
with a 4.9% sales charge $35.00 $37.00 $38.00
State Trust with a 5.5% sales charge $36.00 $38.00 $39.00
Long Intermediate Trust $31.00 $32.00 $33.00
Intermediate Trust $26.00 $27.00 $28.00
Short Intermediate Trust $21.00 $22.00 $22.00
</TABLE>
______________
(1) The applicable concession will be allotted to broker/dealers
or banks who purchase Units from the Sponsor only on the Initial
Date of Deposit of a given Trust.
What are the Sponsor's Profits?
The Underwriters of each Trust, including the Sponsor, will receive
a gross sales commission equal to 4.9% of the Public Offering
Price of the Units for a National Trust and certain State Trusts
(5.152% of the net amount invested), 5.5% of the Public Offering
Price of the Units for other State Trusts (5.820% of the net amount
invested), 4.4% of the Public Offering Price of the Units for
a Long Intermediate Trust (4.603% of the net amount invested),
3.9% of the Public Offering Price of the Units for an Intermediate
Trust (4.058% of the net amount invested) and 3.0% of the Public
Offering Price of the Units for a Short Intermediate Trust (3.093%
of the net amount invested), less any reduced sales charge for
quantity purchases as described under "Public Offering-How is
the Public Offering Price Determined?" See "What are the Underwriting
Concessions?" for information regarding the receipt of the excess
gross sales commissions by the Sponsor from the other Underwriters
and additional concessions available to Underwriters, dealers
and other selling agents. In addition, the Sponsor and the other
Underwriters of each Trust may be considered to have realized
a profit or the Sponsor may be considered to have sustained a
loss, as the case may be for each Trust, in the amount of any
difference between the cost of the Bonds to each Trust (which
is based on the Evaluator's determination of the aggregate offering
price of the underlying Bonds of such Trust on the Initial Date
of Deposit as well as subsequent deposits) and the cost of such
Bonds of such Trust to the Sponsor (including the cost of insurance
obtained by the Sponsor prior to the Initial Date of Deposit for
individual Bonds). See "What are the Underwriting Concessions?"
and Note 1 of "Notes to Portfolio" appearing in each Part I of
this Prospectus. Such profits or losses may be realized or sustained
by the Sponsor and the other Underwriters with respect to Bonds
which were acquired by the Sponsor from underwriting syndicates
of which it and the other Underwriters were members. During the
initial offering period, the Underwriters also may realize profits
or sustain losses from the sale of Units to other Underwriters
or as a result of fluctuations after the Initial Date of Deposit
or subsequent dates of deposit in the offering prices of the Bonds
and hence in the Public Offering Price received by the Underwriters.
The Sponsor has not participated as sole underwriter or manager
or member of underwriting syndicates from which any of the Bonds
in the Fund were acquired. An underwriter or underwriting syndicate
purchases bonds from the issuer on a negotiated or competitive
bid basis as principal with the motive of marketing such bonds
to investors at a profit.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between
the price at which Units are purchased (based on the bid prices
of the Bonds in each Trust) and the price at which Units are resold
(which price is also based on the bid prices of the Bonds in each
Trust and includes a sales charge of 5.8% for a National or Discount
Trust, 5.8% for a State Trust, 4.7% for an Intermediate or Long
Intermediate Trust and 3.7% for a Short Intermediate Trust) or
redeemed. The secondary market public offering price of Units
may be greater or less than the cost of such Units to the Sponsor.
What are the Underwriting Concessions?
The Agreement Among Underwriters provides that a public offering
of the Units of each Trust will be made at the Public Offering
Price described in the Prospectus. Units may also be sold to or
through dealers and
Page 15
other selling agents during the initial offering period and in
the secondary market at prices representing a concession or agency
commission as described in "Public Offering-How are Units Distributed?"
The Sponsor will receive from the Underwriters the excess over
the gross sales commission contained in the following table:
<TABLE>
<CAPTION>
Underwriting Concession per Unit
___________________________________________________________
100-249 250-499 500-999 1,000 or More
Units Units Units Units
Series of the Fund Underwritten Underwritten Underwritten Underwritten
__________________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
National Trust and a State Trust
with a 4.9% sales charge $35.00 $37.00 $38.00 $38.00
State Trust with a 5.5% sales charge $36.00 $38.00 $39.00 $41.00
Long Intermediate Trust $30.00 $32.00 $33.00 $34.00
Intermediate Trust $26.00 $28.00 $28.00 $29.00
Short Intermediate Trust $20.00 $22.00 $22.00 $22.00
</TABLE>
In addition to any other benefits that the Underwriters may realize
from the sale of the Units of a Trust, the Agreement Among Underwriters
provides that the Sponsor will share with the other Underwriters
50% of the net gain, if any, represented by the difference between
the Sponsor's cost of the Bonds in connection with their acquisition
(including the cost of insurance obtained by the Sponsor prior
to the Initial Date of Deposit for individual Bonds and including
the effects of portfolio hedging gains and losses and portfolio
hedging transaction costs) and the Aggregate Offering Price thereof
on the Initial Date of Deposit, less a charge for acquiring the
Bonds in the portfolio and for the Sponsor maintaining a secondary
market for the Units. Furthermore, any underwriter that sells
a total of 1,000 Units or more of any National Trust will receive
an additional $2.00 per Unit sold. See "Public Offering-What are
the Sponsor's Profits?" and Note 1 of "Notes to Portfolio" in
each Part I of this Prospectus. McLaughlin, Piven, Vogel Securities,
Inc. ("MPV") and Nike Securities L.P. have an agreement under
which MPV will receive from Nike Securities L.P. reimbursement
for certain costs and further compensation, in addition to that
described above, based on the number of Units it underwrites or
otherwise sells and on the total Units of Nike Securities L.P.
products sold.
From time to time the Sponsor may implement programs under which
Underwriters and dealers of the Fund may receive nominal awards
from the Sponsor for each of their registered representatives
who have sold a minimum number of UIT Units during a specified
time period. In addition, at various times the Sponsor may implement
other programs under which the sales force of an Underwriter or
dealer may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will reallow to any
such Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, 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 Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are primarily intended to result in sales
of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts.
These programs will not change the price Unit holders pay for
their Units or the amount that the Trusts will receive from the
Units sold.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated
to do so, the Sponsor intends to maintain a market for the Units
and continuously to offer to purchase Units at prices, subject
to change at any time, based upon the aggregate bid price of the
Bonds in the portfolio of each Trust plus interest accrued to
the date of settlement. All expenses incurred in maintaining a
secondary market, other than the fees of the Evaluator, the other
expenses of the Trust and the costs of the Trustee in transferring
and recording the ownership of Units, will be borne by the Sponsor.
The Sponsor may, at any time, discontinue purchases of Units at
such prices. If a Unit holder wishes to dispose of his Units,
he should inquire of the Sponsor as to current market prices prior
to making a tender for redemption to the Trustee. Prospectuses
relating to certain other bond funds indicate an intention, subject
to change, on the part of the respective sponsors of such funds
to repurchase units of those funds on the basis of a price higher
than the bid prices of the securities in the funds.
Page 16
Consequently, depending upon the prices actually paid, the repurchase
price of other sponsors for units of their funds may be computed
on a somewhat more favorable basis than the repurchase price offered
by the Sponsor for Units of a Trust in secondary market transactions.
As in this Fund, the purchase price per unit of such bond funds
will depend primarily on the value of the securities in the portfolio
of the fund.
RIGHTS OF UNIT HOLDERS
How are Certificates Issued and Transferred?
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. Ownership of Units is evidenced by registered certificates
executed by the Trustee and the Sponsor. Delivery of certificates
representing Units ordered for purchase is normally made three
days following such order or shortly thereafter. Certificates
to be redeemed or transferred must be surrendered to the Trustee
properly endorsed or accompanied by a written instrument or instruments
of transfer. A Unit holder must sign exactly as his name appears
on the face of the certificate with the signature guaranteed by
a participant in the Securities Transfer Agents Medallion Program
("STAMP") or such other signature guaranty program in addition
to, or in substitution for, STAMP, as may be accepted by 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. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Certificates for Units will bear an appropriate notation on their
face indicating which plan of distribution has been selected in
respect thereof. When a change is made, the existing certificate
must be surrendered to the Trustee and a new certificate issued
to reflect the then currently effective plan of distribution.
There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued
to replace destroyed, stolen or lost certificates, the Unit holder
may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Interest and Principal Distributed?
Interest from each Trust after deduction of amounts sufficient
to reimburse the Trustee, without interest, for any amounts advanced
and paid to FGIC and/or AMBAC or to the Sponsor as the Unit holder
of record as of the First Settlement Date will be distributed
on or shortly after the last day of each month on a pro rata basis
to Unit holders of record as of the preceding Record Date who
are entitled to distributions at that time under the plan of distribution
chosen. All distributions for a Trust will be net of applicable
expenses for such Trust.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with
the Distribution Dates being the last day of the month in which
the related Record Date occurs. It is anticipated that an amount
equal to approximately one-half of the amount of net annual interest
income per Unit will be distributed on or shortly after each Distribution
Date to Unit holders of record on the preceding Record Date. See
"Special Trust Information" appearing in each Part I of this Prospectus.
Record Dates for monthly distributions of interest are the fifteenth
day of each month. The Distribution Dates for distributions of
interest under the monthly plan is the last day of each month
in which the related Record Date occurs. All Unit holders will
receive the first distribution of interest regardless of the plan
of distribution chosen and all Unit holders will receive such
distributions, if any, from the Principal Account as are made
as of the Record Dates for monthly distributions. PURCHASERS OF
UNITS WHO DESIRE TO RECEIVE DISTRIBUTIONS ON A SEMI-ANNUAL BASIS
MAY ELECT TO DO SO AT THE TIME OF PURCHASE DURING THE INITIAL
PUBLIC OFFERING PERIOD. THOSE NOT SO INDICATING WILL BE DEEMED
TO HAVE CHOSEN THE MONTHLY DISTRIBUTION PLAN.
Page 17
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 year, approximately
six weeks prior to the end of May, the Trustee will furnish each
Unit holder a card to be returned to the Trustee not more than
thirty nor less than ten days before the end of such month. Unit
holders desiring to change the plan of distribution in which they
are participating may so indicate on the card and return same,
together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate
are not returned to the Trustee, the Unit holder will be deemed
to have elected to continue with the same plan for the following
twelve months.
The pro rata share of cash in the Principal Account of each Trust
will be computed as of the fifteenth day of each month, and distributions
to the Unit holders of such Trust as of such Record Date will
be made on or shortly after the last day of each month. Proceeds
from the disposition of any of the Bonds of such Trust (less any
premiums due with respect to Bonds for which the Trustee has exercised
the right to obtain Permanent Insurance) received after such Record
Date and prior to the following Distribution Date will be held
in the Principal Account of such Trust and not distributed until
the next Distribution Date. The Trustee is not required to make
a distribution from the Principal Account of a Trust unless the
amount available for distribution shall equal at least $1.00 per Unit.
The Trustee will credit to the Interest Account of each Trust
all interest received by such Trust, including that part of the
proceeds (including insurance proceeds if any, paid to an Insured
Trust) of any disposition of Bonds which represents accrued interest.
Other receipts will be credited to the Principal Account of such
Trust. The distribution to the Unit holders of a Trust as of each
Record Date will be made on the following Distribution Date or
shortly thereafter and shall consist of an amount substantially
equal to such portion of the holder's pro rata share of the estimated
annual income of such Trust after deducting estimated expenses.
Except through an advancement of its own funds, the Trustee has
no cash for distribution to Unit holders until it receives interest
payments on the Bonds in a Trust. The Trustee shall be reimbursed,
without interest, for any advances from funds in the Interest
Account of such Trust on the ensuing Record Date. Persons who
purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date
after the purchase under the applicable plan of distribution.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Account of a Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct
from the Interest Account of each Trust and, to the extent funds
are not sufficient therein, from the Principal Account of each
Trust, amounts necessary to pay the expenses of such Trust. 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 of a Trust such
amounts as may be necessary to cover redemption of Units of such
Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income or principal on the participant's Units to,
among other investment vehicles, a Unit holder's checking, bank
savings, money market, insurance, reinvestment or any other account.
All such distributions, of course, are subject to the minimum
investment and sales charges, if any, of the particular investment
vehicle to which distributions are directed. The Trustee will
notify the participant of each distribution pursuant to the Universal
Distribution Option. The Trustee will distribute directly to the
Unit holder any distributions which are not accepted
Page 18
by the specified investment vehicle. A participant may at any
time, by so notifying the Trustee in writing, elect to terminate
his participation in the Universal Distribution Option and receive
directly future distributions on his Units.
Distribution Reinvestment Option. The Sponsor has entered into
an arrangement with Oppenheimer Management Corporation which permits
any Unit holder of a Trust to elect to have each distribution
of interest income or principal on his Units automatically reinvested
in shares of either the Oppenheimer Intermediate Tax-Exempt Bond
Fund (the "Intermediate Series") or the Oppenheimer Insured Tax-Exempt
Bond Fund (the "Insured Series"). Oppenheimer Management Corporation
is the investment adviser of each Series which are open-end, diversified
management investment companies. The investment objective of the
Intermediate Series is to provide a high level of current interest
income exempt from Federal income tax through the purchase of
investment grade securities. The investment objective of the Insured
Series is to provide as high a level of current interest income
exempt from Federal income tax as is consistent with the assurance
of the scheduled receipt of interest and principal through insurance
and the preservation of capital (the income of either Series may
constitute an item of preference for determining the Federal alternative
minimum tax). The objectives and policies of each Series are presented
in more detail in the prospectus for each Series.
