File No. 2-63659
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 21
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : July 31, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
5,921 UNITS
PROSPECTUS
Part One
Dated July 26, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
In the opinion of Counsel, interest income to the Trust and to Unit holders,
with certain exceptions, is exempt under existing law from all Federal income
taxes, but may be subject to state and local taxes. Capital gains, if any,
are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds, Series 41 (the "Trust") is a fixed
portfolio of insured interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities, the interest on which is,
in the opinion of recognized bond counsel to the issuing governmental
authorities, exempt from all Federal income taxes under existing law. At June
16, 2000, each Unit represented a 1/5,921 undivided interest in the principal
and net income of the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.4% of the Public Offering Price (5.708%
of the amount invested). At June 16, 2000, the Public Offering Price per Unit
was $457.06 plus net interest accrued to date of settlement (three business
days after such date) of $4.31, $4.31 and $4.31 for the monthly, quarterly and
semi-annual distribution plans, respectively (see "Market for Units" in Part
Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 6.04% per annum on June 16, 2000, and 5.95% and 6.01% under the
monthly and quarterly distribution plans, respectively. Estimated Long-Term
Return to Unit holders under the semi-annual distribution plan was 5.09% per
annum on June 16, 