Each person who purchases Units of a Trust may contact the Trustee
to request a prospectus describing each Series and a form by which
such person may elect to become a participant in a Distribution
Reinvestment Option with respect to a Series. Each distribution
of interest income or principal on the participant's Units will
automatically be applied by the Trustee to purchase shares (or
fractions thereof) of a Series without a sales charge and with
no minimum investment requirements.
The shareholder service agent for each Series will mail to each
participant in the Distribution Reinvestment Option confirmations
of all transactions undertaken for such participant in connection
with the receipt of distributions from The First Trust Combined
Series and the purchase of shares (or fractions thereof) of a Series.
A participant may at any time, by so notifying the Trustee in
writing, elect to terminate his participation in the Distribution
Reinvestment Option and receive future distributions on his Units
in cash. There will be no charge or other penalty for such termination.
The Sponsor and Oppenheimer Management Corporation each have the
right to terminate the Distribution Reinvestment Option, in whole
or in part.
It should be remembered that even if distributions are reinvested
through the Universal Distribution Option or the Distribution
Reinvestment Option they are still treated as distributions for
income tax purposes.
What is the Federal Tax Status of Unit Holders?
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. If interest on a Bond should be determined to be taxable,
the Bond would generally have to be sold at a substantial discount.
In addition, investors could be required to pay income tax on
interest received prior to the date on which interest is determined
to be taxable. Gain realized on the sale or redemption of the
Bonds by the Trustee or of a Unit by a Unit holder is, however,
includable in gross income for Federal income tax purposes. (It
should be noted in this connection that such gain does not include
any amounts received in respect of accrued interest or accrued
original issue discount, if any.) It should be noted that under
provisions of the Revenue Reconciliation Act of 1993 (the "Tax
Act") that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit
holders when principal payments are received on the Bond, upon
sale or at redemption (including early redemption) or upon the
sale or redemption of the Units, unless a Unit holder elects to
include market
Page 19
discount in taxable income as it accrues. The market discount
rules are complex and Unit holders should consult their tax advisers
regarding these rules and their application.
In the opinion of Chapman and Cutler, Counsel for the Sponsor,
under existing law:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes. Tax-exempt interest received by each
of the Trusts on Bonds deposited therein will retain its status
as tax-exempt interest, for Federal income tax purposes, when
distributed to a Unit holder except that (i) interest income on
certain Bonds in certain Trusts may be included as an item of
tax preference in calculating the Alternative Minimum Tax applicable
to both individuals and corporations (see "Portfolio" for each
Trust to determine whether the Trust contains Bonds that generate
this type of interest income) and (ii) the alternative minimum
tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders;"
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Bonds delivered
after the date the Unit holders pay for their Units and, consequently,
such Unit holders may have an increase in taxable gain or reduction
in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing
the proceeds of such sale or redemption with the adjusted basis
of the Units. If the Trustee disposes of Bonds (whether by sale,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder. The amount of any such gain or
loss is measured by comparing the Unit holder's pro rata share
of the total proceeds from such disposition with his basis for
his fractional interest in the asset disposed of. In the case
of a Unit holder who purchases his Units, such basis is determined
by apportioning the tax basis for the Units among each of the
Trust assets ratably according to value as of the date of acquisition
of the Units. The basis of each Unit and of each Bond which was
issued with original issue discount must be increased by the amount
of accrued original issue discount and the basis of each Unit
and of each Bond which was purchased by a Trust at a premium must
be reduced by the annual amortization of Bond premium. The tax
cost reduction requirements of said Code relating to amortization
of bond premium may, under some circumstances, result in the Unit
holder realizing a taxable gain when his Units are sold or redeemed
for an amount equal to or less than his original cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 20
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. See "Portfolio" in Part
I of this Prospectus for each Trust to determine whether the Trust
includes any such private activity bonds issued on or after that
date. SEE "PORTFOLIO" IN PART I OF THIS PROSPECTUS FOR EACH TRUST
TO DETERMINE WHETHER THE TRUST INCLUDES ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
All taxpayers are presently required to disclose to the Internal
Revenue Service the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Page 21
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Fund for New York tax matters, under the existing income tax
laws of the State and City of New York, each Trust will not constitute
an association taxable as a corporation under New York law, and
accordingly will not be subject to the New York State franchise
tax or the New York City general corporation tax. Under the income
tax laws of the State and City of New York, the income of each
Trust will be considered the income of the holders of the Units.
For information with respect to exemption from state or other
local taxes, see the sections in the Prospectus pertaining to
each Trust.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection
with each distribution a statement of the amount of interest,
if any, and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
Within a reasonable time after the last business day of each calendar
year, the Trustee will furnish to each person who at any time
during the calendar year was a Unit holder of a Trust of record,
a statement as to (1) the Interest Account: interest received
by such Trust (including amounts representing interest received
upon any disposition of Bonds of such Trust), the amount of such
interest representing insurance proceeds (if applicable), deductions
for payment of applicable taxes and for fees and expenses of the
Trust, redemption 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) the Principal Account: the dates of disposition of any
Bonds of such Trust and the net proceeds received therefrom (excluding
any portion representing interest and the premium attributable
to the exercise of the right, if applicable, to obtain Permanent
Insurance), deduction for payment of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, and the
balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing
the pro rata share of each Unit outstanding on the last business
day of such calendar year; (3) the Bonds held and the number of
Units of such Trust 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)
the amounts actually distributed during such calendar year from
the Interest Account and from the Principal Account of such Trust,
separately stated, expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the Record Date for
such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its unit investment trust office in the City
of New York of the certificates representing the Units to be redeemed,
duly endorsed or accompanied by proper instruments of transfer
with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or
destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the third
day following such tender, the Unit holder will be entitled to
receive in cash an amount for each Unit equal to the Redemption
Price per Unit next computed after receipt by the Trustee of such
tender of Units. 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 close of trading on the New York Stock
Exchange, the date of tender is the next day on which such Exchange
is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled.
Accrued interest to the settlement date paid on redemption shall
be withdrawn from the Interest Account of the Trust or, if the
balance therein is insufficient, from the Principal Account of
such Trust. All other amounts paid on redemption shall be withdrawn
from the Principal Account of the Trust.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Bonds in the Trust as of the close of trading
on the New York Stock Exchange
Page 22
on the date any such determination is made. On the Initial Date
of Deposit the Public Offering Price per Unit (which is based
on the offering prices of the Bonds in the Trust and includes
the sales charge) exceeded the Unit value at which Units could
have been redeemed (based upon the current bid prices of the Bonds
in such Trust) by the amount shown under "Summary of Essential
Information" in each Part I of this Prospectus. The Redemption
Price per Unit is the pro rata share of each Unit determined by
the Trustee on the basis of (1) the cash on hand in the Trust
or moneys in the process of being collected, (2) the value of
the Bonds in such Trust based on the bid prices of the Bonds,
except for those cases in which the value of the insurance, if
applicable, has been added, and (3) interest accrued thereon,
less (a) amounts representing taxes or other governmental charges
payable out of such Trust, (b) the accrued expenses of such Trust,
and (c) cash held for distribution to Unit holders of record as
of a date prior to the evaluation then being made. The Evaluator
may determine the value of the Bonds in the Trust (1) on the basis
of current bid prices of the Bonds obtained from dealers or brokers
who customarily deal in bonds comparable to those held by such
Trust, (2) on the basis of bid prices for bonds comparable to
any Bonds for which bid prices are not available, (3) by determining
the value of the Bonds by appraisal, or (4) by any combination
of the above. In determining the Redemption Price per Unit for
an Insured Trust, no value will be attributed to the portfolio
insurance covering the Bonds in such Trust unless such Bonds are
in default in payment of principal or interest or in significant
risk of such default. On the other hand, Bonds insured under a
policy obtained by the Bond issuer, the underwriters, the Sponsor
or others are entitled to the benefits of such insurance at all
times and such benefits are reflected and included in the market
value of such Bonds. See "General Trust Information-Why and How
are the Insured Trusts Insured?" For a description of the situations
in which the evaluator may value the insurance obtained by an
Insured Trust, see "Public Offering-How is the Public Offering
Price Determined?"
The difference between the bid and offering prices of such Bonds
may be expected to average 1-2% of the principal amount. In the
case of actively traded bonds, the difference may be as little
as 1/2 of 1% and, in the case of inactively traded bonds, such
difference usually will not exceed 3%. Therefore, the price at
which Units may be redeemed could be less than the price paid
by the Unit holder and may be less than the par value of the Securities
represented by the Units so redeemed.
The Trustee is empowered to sell underlying Bonds in a Trust in
order to make funds available for redemption. To the extent that
Bonds are sold, the size and diversity of such Trust will be reduced.
Such sales may be required at a time when Bonds would not otherwise
be sold and might result in lower prices than might otherwise
be realized.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or an emergency exists, as a result
of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances,
the Sponsor 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.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 12:00 p.m. eastern
standard time on the next succeeding business day and by making
payment therefor to the Unit holder not later than the day on
which the Units would otherwise have been redeemed by the Trustee.
Units held by the Sponsor may be tendered to the Trustee for redemption
as any other Units. Any profit or loss resulting from the resale
or redemption of such Units will belong to the Sponsor.
How May Bonds be Removed from the Fund?
The Trustee is empowered to sell such of the Bonds in each Trust
on a list furnished by the Sponsor as the Trustee in its sole
discretion may deem necessary to meet redemption requests or pay
expenses to the extent funds are unavailable. As described in
the following paragraph and in certain other unusual circumstances
Page 23
for which it is determined by the Depositor to be in the best
interests of the Unit holders or if there is no alternative, the
Trustee is empowered to sell Bonds in a Trust which are in default
in payment of principal or interest or in significant risk of
such default and for which value has been attributed to the insurance,
if any, obtained by the Trust. See "How May Units be Redeemed?"
The Sponsor is empowered, but not obligated, to direct the Trustee
to dispose of Bonds in a Trust in the event of advanced refunding.
The Sponsor may from time to time act as agent for a Trust with
respect to selling Bonds out of a Trust. From time to time, the
Trustee may retain and pay compensation to the Sponsor subject
to the restrictions under the Investment Company Act of 1940,
as amended.
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, if any, or otherwise, within
thirty days, the Trustee is required to notify the Sponsor thereof.
If the Sponsor fails to instruct the Trustee to sell or to hold
such Bond within thirty days after notification by the Trustee
to the Sponsor of such default, the Trustee may, in its discretion,
sell the defaulted Bond and not be liable for any depreciation
or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made
by an issuer of any of the Bonds to issue new obligations in exchange
and substitution for any Bonds pursuant to a refunding or refinancing
plan, except that the Sponsor may instruct the Trustee to accept
such an offer or to take any other action with respect thereto
as the Sponsor may deem proper if the issuer is in default with
respect to such Bonds or in the written opinion of the Sponsor
the issuer will probably default in respect to such Bonds in the
foreseeable future. Any obligations so received in exchange or
substitution will be held by the Trustee subject to the terms
and conditions in the Indenture to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations
in exchange or substitution for underlying Bonds, the Trustee
is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under
"What are Certain General Matters Relating to the Trusts?" for
Failed Bonds, the acquisition by a Trust of any securities other
than the Bonds initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $9 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994, the total partners' capital of Nike Securities
L.P. was $10,863,058 (audited). (This paragraph relates only to
the Sponsor and not to the Trust or to any series thereof or to
any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank (National Association), a national
banking association with its principal executive office located at 1 Chase
Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, New York 10003. Unit holders who have
questions regarding the Trusts may call the Customer Service Help Line at
1-800-682-7520. The Trustee is subject to supervision by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
Page 24
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Fund which the Trustee may be required to pay under
any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the
Indenture contains other customary provisions limiting the liability
of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trusts as provided herein, or (c)
continue to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor or the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture 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, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
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 Indenture 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
(as determined in good faith by the Sponsor and the Trustee),
provided that the Indenture is not amended to increase the number
of Units of any Trust issuable thereunder or to permit the deposit
or acquisition of securities either in addition to or in substitution
for any of the Bonds of any Trust initially deposited in a Trust,
except for the substitution of certain refunding securities for
Bonds or New Bonds for Failed Bonds. In the event of any amendment,
the Trustee is obligated to notify promptly all Unit holders of
the substance of such amendment.
Page 25
Each Trust may be liquidated at any time by consent of 100% of
the Unit holders of such Trust or by the Trustee when the value
of such Trust, as shown by any evaluation, is less than 20% of
the aggregate principal amount of the Bonds deposited in the Trust
during the primary offering period or by the Trustee in the event
that Units of a Trust not yet sold aggregating more than 60% of
the Units of such Trust are tendered for redemption by the Underwriters,
including the Sponsor. If a Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of such Trust the
entire sales charge paid by such purchaser. The Indenture will
terminate upon the redemption, sale or other disposition of the
last Bond held thereunder, but in no event shall it continue beyond
December 31, 2044. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders of such
Trust. Within a reasonable period after termination, the Trustee
will sell any Bonds remaining in the Trust and, after paying all
expenses and charges incurred by such Trust, will distribute to
each Unit holder of such Trust (including the Sponsor if it then
holds any Units), upon surrender for cancellation of his Certificate
for Units, his pro rata share of the balances remaining in the
Interest and Principal Accounts of such Trust, all as provided
in the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, 2 Wall Street, New York,
New York 10005, will act as counsel for the Trustee and as special
counsel for the Fund for New York tax matters. For information
with respect to state and local tax matters, including the State
Trust special counsel for such matters, see the section of the
Prospectus describing each Trust appearing herein.
Experts
The statements of net assets, including the portfolios, of the
Trusts on the Initial Date of Deposit appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon
appearing in each Part I of this Prospectus and
in the Registration Statement, and are included in reliance upon
such reports given upon the authority of such firm as experts
in accounting and auditing.
Supplemental Information
Upon written or telephonic request to the Trustee, investors will
receive at no cost to the investor supplemental information about
this Series, which has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference. The supplemental
information includes more detailed information concerning certain
of the Bonds included in the Trusts and more specific risk information
concerning the individual state Trusts.
Page 26
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Page 27
<TABLE>
<CAPTION>
<S> <C>
CONTENTS:
What is the First Trust Combined Series? 1
What are Certain General Matters Relating
to the Trusts? 2
Risk Factors 3
What are Estimated Long-Term Return and
Estimated Current Return? 7
How is Accrued Interest Treated? 8
What are the Expenses and Charges? 9
Why and How are the Insured Trusts Insured? 10
Public Offering:
How is the Public Offering Price Determined? 12
How are Units Distributed? 14
What are the Sponsor's Profits? 15
What are the Underwriting Concessions? 15
Will There be a Secondary Market? 16
Rights of Unit Holders:
How are Certificates Issued and Transferred? 17
How are Interest and Principal Distributed? 17
How Can Distributions to Unit Holders be
Reinvested? 18
What is the Federal Tax Status of Unit Holders? 19
What Reports will Unit Holders Receive? 22
How May Units be Redeemed? 22
How May Units be Purchased by the Sponsor? 23
How May Bonds be Removed from the Fund? 23
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 24
Who is the Trustee? 24
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 25
Other Information:
How May the Indenture be Amended or
Terminated? 25
Legal Opinions 26
Experts 26
Supplemental Information 26
</TABLE>
________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
THE FIRST TRUST COMBINED SERIES
Prospectus
Part II
FIRST TRUST (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Company
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
This Part Two Must Be
Accompanied by Part One.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
September 7, 1995
Page 28
THE FIRST TRUST (REGISTERED TRADEMARK) COMBINED SERIES 257
INFORMATION SUPPLEMENT
This Information Supplement provides additional information concerning
the structure, operations and risks of a First Trust Combined Series
Trust not found in the prospectuses for the Trusts. This Information
Supplement is not a prospectus and does not include all of the
information that a prospective investor should consider before investing
in a Trust. This Information Supplement should be read in conjunction
with the prospectus for the Trust in which an investor is considering
investing ("Prospectus"). Copies of the Prospectus can be obtained by
calling or writing the Trustee at the telephone number and address
indicated in Part II of the Prospectus. This Information Supplement has
been created to supplement information contained in the Prospectus.
The objectives of the Trust are conservation of capital and income
exempt, with certain exceptions, from Federal and applicable state and
local income taxes. The objectives are, of course, dependent upon the
continuing ability of the issuers, obligors and/or insurers to meet
their respective obligations.
This Information Supplement is dated January 17, 1996. Capitalized
terms have been defined in the Prospectus.
TABLE OF CONTENTS
General Risk Disclosure
Discount Bonds 1
Original Issue Discount Bonds 2
Zero Coupon Bonds 2
Premium Bonds 2
General Obligation Bonds 3
Healthcare Revenue Bonds 3
Single Family Mortgage Revenue Bonds 3
Multi-Family Mortgage Revenue Bonds 4
Water and Sewerage Revenue Bonds 4
Electric Utility Revenue Bonds 4
Lease Obligation Revenue Bonds 5
Industrial Revenue Bonds 5
Transportation Facility Revenue Bonds 5
Educational Obligation Revenue Bonds 6
Resource Recovery Facility Revenue Bonds 6
Bonds of Issuers Located in the Commonwealth of Puerto Rico 6
Insurance on the Bonds 7
How is the Public Offering Price Determined? 15
Description of Bond Ratings 15
General Risk Disclosure
Discount Bonds. Certain of the Bonds in the Trusts may have been
acquired at a market discount from par value at maturity. The coupon
interest rates on the discount bonds at the time they were purchased and
deposited in the Trusts were lower than the current market interest
rates for newly issued bonds of comparable rating and type. If such
interest rates for newly issued comparable bonds increase, the market
discount of previously issued bonds will become greater, and if such
interest rates for newly issued comparable bonds decline, the market
discount of previously issued bonds will be reduced, other things being
equal. Investors should also note that the value of bonds purchased at a
market discount will increase in value faster than bonds purchased at a
Page 1
market premium if interest rates decrease. Conversely, if interest rates
increase, the value of bonds purchased at a market discount will
decrease faster than bonds purchased at a market premium. In addition,
if interest rates rise, the prepayment risk of higher yielding, premium
bonds and the prepayment benefit for lower yielding, discount bonds will
be reduced. A discount bond held to maturity will have a larger portion
of its total return in the form of taxable income and capital gain and
less in the form of tax-exempt interest income than a comparable bond
newly issued at current market rates. See "What is the Federal Tax
Status of Unit Holders?" Market discount attributable to interest
changes does not indicate a lack of market confidence in the issue.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds.
Original Issue Discount Bonds. Certain of the Bonds in the Trusts may be
original issue discount bonds. Under current law, the original issue
discount, which is the difference between the stated redemption price at
maturity and the issue price of the Bonds, is deemed to accrue on a
daily basis and the accrued portion is treated as tax-exempt interest
income for Federal income tax purposes. On sale or redemption, any gain
realized that is in excess of the earned portion of original issue
discount will be taxable as capital gain unless the gain is attributable
to market discount in which case the accretion of market discount is
taxable as ordinary income. See "What is the Federal Tax Status of Unit
Holders?" The current value of an original issue discount bond reflects
the present value of its stated redemption price at maturity. The market
value tends to increase in greater increments as the Bonds approach
maturity.
Zero Coupon Bonds. Certain of the original issue discount bonds may be
Zero Coupon Bonds (including bonds known as multiplier bonds, money
multiplier bonds, capital appreciation bonds, capital accumulator bonds,
compound interest bonds and money discount maturity payment bonds). Zero
Coupon Bonds do not provide for the payment of any current interest and
generally provide for payment at maturity at face value unless sooner
sold or redeemed. Zero Coupon Bonds may be subject to more price
volatility than conventional bonds. While some types of Zero Coupon
Bonds, such as multipliers and capital appreciation bonds, define par as
the initial offering price rather than the maturity value, they share
the basic Zero Coupon Bond features of (1) not paying interest on a semi-
annual basis and (2) providing for the reinvestment of the bond's semi-
annual earnings at the bond's stated yield to maturity. While Zero
Coupon Bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection, i.e., a bond's provision for
redemption at only a modest premium over the accreted value of the bond.
Premium Bonds. Certain of the Bonds in the Trusts may have been acquired
at a market premium from par value at maturity. The coupon interest
rates on the premium bonds at the time they were purchased and deposited
in the Trusts were higher than the current market interest rates for
newly issued bonds of comparable rating and type. If such interest rates
for newly issued and otherwise comparable bonds decrease, the market
premium of previously issued bonds will be increased, and if such
interest rates for newly issued comparable bonds increase, the market
premium of previously issued bonds will be reduced, other things being
equal. The current returns of bonds trading at a market premium are
initially higher than the current returns of comparable bonds of a
similar type issued at currently prevailing interest rates because
premium bonds tend to decrease in market value as they approach maturity
when the face amount becomes payable. Because part of the purchase price
is thus returned not at maturity but through current income payments,
early redemption of a premium bond at par or early prepayments of
principal will result in a reduction in yield. 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 or for original issue
discount Bonds a premium over the accreted value. To the extent that the
Bonds were deposited in the Fund at a price higher than the price at
which they are redeemed, this will represent a loss of capital when
compared to the original Public Offering Price of the Units. Because
premium bonds generally pay a higher rate of interest than bonds priced
at or below par, the effect of the redemption of premium bonds would be
to reduce Estimated Net Annual Unit Income by a greater percentage than
the par amount of such bonds bears to the total par amount of Bonds in
Page 2
the Trust. Although the actual impact of any such redemptions that may
occur will depend upon the specific Bonds that are redeemed, it can be
anticipated that the Estimated Net Annual Unit Income will be
significantly reduced after the dates on which such Bonds are eligible
for redemption. The Trust may be required to sell Zero Coupon Bonds
prior to maturity (at their current market price which is likely to be
less than their par value) in the event that all the Bonds in the
portfolio other than the Zero Coupon Bonds are called or redeemed in
order to pay expenses of the Trust or in case the Trust is terminated.
See "Rights of Unit Holders: How May Bonds be Removed from the Fund?"
and "Other Information: How May the Indenture be Amended or Terminated?"
See "Portfolio" for each Trust for the earliest scheduled call date and
the initial redemption price for each Bond.
General Obligation Bonds. Certain of the Bonds in the Trusts may be
general obligations of a governmental entity that are backed by the
taxing power of such entity. All other Bonds in the Trusts are revenue
bonds payable from the income of a specific project or authority and are
not supported by the issuer's power to levy taxes. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds, on the
other hand, are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of
a special excise tax or other specific revenue source. There are, of
course, variations in the security of the different Bonds in the Fund,
both within a particular classification and between classifications,
depending on numerous factors.
Healthcare Revenue Bonds. Certain of the Bonds in the Trusts may be
health care revenue bonds. Ratings of bonds issued for health care
facilities are sometimes based on feasibility studies that contain
projections of occupancy levels, revenues and expenses. A facility's
gross receipts and net income available for debt service may be affected
by future events and conditions including among other things, demand for
services, the ability of the facility to provide the services required,
physicians' confidence in the facility, management capabilities,
competition with other hospitals, efforts by insurers and governmental
agencies to limit rates, legislation establishing state rate-setting
agencies, expenses, government regulation, the cost and possible
unavailability of malpractice insurance and the termination or
restriction of governmental financial assistance, including that
associated with Medicare, Medicaid and other similar third party payor
programs. Pursuant to recent Federal legislation, Medicare
reimbursements are currently calculated on a prospective basis utilizing
a single nationwide schedule of rates. Prior to such legislation
Medicare reimbursements were based on the actual costs incurred by the
health facility. The current legislation may adversely affect
reimbursements to hospitals and other facilities for services provided
under the Medicare program.
Single Family Mortgage Revenue Bonds. Certain of the Bonds in the Trusts
may be single family mortgage revenue bonds, which are issued for the
purpose of acquiring from originating financial institutions notes
secured by mortgages on residences located within the issuer's
boundaries and owned by persons of low or moderate income. Mortgage
loans are generally partially or completely prepaid prior to their final
maturities as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these Bonds are subject
to extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such Bonds will
probably be redeemed prior to their scheduled maturities or even prior
to their ordinary call dates. The redemption price of such issues may be
more or less than the offering price of such Bonds. Extraordinary
mandatory redemption without premium could also result from the failure
of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some cases,
from the sale by the Bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other
sources becoming competitive with the interest rates on the mortgage
loans funded with the proceeds of the single family mortgage revenue
bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single family
mortgage revenue bonds issued after December 31, 1980 were issued under
Page 3
Section 103A of the Internal Revenue Code, which Section contains
certain ongoing requirements relating to the use of the proceeds of such
Bonds in order for the interest on such Bonds to retain its tax-exempt
status. In each case, the issuer of the Bonds has covenanted to comply
with applicable ongoing requirements and bond counsel to such issuer has
issued an opinion that the interest on the Bonds is exempt from Federal
income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to
meet these requirements could cause the interest on the Bonds to become
taxable, possibly retroactively from the date of issuance.
Multi-Family Mortgage Revenue Bonds. Certain of the Bonds in the Trusts
may be obligations of issuers whose revenues are primarily derived from
mortgage loans to housing projects for low to moderate income families.
The ability of such issuers to make debt service payments will be
affected by events and conditions affecting financed projects,
including, among other things, the achievement and maintenance of
sufficient occupancy levels and adequate rental income, increases in
taxes, employment and income conditions prevailing in local labor
markets, utility costs and other operating expenses, the managerial
ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies and social and economic
trends affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high rent
levels and income limitations imposed under Federal and state programs.
Like single family mortgage revenue bonds, multi-family mortgage revenue
bonds are subject to redemption and call features, including
extraordinary mandatory redemption features, upon prepayment, sale or
non-origination of mortgage loans as well as upon the occurrence of
other events. Certain issuers of single or multi-family housing bonds
have considered various ways to redeem bonds they have issued prior to
the stated first redemption dates for such bonds. In one situation the
New York City Housing Development Corporation, in reliance on its
interpretation of certain language in the indenture under which one of
its bond issues was created, redeemed all of such issue at par in spite
of the fact that such indenture provided that the first optional
redemption was to include a premium over par and could not occur prior
to 1992. In connection with the housing Bonds held by a Trust, the
Sponsor has not had any direct communications with any of the issuers
thereof, but at the Initial Date of Deposit it is not aware that any of
the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call
dates. However, there can be no assurance that an issuer of a Bond in a
Trust will not attempt to so redeem a Bond in a Trust.
Water and Sewerage Revenue Bonds. Certain of the Bonds in the Trusts may
be obligations of issuers whose revenues are derived from the sale of
water and/or sewerage services. Water and sewerage bonds are generally
payable from user fees. Problems faced by such issuers include the
ability to obtain timely and adequate rate increases, population decline
resulting in decreased user fees, the difficulty of financing large
construction programs, the limitations on operations and increased costs
and delays attributable to environmental considerations, the increasing
difficulty of obtaining or discovering new supplies of fresh water, the
effect of conservation programs and the impact of "no-growth" zoning
ordinances. All of such issuers have been experiencing certain of these
problems in varying degrees.
Electric Utility Revenue Bonds. Certain of the Bonds in the Trusts may
be obligations of issuers whose revenues are primarily derived from the
sale of electric energy. Utilities are generally subject to extensive
regulation by state utility commissions which, among other things,
establish the rates which may be charged and the appropriate rate of
return on an approved asset base. The problems faced by such issuers
include the difficulty in obtaining approval for timely and adequate
rate increases from the governing public utility commission, the
difficulty in financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, increased competition, recent reductions in estimates of
future demand for electricity in certain areas of the country, the
difficulty of the capital market in absorbing utility debt, the
difficulty in obtaining fuel at reasonable prices and the effect of
energy conservation. All of such issuers have been experiencing certain
of these problems in varying degrees. In addition, Federal, state and
municipal governmental authorities may from time to time review existing
and impose additional regulations governing the licensing, construction
and operation of nuclear power plants, which may adversely affect the
ability of the issuers of such Bonds to make payments of principal
and/or interest on such Bonds.
Page 4
Lease Obligation Revenue Bonds. Certain of the Bonds in the Trusts may
be lease obligations issued for the most part by governmental
authorities that have no taxing power or other means of directly raising
revenues. Rather, the governmental authorities are financing vehicles
created solely for the construction of buildings (schools,
administrative offices, convention centers and prisons, for example) or
the purchase of equipment (police cars and computer systems, for
example) that will be used by a state or local government (the
"lessee"). Thus, these obligations are subject to the ability and
willingness of the lessee government to meet its lease rental payments
which include debt service on the obligations. Lease obligations are
subject, in almost all cases, to the annual appropriation risk, i.e.,
the lessee government is not legally obligated to budget and appropriate
for the rental payments beyond the current fiscal year. These
obligations are also subject to construction and abatement risk in many
states-rental obligations cease in the event that delays in building,
damage, destruction or condemnation of the project prevents its use by
the lessee. In these cases, insurance provisions designed to alleviate
this risk become important credit factors. In the event of default by
the lessee government, there may be significant legal and/or practical
difficulties involved in the re-letting or sale of the project. Some of
these issues, particularly those for equipment purchase, contain the so-
called "substitution safeguard", which bars the lessee government, in
the event it defaults on its rental payments, from the purchase or use
of similar equipment for a certain period of time. This safeguard is
designed to insure that the lessee government will appropriate, even
though it is not legally obligated to do so, but its legality remains
untested in most, if not all, states.
Industrial Revenue Bonds. Certain of the Bonds in the Trusts may be
industrial revenue bonds ("IRBs"), including pollution control revenue
bonds, which are tax-exempt securities issued by states, municipalities,
public authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. These projects
are usually operated by corporate entities. Issuers are obligated only
to pay amounts due on the IRBs to the extent that funds are available
from the unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate
operator of a project. The arrangement may be in the form of a lease,
installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to
be sufficient to meet the payments of amounts due on the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon
the creditworthiness of the corporate operator of the project or
corporate guarantor. Corporate operators or guarantors may be affected
by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of
revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents or environmentally-caused illnesses,
extensive competition and financial deterioration resulting from a
complete restructuring pursuant to a leveraged buy-out, takeover or
otherwise. Such a restructuring may result in the operator of a project
becoming highly leveraged which may impact on such operator's
creditworthiness, which in turn would have an adverse impact on the
rating and/or market value of such Bonds. Further, the possibility of
such a restructuring may have an adverse impact on the market for and
consequently the value of such Bonds, even though no actual takeover or
other action is ever contemplated or affected. The IRBs in a Trust may
be subject to special or extraordinary redemption provisions which may
provide for redemption at par or, with respect to original issue
discount bonds, at issue price plus the amount of original issue
discount accreted to the redemption date plus, if applicable, a premium.
The Sponsor cannot predict the causes or likelihood of the redemption of
IRBs or other Bonds in the Trusts prior to the stated maturity of such
Bonds.
Transportation Facility Revenue Bonds. Certain of the Bonds in the
Trusts may be obligations which are payable from and secured by revenues
derived from the ownership and operation of facilities such as airports,
bridges, turnpikes, port authorities, convention centers and arenas. The
major portion of an airport's gross operating income is generally
derived from fees received from signatory airlines pursuant to use
agreements which consist of annual payments for leases, occupancy of
certain terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their
obligations under the use agreements. The air transport industry is
Page 5
experiencing significant variations in earnings and traffic, due to
increased competition, excess capacity, increased costs, deregulation,
traffic constraints and other factors, and several airlines are
experiencing severe financial difficulties. The Sponsor cannot predict
what effect these industry conditions may have on airport revenues which
are dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
Bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected
by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Educational Obligation Revenue Bonds. Certain of the Bonds in the Trusts
may be obligations of issuers which are, or which govern the operation
of, schools, colleges and universities and whose revenues are derived
mainly from ad valorem taxes, or for higher education systems, from
tuition, dormitory revenues, grants and endowments. General problems
relating to school bonds include litigation contesting the state
constitutionality of financing public education in part from ad valorem
taxes, thereby creating a disparity in educational funds available to
schools in wealthy areas and schools in poor areas. Litigation or
legislation on this issue may affect the sources of funds available for
the payment of school bonds in the Trusts. General problems relating to
college and university obligations would include the prospect of a
declining percentage of the population consisting of "college" age
individuals, possible inability to raise tuitions and fees sufficiently
to cover increased operating costs, the uncertainty of continued receipt
of Federal grants and state funding and new government legislation or
regulations which may adversely affect the revenues or costs of such
issuers. All of such issuers have been experiencing certain of these
problems in varying degrees.
Resource Recovery Facility Revenue Bonds. Certain of the Bonds in the
Trusts may be obligations which are payable from and secured by revenues
derived from the operation of resource recovery facilities. Resource
recovery facilities are designed to process solid waste, generate steam
and convert steam to electricity. Resource recovery bonds may be subject
to extraordinary optional redemption at par upon the occurrence of
certain circumstances, including but not limited to: destruction or
condemnation of a project; contracts relating to a project becoming
void, unenforceable or impossible to perform; changes in the economic
availability of raw materials, operating supplies or facilities
necessary for the operation of a project or technological or other
unavoidable changes adversely affecting the operation of a project;
administrative or judicial actions which render contracts relating to
the projects void, unenforceable or impossible to perform; or impose
unreasonable burdens or excessive liabilities. The Sponsor cannot
predict the causes or likelihood of the redemption of resource recovery
bonds in the Trusts prior to the stated maturity of the Bonds.
Bonds of Issuers Located in the Commonwealth of Puerto Rico. Certain
Trusts of the Fund may contain Bonds of issuers located in the
Commonwealth of Puerto Rico or issuers which will be affected by general
economic conditions of Puerto Rico. Puerto Rico's unemployment rate
remains significantly higher than the U.S. unemployment rate.
Furthermore, the economy is largely dependent for its development upon
U.S. policies and programs that are being reviewed and may be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output is shipped
to the mainland United States, which is also the chief source of semi-
finished manufactured articles on which further manufacturing operations
are performed in Puerto Rico. Since World War II the economic importance
of agriculture for Puerto Rico, particularly in the dominance of sugar
production, has declined. Nevertheless, the Commonwealth-controlled
sugar monopoly remains an important economic factor and is largely
dependent upon Federal maintenance of sugar prices, the discontinuation
of which could severely affect Puerto Rico sugar production. The level
of tourism is affected by various factors including the strength of the
U.S. dollar. During periods when the dollar is strong, tourism in
foreign countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth and
Federal investment incentive programs. For example, Section 936 of the
Internal Revenue Code provides for a credit against Federal income taxes
Page 6
for U.S. companies operating on the island if certain requirements are
met. The Omnibus Budget Reconciliation Act of 1993 imposes limits on
such credit, effective for tax years beginning after 1993. In addition,
from time to time proposals are introduced in Congress which, if enacted
into law, would eliminate some or all of the benefits of Section 936.
Although no assessment can be made at this time of the precise effect of
such limitation, it is expected that the limitation of Section 936
credits would have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily on
Federal programs, and current Federal budgetary policies suggest that an
expansion of aid to Puerto Rico is unlikely. An adverse effect on the
Puerto Rican economy could result from other U.S. policies, including a
reduction of tax benefits for distilled products, further reduction in
transfer payment programs such as food stamps, curtailment of military
spending and policies which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate chose
to continue Puerto Rico's Commonwealth status. Previously proposed
legislation, which was not enacted, would have preserved the federal tax
exempt status of the outstanding debts of Puerto Rico and its public
corporations regardless of the outcome of the referendum, to the extent
that similar obligations issued by the states are so treated and subject
to the provisions of the Internal Revenue Code currently in effect.
There can be no assurance that any pending or future legislation finally
enacted will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to have both
direct and indirect consequences on such matters as the basic
characteristics of future Puerto Rico debt obligations, the markets for
these obligations, and the types, levels and quality of revenue sources
pledged for the payment of existing and future debt obligations. Such
possible consequences include, without limitation, legislative proposals
seeking restoration of the status of Section 936 benefits otherwise
subject to the limitations discussed above. However, no assessment can
be made at this time of the economic and other effects of a change in
federal laws affecting Puerto Rico as a result of the November 1993
plebiscite.
The foregoing information constitutes only a brief summary of some of
the financial difficulties which may impact certain issuers of Bonds and
does not purport to be a complete or exhaustive description of all
adverse conditions to which the issuers of the Bonds are subject.
Additionally, many factors including national economic, social and
environmental policies and conditions, which are not within the control
of the issuers of Bonds, could affect or could have an adverse impact on
the financial condition of Puerto Rico and various agencies and
political subdivisions located in Puerto Rico. The Sponsor is unable to
predict whether or to what extent such factors or other factors may
affect the issuers of Bonds, the market value or marketability of the
Bonds or the ability of the respective issuers of the Bonds acquired by
the Trusts to pay interest on or principal of the Bonds.
Insurance on the Bonds
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS. THE
BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED BY
INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as to the
scheduled payment of interest and principal by policies obtained by each
Insured Trust from Financial Guaranty Insurance Company ("Financial
Guaranty" or "FGIC"), a New York stock insurance company, or AMBAC
Indemnity Corporation ("AMBAC Indemnity" or "AMBAC"), a Wisconsin-
domiciled stock insurance company, or obtained by the Bond issuer, the
underwriters, the Sponsor or others prior to the Initial Date of Deposit
directly from Financial Guaranty, AMBAC Indemnity or other insurers (the
"Preinsured Bonds"). The insurance policy obtained by each Insured Trust
is noncancellable and will continue in force for such Trust so long as
such Trust is in existence and the Bonds described in the policy
continue to be held by such Trust (see "Portfolio" for each Insured
Trust). Nonpayment of premiums on the policy obtained by each Insured
Page 7
Trust will not result in the cancellation of insurance, but will permit
Financial Guaranty and/or AMBAC Indemnity to take action against the
Trustee to recover premium payments due it. Premium rates for each issue
of Bonds protected by the policy obtained by each Insured Trust are
fixed for the life of such Trust. The premium for any Preinsured Bonds
has been paid in advance by the Bond issuer, the underwriters, the
Sponsor or others and any such policy or policies are noncancellable and
will continue in force so long as the Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. If the
provider of an original issuance insurance policy is unable to meet its
obligations under such policy, or if the rating assigned to the claims-
paying ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure any issue adversely affected
by either of the above described events. A monthly premium is paid by
each Insured Trust for the insurance obtained by such Trust, which is
payable from the interest income received by such Trust. In the case of
Preinsured Bonds, no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of the
aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay to
Citibank, N.A., or its successor, as its agent (the "Fiscal Agent"),
that portion of the principal of and interest on the Bonds covered by
the policy which shall become due for payment but shall be unpaid by
reason of nonpayment by the issuer of the Bonds. The term "due for
payment" means, when referring to the principal of a Bond, its stated
maturity date or the date on which it shall have been called for
mandatory sinking fund redemption and does not refer to any earlier date
on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on a Bond, the stated
date for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation, "due
for payment" also means, when referring to the principal of such Bond,
the date on which such Bond has been called for mandatory redemption as
a result of such determination of taxability, and when referring to
interest on such Bond, the accrued interest at the rate provided in such
documentation to the date on which such Bond has been called for such
mandatory redemption, together with any applicable redemption premium.
The term "due for payment" will not include, when referring to either
the principal of a Bond or the interest on a Bond, any acceleration of
payment unless such acceleration is at the sole option of Financial
Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent on the
date such principal or interest becomes due for payment or on the
business day next following the day on which Financial Guaranty shall
have received notice of nonpayment, whichever is later. The Fiscal Agent
will disburse to the Trustee the face amount of principal and interest
which is then due for payment but is unpaid by reason of nonpayment by
the issuer but only upon receipt by the Fiscal Agent of (i) evidence of
the Trustee's right to receive payment of the principal or interest due
for payment and (ii) evidence, including any appropriate instruments of
assignment, that all of the rights to payment of such principal or
interest due for payment shall thereupon vest in Financial Guaranty.
Upon such disbursement, Financial Guaranty shall become the owner of the
Bond, appurtenant coupon or right to payment of principal or interest on
such Bond and shall be fully subrogated to all of the Trustee's rights
thereunder, including the right to payment thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained by an
Insured Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds regardless of the
identity of the holder thereof) (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 an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee
will exercise the right to obtain Permanent Insurance only if upon such
exercise the Insured Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium attributable to the Permanent
Insurance) from such sale in excess of the sale proceeds if such Bonds
were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance is determined based upon the
insurability of each Bond as of the Initial Date of Deposit and will not
be increased or decreased for any change in the creditworthiness of such
Bond.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a wholly
owned subsidiary of General Electric Capital Corporation ("GECC").
Page 8
Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is domiciled in
the State of New York and is subject to regulation by the State of New
York Insurance Department. As of September 30, 1995, the total capital
and surplus of Financial Guaranty was approximately $994,500,000. Copies
of Financial Guaranty's financial statements, prepared on the basis of
statutory accounting principles, and the Corporation's financial
statements, prepared on the basis of generally accepted accounting
principles, may be obtained by writing to Financial Guaranty at 115
Broadway, New York, New York 10006, Attention: Communications Department
(telephone number (212) 312-3000) or to the New York State Insurance
Department at 160 West Broadway, 18th Floor, New York, New York 10013,
Attention: Financial Condition Property/Casualty Bureau (telephone
number (212) 621-0389).
In addition, Financial Guaranty is currently licensed to write insurance
in all fifty states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained
herein with respect to such corporation is unaudited but appears in
reports or other materials filed with state insurance regulatory
authorities and is subject to audit and review by such authorities. 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.
AMBAC Indemnity Corporation ("AMBAC Indemnity"). The Insurance Policy of
AMBAC Indemnity obtained by an Insured Trust is noncancellable and will
continue in force for so long as the Bonds described in the Insurance
Policy are held by an Insured Trust. A monthly premium is paid by an
Insured Trust for the Insurance Policy obtained by it. The Trustee will
pay, when due, successively, the full amount of each installment of the
insurance premium. Pursuant to a binding agreement with AMBAC Indemnity,
in the event of a sale of a Bond covered by the AMBAC Indemnity
Insurance Policy, the Trustee has the right to obtain permanent
insurance for such Bond upon payment of a single predetermined premium
from the proceeds of the sale of such Bond.
Under the terms of the Insurance Policy, AMBAC Indemnity agrees to pay
to the Trustee that portion of the principal of and interest on the
Bonds insured by AMBAC Indemnity which shall become due for payment but
shall be unpaid by reason of nonpayment by the issuer of the Bonds. The
term "due for payment" means, when referring to the principal of a Bond
so insured, its stated maturity date or the date on which it shall have
been called for mandatory sinking fund redemption and does not refer to
any earlier date on which payment is due by reason of call for
redemption (other than by mandatory sinking fund redemption),
acceleration or other advancement of maturity and means, when referring
to interest on a Bond, the stated date for payment of interest.
AMBAC Indemnity will make payment to the Trustee not later than thirty
days after notice from the Trustee is received by AMBAC Indemnity that a
nonpayment of principal or of interest on a Bond has occurred, but not
earlier than the date on which the Bonds are due for payment. AMBAC
Indemnity will disburse to the Trustee the face amount of principal and
interest which is then due for payment but is unpaid by reason of
nonpayment by the issuer in exchange for delivery of Bonds, not less in
face amount than the amount of the payment in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where
Bonds are issuable only in a form whereby principal is payable to
registered holders or their assigns, AMBAC Indemnity shall pay principal
only upon presentation and surrender of the unpaid Bonds uncancelled and
free of any adverse claim, together with an instrument of assignment in
satisfactory form, so as to permit ownership of such Bonds to be
registered in the name of AMBAC Indemnity or its nominee. In cases where
Bonds are issuable only in a form whereby interest is payable to
registered holders or their assigns, AMBAC Indemnity shall pay interest
only upon presentation of proof that the claimant is the person entitled
to the payment of interest on the Bonds and delivery of an instrument of
assignment, in satisfactory form, transferring to AMBAC Indemnity all
right under such Bonds to receive the interest in respect of which the
insurance payment was made.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Page 9
Wisconsin and licensed to do business in fifty states, the District of
Columbia and the Commonwealth of Puerto Rico, with admitted assets of
approximately $2,145,000,000 (unaudited) and statutory capital of
approximately $782,000,000 (unaudited) as of December 31, 1994.
Statutory capital consists of AMBAC Indemnity's policyholders' surplus
and statutory contingency reserve. AMBAC Indemnity is a wholly owned
subsidiary of AMBAC Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's have both assigned a
triple-A claims-paying ability rating to AMBAC Indemnity.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York, New
York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has been
furnished by AMBAC Indemnity. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any
adverse changes in such information, subsequent to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or AMBAC
Indemnity has applied its own standards which are not necessarily the
same as the criteria used in regard to the selection of bonds by the
Sponsor. This decision is made prior to the Initial Date of Deposit, as
bonds not covered by such insurance are not deposited in an Insured
Trust, unless such bonds are Preinsured Bonds. The insurance obtained by
an Insured Trust covers Bonds deposited in such Trust and physically
delivered to the Trustee in the case of bearer bonds or registered in
the name of the Trustee or its nominee or delivered along with an
assignment in the case of registered bonds or registered in the name of
the Trustee or its nominee in the case of Bonds held in book-entry form.
Contracts to purchase Bonds are not covered by the insurance obtained by
an Insured Trust although Bonds underlying such contracts are covered by
insurance upon physical delivery to the Trustee.
Insurance obtained by each Insured Trust or by the Bond issuer, the
underwriters, the Sponsor or others does not guarantee the market value
of the Bonds or the value of the Units of such Trust. The insurance
obtained by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by the
Trustee, the insurance terminates as to such Bond on the date of sale.
In the event of a sale of a Bond insured by an Insured Trust, the
Trustee has the right to obtain Permanent Insurance upon the payment of
an insurance premium from the proceeds of the sale of such Bond. Except
as indicated below, insurance obtained by an Insured Trust has no effect
on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value to such insurance obtained by an
Insured Trust (including the right to obtain Permanent Insurance) for
the purpose of computing the price or redemption value of Units only if
the Bonds covered by such insurance are in default in payment of
principal or interest or, in the Sponsor's 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 (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering-How is the Public Offering
Price Determined?" herein for a more complete description of the
Evaluator's method of valuing defaulted Bonds and Bonds which have a
significant risk of default. Insurance on a Preinsured Bond is effective
as long as such Bond is outstanding. Therefore, any such insurance 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.
A contract of insurance obtained by an Insured Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and/or AMBAC Indemnity and the Fund. Otherwise
neither Financial Guaranty nor its parent, FGIC Corporation, or any
affiliate thereof, nor AMBAC Indemnity nor its parent, AMBAC, Inc., or
Page 10
any affiliate thereof has any significant relationship, direct or
indirect, with the Fund or the Sponsor, except that the Sponsor has in
the past and may from time to time in the future, in the normal course
of its business, participate as sole underwriter or as manager or as a
member of underwriting syndicates in the distribution of new issues of
municipal bonds in which the investors or the affiliates of FGIC
Corporation and/or AMBAC Inc. have or will be participants or for which
a policy of insurance guaranteeing the scheduled payment of interest and
principal has been obtained from Financial Guaranty and/or AMBAC
Indemnity. Neither the Fund nor the Units of a Trust nor the portfolio
of such Trust is insured directly or indirectly by FGIC Corporation
and/or AMBAC Inc.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation" or "MBIA") is the principal operating subsidiary of MBIA,
Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA Corporation. MBIA
Corporation is a limited liability corporation rather than a several
liability association. MBIA Corporation is domiciled in the State of New
York and licensed to do business in all fifty states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the
Northern Mariana Islands, the Virgin Islands of the United States and
the Territory of Guam. MBIA has one European branch in the Republic of
France.
As of December 31, 1994, MBIA had admitted assets of $3.4 billion
(audited), total liabilities of $2.3 billion (audited), and total
capital and surplus of $1.1 billion (audited) determined in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities. As of September 30, 1995, MBIA had admitted
assets of $3.7 billion (audited), total liabilities of $2.5 billion
(audited), and total capital and surplus of $1.2 billion (audited),
determined in accordance with statutory accounting practices prescribed
or permitted by insurance regulatory authorities. Copies of MBIA's
financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of Bond Investors Guaranty
Insurance Company (BIG), now known as MBIA Insurance Corp. of Illinois.
Through a reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves, to MBIA
and MBIA has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG 1," both designated to be of the highest
quality. Standard & Poor's rates all new issues insured by MBIA "AAA."
Capital Guaranty Insurance Company. Capital Guaranty Insurance Company
("Capital Guaranty") is a "Aaa/AAA" rated monoline stock insurance
company incorporated in the State of Maryland, and is a wholly owned
subsidiary of Capital Guaranty Corporation, a Maryland insurance holding
company. Capital Guaranty Corporation is a publicly owned company whose
shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all fifty
states, the District of Columbia, the Commonwealth of Puerto Rico, Guam
and the U.S. Virgin Islands. Capital Guaranty focuses on insuring
municipal securities, and its policies guaranty the timely payment of
principal and interest when due for payment on new issue and secondary
market issue municipal bond transactions. Capital Guaranty's claims-
paying ability is rated "Triple-A" by both Moody's Investors Service,
Inc. and Standard & Poor's.
As of September 30, 1995, Capital Guaranty had more than $19.0 billion
in net exposure outstanding (excluding defeased issues). The total
statutory policyholders' surplus and contingency reserve of Capital
Guaranty was $204,642,000 and the total admitted assets were
$303,723,316 (unaudited) as reported to the Insurance Department of the
State of Maryland as of September 30, 1995. The address of Capital
Guaranty's headquarters and its telephone number are Steuart Tower, 22nd
Floor, One Market Plaza, San Francisco, CA 94105-1413 and (415) 995-8000.
CapMAC. CapMAC is a New York-domiciled monoline stock insurance company
which engages only in the business of financial guarantee and surety
insurance. CapMAC is licensed in 49 states in addition to the District
of Columbia, the Commonwealth of Puerto Rico and the territory of Guam.
CapMAC insures structured asset-backed, corporate and other financial
obligations in the domestic and foreign capital markets. CapMAC may also
provide financial guarantee reinsurance for structured asset-backed,
corporate and municipal obligations written by other major insurance
companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Page 11
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's, and "AAA" by Duff
& Phelps, Inc. ("Duff & Phelps"). Such ratings reflect only the views of
the respective rating agencies, are not recommendations to buy, sell or
hold securities and are subject to revision or withdrawal at any time by
such rating agencies.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a company
that is owned by a group of institutional and other investors, including
CapMAC's management and employees. CapMAC commenced operations on
December 24, 1987 as an indirect, wholly-owned subsidiary of Citibank
(New York State), a wholly-owned subsidiary of Citicorp. On June 25,
1992, Citibank (New York State) sold CapMAC to Holdings (the "Sale").
Neither Holdings nor any of its stockholders is obligated to pay any
claims under any surety bond issued by CapMAC or any debts of CapMAC or
to make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the State of
New York. In addition, CapMAC is subject to regulation by the insurance
departments of the other jurisdictions in which it is licensed. CapMAC
is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes in
control, transactions with affiliates and consolidations and
acquisitions. The amount of exposure per risk that CapMAC may retain,
after giving effect to reinsurance, collateral or other securities, is
also regulated. Statutory and regulatory accounting practices may
prescribe appropriate rates at which premiums are earned and the levels
of reserves required. In addition, various insurance laws restrict the
incurrence of debt, regulate permissible investments of reserves,
capital and surplus, and govern the form of surety bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured. Such
reinsurance does not relieve CapMAC of any of its obligations under the
Surety Bond(s).
THE SURETY BONDS ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In connection with the Sale, Holdings and CapMAC entered into an
Ownership Policy Agreement (the "Ownership Policy Agreement"), which
sets forth Holdings' intent with respect to its ownership and control of
CapMAC and provides for certain policies and agreements with respect to
Holdings' exercise of its control of CapMAC. In the Ownership Policy
Agreement, Holdings has agreed that, during the term of the Ownership
Policy Agreement, it will not and will not permit any stockholder of
Holdings to enter into any transaction the result of which would be a
change of control (as defined in the Ownership Policy Agreement) of
CapMAC, unless the long-term debt obligations or claims-paying ability
of the person which would control CapMAC after such transaction or its
direct or indirect parent are rated in a high investment grade category,
unless Holdings or CapMAC has confirmed that CapMAC's claims-paying
ability rating by Moody's (the "Rating") in effect immediately prior to
any such change of control will not be downgraded by Moody's upon such
change of control or unless such change of control occurs as a result of
a public offering of Holdings' capital stock.
In addition, the Ownership Policy Agreement includes agreements (i) not
to change the "zero-loss" underwriting standards or policies and
procedures of CapMAC in a manner that would materially and adversely
affect the risk profile of CapMAC's book of business, (ii) that CapMAC
will adhere to the aggregate leverage limitations and maintain
capitalization levels considered by Moody's from time to time as
consistent with maintaining CapMAC's Rating and (iii) that until
CapMAC's statutory capital surplus and contingency reserve ("qualified
statutory capital") equal $250 million, CapMAC will maintain a specified
amount of qualified statutory capital in excess of the amount of
qualified statutory capital that CapMAC is required at such time to
maintain under the aggregate leverage limitations set forth in Article
69 of the New York Insurance Law.
The Ownership Policy Agreement will terminate on the earlier of the
date on which a change of control of CapMAC occurs and the date on which
CapMAC and Holdings agree in writing to terminate the Ownership Policy
Agreement; provided that, CapMAC or Holdings has confirmed that CapMAC's
Rating in effect immediately prior to any such termination will not be
downgraded upon such termination.
Page 12
As of December 31, 1994 and 1993, CapMAC had statutory capital and
surplus of approximately $170 million and $168 million, respectively,
and had not incurred any debt obligations. Article 69 of the New York
State Insurance Law requires that CapMAC establishes and maintains the
contingency reserve.
In addition to its capital (including contingency reserve) and other
reinsurance available to pay claims under its surety bonds, on June 25,
1992, CapMAC entered into a Stop Loss Reinsurance Agreement (the "Stop
Loss Agreement") with Winterthur Swiss Insurance Company (the
"Reinsurer"), which is rated AAA by Standard & Poor's and Aaa by
Moody's, pursuant to which the Reinsurer will be required to pay any
losses incurred by CapMAC during the term of the Stop Loss Agreement on
the surety bonds covered under the Stop Loss Agreement in excess of a
specified amount of losses incurred by CapMAC under such surety bonds
(such specified amount initially being $100 million and increasing
annually by an amount equal to 66 2/3% of the increase in CapMAC's
statutory capital and surplus) up to an aggregate limit payable under
the Stop Loss Agreement of $50 million. The Stop Loss Agreement has an
initial term of seven years, is extendable for one-year periods and is
subject to early termination upon the occurrence of certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of banks
rated A1+/P1 by Standard & Poor's and Moody's, respectively, having a
term of 360 days. Under the Liquidity Facility CapMAC will be able,
subject to satisfying certain conditions, to borrow funds from time to
time in order to enable it to fund any claim payments or payments made
in settlement or mitigation of claims payments under its surety bonds,
including the Surety Bond(s).
Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted
accounting principles, and filed with the Insurance Department of the
State of New York are available upon request. CapMAC is located at 885
Third Avenue, New York, New York 10022, and its telephone number is
(212) 755-1155.
Financial Security Assurance. Financial Security Assurance ("Financial
Security") is a monoline insurance company incorporated on March 16,
1984 under the laws of the State of New York. The operations of
Financial Security commenced on July 25, 1985, and Financial Security
received its New York State insurance license on September 23, 1985.
Financial Security and its two wholly owned subsidiaries are licensed to
engage in the financial guaranty insurance business in 49 states, the
District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively in the
business of writing financial guaranty insurance, principally in respect
of asset-backed and other collateralized securities offered in domestic
and foreign markets. Financial Security and its subsidiaries also write
financial guaranty insurance in respect of municipal and other
obligations and reinsure financial guaranty insurance policies written
by other leading insurance companies. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments
of an issuer's securities, thereby enhancing the credit rating of those
securities, in consideration for payment of a premium to the insurer.
Financial Security is approximately 91.6% owned by US West, Inc. and
8.4% owned by The Tokio Marine and Fire Insurance Co., Ltd. ("Tokio
Marine"). US West, Inc. operates businesses involved in communications,
data solutions, marketing services and capital assets, including the
provision of telephone services in 14 states in the western and mid-
western United States. Tokio Marine is the largest property and casualty
insurance company in Japan. No shareholder of Financial Security is
obligated to pay any debt of Financial Security or any claim under any
insurance policy issued by Financial Security or to make any additional
contribution to the capital of Financial Security.
As of March 31, 1993, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively, of
Financial Security and its consolidated subsidiaries were, in accordance
with statutory accounting principles, approximately $479,110,000
(unaudited) and $220,078,000 (unaudited), and the total shareholders'
equity and the unearned premium reserve, respectively, of Financial
Page 13
Security and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately $628,119,000
(unaudited), and $202,493,000 (unaudited). Copies of Financial
Security's financial statements may be obtained by writing to Financial
Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's telephone number is
(212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or either of its
subsidiaries are reinsured among such companies on an agreed-upon
percentage substantially proportional to their respective capital,
surplus and reserves, subject to applicable statutory risk limitations.
In addition, Financial Security reinsures a portion of its liabilities
under certain of its financial guaranty insurance policies with
unaffiliated reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by
Financial Security as a risk management device and to comply with
certain statutory and rating agency requirements; it does not alter or
limit Financial Security's obligations under any financial guaranty
insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc, and "AAA" by Standard & Poor's, Nippon Investors
Service Inc., Duff & Phelps Inc. and Australian Ratings Pty. Ltd. Such
ratings reflect only the views of the respective rating agencies, are
not recommendations to buy, sell or hold securities and are subject to
revision or withdrawal at any time by such rating agencies.
Connie Lee Insurance Company. Connie Lee Insurance Company ("Connie
Lee") is a stock insurance company incorporated in the State of
Wisconsin and a wholly-owned subsidiary of College Construction Loan
Insurance Association ("CCLIA"), a District of Columbia insurance
holding company. As of December 31, 1994, the total policyholders'
surplus of Connie Lee was approximately $106,000,000 (audited) and total
admitted assets was approximately $194,000,000 (audited), as reported to
the Commissioner of Insurance of the State of Wisconsin. Connie Lee's
address is 2445 M Street, N.W., Washington D.C. 20037.
Because the Bonds in each Insured Trust are insured as to the scheduled
payment of principal and interest and on the basis of the financial
condition of the insurance companies referred to above, Standard &
Poor's has assigned to units of each Insured Trust its "AAA" investment
rating. This is the highest rating assigned to securities by Standard &
Poor's. See "Description of Bond Ratings." The obtaining of this rating
by each Insured Trust should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the
market value of each Insured Trust or the Units of such Trust. Standard
& Poor's has indicated that this rating is not a recommendation to buy,
hold or sell Units nor does it take into account the extent to which
expenses of each Trust or sales by each Trust of Bonds for less than the
purchase price paid by such Trust will reduce payment to Unit holders of
the interest and principal required to be paid on such Bonds. Such
rating will be in effect for a period of thirteen months from the
Initial Date of Deposit of an Insured Trust and will, unless renewed,
terminate at the end of such period. There is no guarantee that the
"AAA" investment rating with respect to the Units of an Insured Trust
will be maintained.
An objective of portfolio insurance obtained by such Insured Trust is
to obtain a higher yield on the Bonds in the portfolio of such Trust
than would be available if all the Bonds in such portfolio had the
Standard & Poor's "AAA" and/or Moody's Investors Service, Inc. "Aaa"
rating(s) and at the same time to have the protection of insurance of
scheduled payment of interest and principal on the Bonds. There is, of
course, no certainty that this result will be achieved. Bonds in a Trust
for which insurance has been obtained by the Bond issuer, the
underwriters, the Sponsor or others (all of which were rated "AAA" by
Standard & Poor's and/or "Aaa" by Moody's Investors Service, Inc.) may
or may not have a higher yield than uninsured bonds rated "AAA" by
Standard & Poor's or "Aaa" by Moody's Investors Service, Inc. In
selecting Bonds for the portfolio of each Insured Trust, the Sponsor has
applied the criteria herein before described.
How is the Public Offering Price Determined?
Secondary Market Sales Charge. The sales charge assessed on Units sold
in secondary market transactions is determined in accordance with the
table set forth below based upon the number of years remaining to the
Page 14
maturity of each such Bond. The effect of this method of sales charge
calculation will be that different sales charge rates will be applied to
the various Bonds in a Trust portfolio based upon the maturities of such
Bonds, in accordance with the following schedule.
Secondary Offering Period
Sales Charge
____________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ ________ _________
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
There will be no reduction of the sales charges for volume purchases
for secondary market transactions. A dealer will receive from the
Sponsor a dealer concession of 70% of the total sales charges for Units
sold by such dealer and dealers will not be eligible for additional
concessions for Units sold pursuant to the above schedule.
Description of Bond Ratings*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
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 arrangements 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.**
[FN]
______________
* As published by the rating companies.
** Bonds insured by Financial Guaranty Insurance Company, AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation,
Connie Lee Insurance Company, Financial Security Assurance and Capital
Guaranty Insurance Company are automatically rated "AAA" by Standard &
Poor's.
Page 15
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.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
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. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
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. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
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. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
Page 16
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
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. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a
generic rating classification. The modifier 1 indicates that the bond
ranks at the high end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Con.(- - -)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation 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.
Fitch Investors Service, Inc. A brief description of the applicable
Fitch Investors Service, Inc. rating symbols and their meanings follow:
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments.
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to
show relative standing within these major rating categories.
Page 17
CONTENTS OF REGISTRATION STATEMENT
Item A. Bonding Arrangements of Depositor
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being National
Union Fire Insurance Company of Pittsburgh.
Item B.
This Registration Statement on Form S-6 comprises the
following papers and documents:
The Facing Sheet
The Cross-Reference Sheet
The Prospectus
The Signatures
Exhibits
Financial Data Schedules
EXPLANATORY NOTE
This Amendment No. 1 to the Registration Statement contains
multiple separate prospectuses. Each prospectus will relate to
an individual unit investment trust and will consist of a Part I,
a Part II and an Information Supplement, all dated the date of
this Amendment No. 1 to the Registration Statement. Each
prospectus will be identical with the exception of the respective
Part I which will contain the financial information specific to
such underlying unit investment trust.
UNDERTAKINGS
1. With the exception of the information included in the
state specific appendices to the Information Supplement, which
will vary depending upon the make-up of a Fund or updated to
reflect current events, any amendment to a Fund's Information
Supplement will be subject to the review of the staff of the
Securities and Exchange Commission prior to distribution; and
2. The Information Supplement to the Trust will not
include third party financial information.
S-1
SIGNATURES
The Registrant, The First Trust Combined Series 257, hereby
identifies The First Trust Combined Series 83, The First Trust
Combined Series 198, The First Trust Combined Series 248, The
First Trust Combined Series 251 and The First Trust Special
Situations Trust, Series 18, for 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, The First Trust Combined Series 257, has duly
caused this Amendment of Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on January 17, 1996.
THE FIRST TRUST COMBINED SERIES 257
By: NIKE SECURITIES L.P.
(Depositor)
By: Carlos E. Nardo
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director )
of Nike Securities )
Corporation, the ) January 17, 1996
General Partner of )
Nike Securities L.P. )
)
)
) Carlos E. Nardo
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our reports dated January 17, 1996,
in Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 33-63481) and related Prospectus of The First Trust Combined
Series 257.
ERNST & YOUNG LLP
Chicago, Illinois
January 17, 1996
CONSENTS OF COUNSEL
The consents of counsel are contained in their respective
opinions filed by this amendment as Exhibits 3.1, 3.2, 3.3, 3.4
and 3.5 to the Registration Statement.
CONSENT OF SECURITIES EVALUATION SERVICE, INC.
The consent of Securities Evaluation Service, Inc. to the use of
its name in the Prospectus included in the Registration Statement
is filed as Exhibit 4.1 to the Registration Statement.
CONSENT OF STANDARD & POOR'S RATINGS SERVICES, A DIVISION OF THE
McGRAW-HILL COMPANIES, INC.
The consent of Standard & Poor's Ratings Services, A Division of
the McGraw-Hill Companies, Inc. to the use of its name in the
Prospectus included in the Registration Statement is filed as
Exhibit 4.2 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Combined Series 145 and subsequent Series
effective October 16, 1991, among Nike Securities L.P.,
as Depositor, United States Trust Company of New York,
as Trustee, Securities Evaluation Service, Inc., as
Evaluator and Nike Financial Advisory Services L.P., as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-43289] filed on
behalf of The First Trust Combined Series 145).
1.1.1 Form of Trust Agreement for Series 257 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank
(National Association), as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust
Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, General Partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, General
Partner of Nike Securities L.P., Depositor (incorporated
by reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.7 Master Agreement Among Underwriters (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43289] filed on behalf of The First Trust Combined
Series 145).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
on page 2 and incorporated herein by reference).
S-5
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by Trustee.
4.1 Consent of Securities Evaluation Service, Inc.
4.2 Consent of Standard & Poor's Ratings Services, A division
of The McGraw-Hill Companies, Inc.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
EX-27 Financial Data Schedules.
S-6
EXHIBIT 1.1.1
THE FIRST TRUST COMBINED SERIES 257
TRUST AGREEMENT
Dated: January 17, 1996
This Trust Agreement among Nike Securities L.P., as
Depositor, The Chase Manhattan Bank (National Association), as
Trustee, Securities Evaluation Service, Inc., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor, sets forth
certain provisions in full and incorporates other provisions by
reference to the document entitled "Standard Terms and Conditions
of Trust for The First Trust Combined Series 145 and subsequent
Series, effective October 16, 1991" (herein called the "Standard
Terms and Conditions of Trust"), and such provisions as are set
forth in full and such provisions as are incorporated by
reference constitute a single instrument. All references herein
to Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and Portfolio Supervisor 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 Standard Terms and Conditions of
Trust 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.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed
to:
(a) The Bonds defined in Section 1.01(5) listed in Schedule
A hereto have been deposited in trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of
the Trust Fund represented by each Unit for a Trust on the
Initial Date of Deposit is the amount set forth under the
captions "Summary of Essential Information - Fractional Undivided
Interest in the Trust per Unit" in the Prospectus.
(c) The number of units in a Trust on the Initial Date of
Deposit referred to in Section 2.03 is set forth under the
caption "Summary of Essential Information - Number of Units" in
the Prospectus.
(d) The approximate amount, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid
to the Depositor pursuant to the second sentence of Section 3.05
shall be the amount per Unit for each Trust that the Trustee
agreed to reduce its fee or pay Trust Fund expenses set forth in
the footnotes to the "Special Trust Information" for each Trust
in the Prospectus times the number of units for such Trust
referred to in Part II (c) of this Trust Agreement.
(e) For each Trust the First General Record Date and the
amount of the second distribution of funds from the Interest
Account shall be the record date for the Interest Account and the
amount set forth under "Special Trust Information-Distributions"
for such Trust in the Prospectus.
(f) For each Trust the "First Settlement Date" is the date
set forth under "Summary of Essential Information-First
Settlement Date" for such Trust in the Prospectus.
(g) The first sentence of Section 3.15. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor shall
receive against a statement or statements therefor submitted to
the Trustee monthly or annually an aggregate annual fee in an
amount which shall not exceed the amount set forth under "Summary
of Essential Information-Supervisory Fee" in the Prospectus times
the number of Units outstanding as of January 1 of such year (or,
with respect to the first calendar year of a Trust, the date of
deposit), but in no event shall such compensation when combined
with all compensation received from other series of the Fund for
providing such supervisory services in any calendar year exceed
the aggregate cost to the Portfolio Supervisor for providing such
services (such annual fee to be pro rated for any calendar year
in which the Portfolio Supervisor provides services during less
than the whole of such year)."
(h) Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust Advisors
L.P. and its successors in interest, or any successor portfolio
supervisor appointed as hereinafter provided."
(i) The first four sentences of Section 6.04 shall be
amended in their entirety to read as follows:
"For services performed under this Indenture the Trustee
shall be paid an amount per annum specified in Part II of the
Trust Agreement in respect of which payment is made pursuant
to Section 3.05. The Trustee's compensation shall accrue
daily and be computed on the basis of the greatest number of
Units in each Trust at any time during the period with
respect to which such compensation is being computed (such
period being the period commencing with the next preceding
Distribution Date, or the initial date of deposit, as
appropriate, and running to, but not including, the
Distribution Date on which such computation is made) and
shall be apportioned among the respective plans of
distribution in effect as of January 1 next preceding such
computation. During the first year of a Trust, such
compensation shall be reduced by the amount of interest which
accrues on "when-issued" Bonds and Contract Bonds from the
First Settlement Date, as defined in Part II of the Trust
Agreement, to the respective delivery dates of such Bonds and
Contract Bonds."
(j) The Trustee's annual fee referred to in Section 6.04 is
set forth for each Trust under "Special Trust Information" for
such Trust in the Prospectus.
(k) The first paragraph of Section 3.05 shall be amended to
read as follows:
"The Trustee, as of the "First Settlement Date", as
defined in Part II of the Trust Agreement, shall advance from
its own funds and shall pay to the Depositor the amount of
interest accrued to such date on the Bonds deposited in the
respective Trusts. The Trustee, as of the "First Settlement
Date," as defined in Part II of the Trust Agreement, shall
also advance to the Trust from its own funds and distribute
to the Depositor the amount specified in Part II of the Trust
Agreement, which is the amount by which the Trustee's fee is
reduced and Trust expenses assumed by the Trustee in respect
of interest accrued on "when-issued" Bonds and on Contract
Bonds delivered to the Trustee subsequent to the First
Settlement Date pursuant to Section 6.04. The Trustee shall
be entitled to reimbursement, without interest, for such
advancements from interest received by the Trust. Subsequent
distributions shall be made as hereinafter provided."
(l) Section 2.01 of Article II of the Standard Terms and
Conditions of Trust is hereby amended by inserting "(a)" prior to
the beginning of the text of the paragraph and adding the
following additional paragraphs:
"(b) From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee additional Bonds, in bearer form or duly endorsed in
blank or accompanied by all necessary instruments of
assignment and transfer in proper form (or Contract
Obligations relating to such Bonds), to be held, managed and
applied by the Trustee as herein provided. Such deposit of
additional Bonds shall be made, in each case, pursuant to a
Notice of Deposit of Additional Bonds from the Depositor to
the Trustee. The Depositor, in each case, shall ensure that
each deposit of additional Bonds pursuant to this Section
shall be, as nearly as is practicable, in the identical
ratio as the Percentage Ratio for such Bonds as is specified
in the Prospectus for each Trust and the Depositor shall
ensure that such Bonds are identical to those deposited on
the Initial Date of Deposit. The Depositor shall deliver
the additional Bonds which were not delivered concurrently
with the deposit of additional Bonds and which were
represented by Contract Obligations within 10 calendar days
after such deposit of additional Bonds (the "Additional
Bonds Delivery Period"). If a contract to buy such Bonds
between the Depositor and seller is terminated by the seller
thereof for any reason beyond the control of the Depositor
or if for any other reason the Bonds are not delivered to
the Trust by the end of the Additional Bonds Delivery Period
for such deposit, the Trustee shall immediately draw on the
Letter of Credit, if any, in its entirety, apply the monies
in accordance with Section 2.01(d), and the Depositor shall
forthwith take the remedial action specified in
Section 3.14.
(c) In connection with the deposits described in
Section 2.01 (a) and (b), the Depositor has, in the case of
Section 2.01(a) deposits, and, prior to the Trustee
accepting a Section 2.01(b) deposit, will, deposit cash
and/or Letter(s) of Credit (meeting the conditions set forth
in Section 2.07) in an amount sufficient to purchase the
Contract Obligations (the "Purchase Amount") relating to
Bonds which are not actually delivered to the Trustee at the
time of such deposit, the terms of which unconditionally
allow the Trustee to draw on the full amount of the
available Letter of Credit. The Trustee may deposit such
cash or cash drawn on the Letter of Credit in a non-interest
bearing account for the Trust.
(d) In the event that the purchase of Contract
Obligations pursuant to any contract shall not be
consummated in accordance with said contract or if the Bonds
represented by Contract Obligations are not delivered to the
Trust in accordance with Section 2.01(a) or 2.01(b) and the
monies, or, if applicable, the monies drawn on the Letter of
Credit, deposited by the Depositor are not utilized for
Section 3.14 purchases of New Bonds, such funds, to the
extent of the purchase price of Special Bonds for which no
New Bond was acquired pursuant to Section 3.14, plus all
amounts described in the next succeeding two sentences,
shall be credited to the Principal Account and distributed
pursuant to Section 3.05 to Unit holders of record as of the
Record Date next following the failure of consummation of
such purchase. The Depositor shall cause to be refunded to
each Unit holder his pro rata portion of the sales charge
levied on the sale of Units to such Unit holder attributable
to such Failed Contract Obligation. The Depositor shall
also pay to the Trustee, for distribution to the Unit
holders, interest on the amount of the purchase price to the
Trust of the Special Bonds, at the rate of 5% per annum to
the date the Depositor notifies the Trustee that no New Bond
will be purchased or, in the absence of such notification,
to the expiration date for purchase of a New Bond specified
in Section 3.14. Any amounts remaining from monies drawn on
the Letter of Credit which are not used to purchase New
Bonds or are not used to provide refunds to Unit holders
shall be paid to the Depositor.
(e) The Trustee is hereby irrevocably authorized to
effect registration or transfer of the Bonds in fully
registered form to the name of the Trustee or to the name of
its nominee.
(f) In connection with and at the time of any deposit
of additional Bonds pursuant to Section 2.01(b), the
Depositor shall exactly replicate Cash (as defined below)
received or receivable by the Trust as of the date of such
deposit. For purposes of this paragraph, "Cash" means, as
to the Principal Account, cash or other property (other than
Bonds) on hand in the Principal Account or receivable and to
be credited to the Principal Account as of the date of the
deposit (other than amounts to be distributed solely to
persons other than holders of Units created by the deposit)
and, as to the Income Account, cash or other property (other
than Bonds) received by the Trust as of the date of the
deposit or receivable by the Trust in respect of a coupon
date which has occurred or will occur before the Trust will
be the holder of record of a Bond, reduced by the amount of
any cash or other property received or receivable on any
Bonds allocable (in accordance with the Trustee's
calculation of the monthly distribution from the Income
Account pursuant to Section 3.05) to a distribution made or
to be made in respect of a Record Date occurring prior to
the deposit. Such replication will be made on the basis of
a fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit."
(m) Article II of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 2.07.:
"Section 2.07. Letter of Credit. The Trustee shall not
accept any Letter of Credit under this Indenture unless the
stated expiration date of the Letter of Credit is at least
thirty days from the respective date of deposit of Contract
Obligations pursuant to Section 2.01(a) or 2.01(b). The
Trustee is authorized to downpost the amount available under
the Letter of Credit, if any, deposited by the Depositor by
an amount equal to the purchase price of Contract
Obligations representing Bonds delivered to the Trust on the
date of delivery of such Bonds."
(n) Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05(e) deduct from the Interest Account
or, to the extent funds are not available in such Account,
from the Principal Account and pay to the Depositor the
amount that it is entitled to receive pursuant to Section
3.16.
(o) Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.16.:
"Section 3.16. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping or other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount which shall not exceed $0.14 times the number
of Units outstanding as of January 1 of such year except for
a year or years in which an initial offering period as
determined by Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Depositor
provides service during less than the whole of such year),
but in no event shall such compensation when combined with
all compensation received from other unit investment trusts
for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
of providing such services to such unit investment trusts.
Such compensation may, from time to time, be adjusted
provided that the total adjustment upward does not, at the
time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Interest and Principal Accounts on or
before the Distribution Date following the Monthly Record
Date on which such period terminates. The Trustee shall
have no liability to any Certificateholder or other person
for any payment made in good faith pursuant to this Section.
If the cash balance in the Interest and Principal
Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.16, the Trustee shall
have the power to sell (i) Bonds from the current list of
Bonds designated to be sold pursuant to Section 5.02 hereof,
or (ii) if no such Bonds have been so designated, such Bonds
as the Trustee may see fit to sell in its own discretion,
and to apply the proceeds of any such sale in payment of the
amounts payable pursuant to this Section 3.16.
Any moneys payable to the Depositor pursuant to this
Section 3.16 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein.
(p) All provisions regarding the Distribution Date included
in Section 3.05 of Article III of the Standard Terms and
Conditions of Trust are hereby amended to change the Distribution
Date from the first day of the month following the Record Date to
the last day of the month in which the Record Date occurs.
(q) Section 1.01.(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank (National
Association), or any successor trustee appointed as hereinafter
provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended to
refer to The Chase Manhattan Bank (National Association).
PART III
Notwithstanding any provision to the contrary contained in
the Standard Terms and Conditions of Trust and in lieu of the
receipt of Certificates evidencing ownership of Units of the
Fund, the Sponsor or any Underwriter of the Fund listed under the
caption "Underwriting" in the Prospectus, at its option, may
elect that Units of the Fund owned by it be reflected by book
entry on the books and records of the Trustee. For all purposes
such Sponsor or Underwriter shall be deemed the owner of such
Units as if a Certificate evidencing ownership of Units of the
Fund had actually been issued by the Trustee. The Units
reflected by book entry on the books and records of the Trustee
may be transferable by the registered owner of such Units by
written instrument in form satisfactory to the Trustee. The
registered owner of Units reflected by book entry on the books
and records of the Trustee shall have the right at any time to
obtain Certificates evidencing ownership of such Units.
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank (National Association), Securities Evaluation
Service, Inc. and First Trust Advisors L.P. have each caused this
Trust Agreement to be executed and the respective corporate seal
to be hereto affixed and attested (if applicable) by authorized
officers; all as of the day, month and year first above written.
NIKE SECURITIES L.P.,
Depositor
By Carlos E. Nardo
Senior Vice President
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), Trustee
(SEAL) By Thomas Porrazzo
Vice President
Attest:
Rosalia A. Raviele
Assistant Vice President
SECURITIES EVALUATION SERVICE,
INC., Evaluator
(SEAL) By James R. Couture
President
Attest:
James G. Prince
Vice President and
Assistant Secretary
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Carlos E. Nardo
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
THE FIRST TRUST COMBINED SERIES 257
(Note: Incorporated herein and made a part hereof is the
"Portfolio" as set forth for each Trust in the
Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 17, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 257
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Combined Series 257, in
connection with the preparation, execution and delivery of a
Trust Agreement dated January 17, 1996 among Nike Securities
L.P., as Depositor, The Chase Manhattan Bank (National
Association), as Trustee, Securities Evaluation Service, Inc., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor, pursuant to which the Depositor has delivered to and
deposited the Bonds listed in Schedule A to the Trust Agreement
with the Trustee and pursuant to which the Trustee has issued to
or on the order of the Depositor a certificate or certificates
representing units of fractional undivided interest in and
ownership of the Fund created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-63481)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF/jln
EXHIBIT 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, IL 60603
January 17, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
(National Association)
770 Broadway, 6th Floor
New York, New York 10003
Re: The First Trust Combined Series 257
Gentlemen:
We have served as counsel for Nike Securities L.P.,
Depositor of The First Trust Combined Series 257 (the "Fund") in
connection with the issuance of Units of fractional undivided
interest in said Fund under a Trust Agreement dated January 17,
1996 (the "Indenture") among Nike Securities L.P., as Depositor,
The Chase Manhattan Bank (National Association), as Trustee,
Securities Evaluation Service, Inc., as Evaluator, and First
Trust Advisors L.P., as Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents as we have deemed pertinent.
Based upon the foregoing, and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing federal income tax law:
(i) Each Trust is not taxable as an association but
will be governed by the provisions of Subchapter J (relating
to Trusts) of Chapter 1, Internal Revenue Code of 1986 (the
"Code").
(ii) Each Certificateholder will be considered as
owning a share of each asset of the respective Trust in the
proportion that the number of Units of such Trust held by
him bears to the total number of Units outstanding of such
Trust. Under Subpart E, Subchapter J of Chapter 1 of the
Code, income of the Trust will be treated as income of each
Certificateholder in the proportion described, and an item
of Trust income will have the same character in the hands of
a Certificateholder as it would have in the hands of the
Trustee. Accordingly, to the extent that the income of a
Trust consists of interest and original issue discount
excludable from gross income under Section 103 of the Code,
such income will be excludable from federal gross income of
the Certificateholder, except in the case of a
Certificateholder who is a substantial user (or a person
related to such user) of a facility financed through
issuance of any industrial development bonds or certain
private activity bonds held by the Trust. In the case of
such Certificateholder who is a substantial user (and no
other) interest received and original issue discount with
respect to his Units attributable to such industrial
development bonds or such private activity bonds is
includable in his gross income. To the extent a Trust holds
Bonds that are "specified private activity Bonds" within the
meaning of Section 57(a)(5) of the Code, a
Certificateholder's pro rata portion of the income on such
Bonds will be included as an item of tax preference in the
computation of the alternative minimum tax applicable to
individuals, trusts and corporations. In the case of
certain corporations, interest on all of the Bonds is
included in computing the alternative minimum tax pursuant
to Section 56(c) of the Code, the environmental tax (the
"Superfund Tax") imposed by Section 59A of the Code, and the
branch profits tax imposed by Section 884 of the Code with
respect to U.S. branches of foreign corporations.
(iii) Gain or loss will be recognized to a
Certificateholder upon redemption or sale of his Units.
Such gain or loss is measured by comparing the proceeds of
such redemption or sale with the adjusted basis of the Units
represented by his Certificate. Before adjustment, such
basis would normally be cost if the Certificateholder had
acquired his Units by purchase, plus his aliquot share of
advances by the Trustee to the respective Trust to pay
interest on Bonds delivered after the Certificateholder's
settlement date to the extent that such interest accrued on
the Bonds during the period from the Certificateholder's
settlement date to the date such Bonds are delivered to the
Trust, but only to the extent that such advances are to be
repaid to the Trustee out of interest received by such Trust
with respect to such Bonds. In addition, such basis will be
increased by the Certificateholder's aliquot share of the
accrued original issue discount with respect to each Bond
held by the Trust with respect to which there was an
original issue discount at the time the Bond was issued and
reduced by the annual amortization of bond premium, if any,
on Bonds held by the Trust.
(iv) If the Trustee disposes of an asset of a Trust
(whether by sale, payment on maturity, redemption or
otherwise), gain or loss is recognized to the
Certificateholder and the amount thereof is measured by
comparing the Certificateholder's aliquot share of the total
proceeds from the transaction with his basis for his
fractional interest in the asset disposed of. Such basis is
ascertained by apportioning the tax basis for his Units
among each of the assets of such Trust (as of the date on
which his Units were acquired) ratably according to their
values as of the valuation date nearest the date on which he
purchased such Units. A Certificateholder's basis in his
Units and of his fractional interest in each asset of the
Trust must be reduced by the amount of his aliquot share of
interest received by the Fund, if any, on Bonds delivered
after the Certificateholder's settlement date to the extent
that such interest accrued on the Bonds during the period
from the Certificateholder's settlement date to the date
such Bonds are delivered to the Trust; must be reduced by
the annual amortization of bond premium, if any, on Bonds
held by the Trust; and must be increased by the
Certificateholder's share of the accrued original issue
discount with respect to each Bond which, at the time the
Bond was issued, had original issue discount.
(v) In the case of any Bond held by the Trust where
the "stated redemption price at maturity" exceeds the "issue
price", such excess shall be original issue discount. With
respect to each Certificateholder, upon the purchase of his
Units subsequent to the original issuance of Bonds held by
the Trust, Section 1272(a)(7) of the Code provides for a
reduction in the accrued "daily portion" of such original
issue discount upon the purchase of a Bond subsequent to the
Bond's original issue, under certain circumstances. In the
case of any Bond held by the Trust the interest on which is
excludable from gross income under Section 103 of the Code,
any original issue discount which accrues with respect
thereto will be treated as interest which is excludable from
gross income under Section 103 of the Code.
(vi) Certain bonds in the portfolio of the Trust have
been insured by the issuers, underwriters, the Sponsor or
others against default in the prompt payment of principal
and interest (the "Insured Bonds"). Such Bonds are so
designated on the portfolio pages in the Prospectus for each
Trust. Insurance on Insured Bonds is effective so long as
such bonds remain outstanding. For each of these bonds, we
have been advised that the aggregate principal amount of
such bonds listed on the portfolio page was acquired by the
Trust and are part of the series of such bonds in the listed
aggregate principal amount. Based upon the assumption that
the Insured Bonds of the Trust are part of a series covered
by an insurance policy, it is our opinion that any amounts
received by the Trust representing maturing interest on such
bonds will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so
excludable if paid in normal course by the Issuer
notwithstanding that the source of the payment is from
policy proceeds provided that, at the time such policies are
purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable
expectation that the issuer of the bonds, rather than the
insurer will pay debt service on the bonds. Paragraph (ii)
of this opinion is accordingly applicable to such payment
representing maturing interest.
Sections 1288 and 1272 of the Code provide a complex set of
rules governing the accrual of original issue discount. These
rules provide that original issue discount accrues either on the
basis of a constant compound interest rate or ratably over the
term of the bond, depending on the date the Bond was issued. In
addition, special rules apply if the purchase price of a Bond
exceeds the original issue price plus the amount of original
issue discount which would have accrued to prior owners. The
application of these rules will also vary depending on the value
of the Bond on the date a Certificateholder acquires his Units,
and the price the Certificateholder pays for his Units.
Except with respect to those Trusts that hold "specified
private activity bonds" within the meaning of Section 57(a)(5) of
the Code issued on or after August 8, 1986 as identified in the
Prospectus related hereto (the "AMT Trusts"), the Trusts do not
include any specified private activity bonds and accordingly none
of the interest income of the Trusts (other than the AMT Trusts,
if any) shall be treated as an item of tax preference when
computing the alternative minimum tax. Because the AMT Trusts
include "specified private activity bonds," all or a portion of
the income of the AMT Trusts shall be treated as an item of tax
preference for alternative minimum tax purposes in the case of
individuals, trusts and corporations. In the case of
corporations, for taxable years beginning after December 31,
1986, the alternative minimum tax and the Superfund Tax depend
upon the corporation's alternative minimum taxable income
("AMTI"), which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, one of the adjustment
items used in computing AMTI and the Superfund Tax of a
corporation (other than an S Corporation, Regulated Investment
Company, Real Estate Investment Trust or REMIC) for taxable years
beginning after 1989, is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount
equal to its AMTI (before such adjustment item and the
alternative tax net operating loss deduction). "Adjusted current
earnings" includes all tax-exempt interest, including interest on
all Bonds in the Trust, and tax-exempt original issue discount.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue
Service the amount of tax-exempt interest earned during the year.
Section 265 of the Code generally provides for a reduction
in each taxable year of 100% of the otherwise deductible interest
on indebtedness incurred or continued by financial institutions,
to which either Section 585 or Section 593 of the Code applies,
to purchase or carry obligations acquired after August 7, 1986,
the interest on which is exempt from federal income taxes for
such taxable year. Under rules prescribed by Section 265, the
amount of interest otherwise deductible by such financial
institutions in any taxable year which is deemed to be
attributable to tax-exempt obligations acquired after August 7,
1986, will be the amount that bears the same ratio to the
interest deduction otherwise allowable (determined without regard
to Section 265) to the taxpayer for the taxable year as the
taxpayer's average adjusted basis (within the meaning of Section
1016) of tax-exempt obligations acquired after August 7, 1986,
bears to such average adjusted basis for all assets of the
taxpayer, unless such financial institution can otherwise
establish, under regulations to be prescribed by the Secretary of
the Treasury, the amount of interest an indebtedness incurred or
continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units by taxpayers other than certain financial
institutions, as referred to above, is not deductible for federal
income tax purposes. Under rules used by the Internal Revenue
Service for determining when borrowed funds are considered used
for the purpose of purchasing or carrying particular assets, the
purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. However, these rules
generally do not apply to indebtedness incurred for expenditures
of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act")
subjects tax-exempt bonds to the market discount rules of the
Code effective for bonds purchased after April 30, 1993. In
general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued)
subject to a statutory de minimis rule. Market discount can
arise based on the price a Trust pays for Bonds or the price a
Certificateholder pays for his or her Units. Under the Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law, the accretion had been treated as capital gain.
Market discount that accretes while a Trust holds a Bond would be
recognized as ordinary income by the Certificateholders when
principal payments are received on the Bond, upon sale or at
redemption (including early redemption), or upon the sale or
redemption of his or her Units, unless a Certificateholder elects
to include market discount in taxable income as it accrues.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-63481)
relating to the Units referred to above and to the use of our
name and to the reference of our firm in said Registration
Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF/jln
EXHIBIT 3.3
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 17, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Combined Series 257
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Combined Series 257
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for The First Trust Combined Series 257 (the
"Trust"), which will be established under a Standard Terms and
Conditions of Trust dated October 16, 1991, and a related Trust
Agreement dated today's date (collectively, the "Indenture"),
among Nike Securities L.P., as Depositor (the "Depositor");
Securities Evaluation Service, Inc., as Evaluator; First Trust
Advisors L.P., as Portfolio Supervisor and The Chase Manhattan
Bank (National Association), as Trustee (the "Trustee").
Pursuant to the terms of the Indenture, units of fractional
undivided interest in the Trusts (the "Units") will be issued in
the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified
copies, or copies otherwise identified to our satisfaction, of
such documents as we have deemed necessary or appropriate for the
purpose of this opinion. In giving this opinion, we have relied
upon the two opinions, each dated today and addressed to the
Trustee, of Chapman and Cutler, counsel for the Depositor, with
respect to the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax.
2. Under the income tax laws of the State and City of New
York, the income of the Trust will be considered the income of
the holders of the Units.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 33-63481) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit Holders?" and "Legal Opinions" in such Registration
Statement and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
EXHIBIT 3.4
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 17, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Combined
Series 257
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Combined Series 257
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
(National Association) ("Chase") in connection with the execution
and delivery of a Trust Agreement (the "Trust Agreement") dated
today's date (which Trust Agreement incorporates by reference a
certain Standard Terms and Conditions of Trust dated October 16,
1991, and the same are collectively referred to herein as the
"Indenture", among Nike Securities L.P., as Depositor (the
"Depositor"); Securities Evaluation Service, Inc., as Evaluator;
First Trust Advisors L.P., as Portfolio Supervisor; and Chase, as
Trustee (the "Trustee"), establishing The First Trust Combined
Series 257 (the "Trust"), and the execution by Chase, as Trustee
under the Indenture, of a certificate or certificates evidencing
ownership of units (such certificate or certificates and such
aggregate units being herein called "Certificates" and "Units"),
each of which represents an undivided interest in the Trust,
which consist of interest bearing, tax-exempt bonds (including
confirmations of contracts for the purchase of certain bonds not
yet delivered and cash, cash equivalents or an irrevocable letter
of credit or a combination thereof, in the amount required for
such purchase upon the receipt of such bonds), such bonds being
defined in the Indenture as Bonds and listed in the Schedules to
the Indenture.
We have examined the Indenture, the Closing Memorandum dated
today's date, a specimen certificate, and such other documents as
we have deemed necessary in order to render this opinion. Based
on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing national banking
association authorized to exercise trust powers.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to
or upon the order of the Depositor a Certificate or Certificates
evidencing ownership of the Units, registered in the name of the
Depositor. Upon receipt of confirmation of the effectiveness of
the registration statement for the sale of the Units filed with
the Securities and Exchange Commission under the Securities Act
of 1933, the Trustee may deliver such other Certificates, in such
names and denominations as the Depositor may request, to or upon
the order of the Depositor as provided in the Closing Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust
amounts as may be necessary to provide periodic interest
distributions of approximately equal amounts, and be reimbursed,
without interest, for any such advances from funds in the
interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Bonds have been duly authorized
and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
EXHIBIT 4.1
SES
Securities Evaluation Service, Inc.
Suite 200
531 E. Roosevelt Road
Wheaton, Illinois 60187
January 17, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST COMBINED SERIES 257
Gentlemen:
We have examined the Registration Statement File No. 33-
63481 for the above captioned fund. We hereby consent to the use
in the Registration Statement of the references to Securities
Evaluation Service, Inc. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Securities Evaluation Service, Inc.
James R. Couture
President
Standard & Poor's Ratings Services,
A Division of The McGraw-Hill Companies
25 Broadway, 13th Floor
New York, New York 10004-1064
Telephone 212/208-8287
FAX 212/208-8034
Sanford Bragg
Managing Director
Managed Funds Ratings
January 17, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 257
(As used in this letter the term "Trust" refers to: The
First Trust of Insured Municipal Bonds--Series 236)
Pursuant to your request for a Standard & Poor's rating on
the units of the above-captioned trust, SEC # 33-63481, 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 for as long as they remain 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 in the trust. 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 for as long as they remain in the trust.
STANDARD & POOR'S WILL MAINTAIN SURVEILLANCE ON THE 'AAA'
RATING UNTIL FEBRUARY 17, 1997. ON THIS DATE, THE RATING WILL BE
AUTOMATICALLY WITHDRAWN BY STANDARD & POOR'S UNLESS A POST
EFFECTIVE LETTER IS REQUESTED BY THE TRUST.
You have permission to use the name of Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.
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.
This letter evidences our consent to the use of the name of
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. 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 Ratings Services, a division of The McGraw-Hill Companies,
Inc. 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,
Sanford B. Bragg
Managing Director
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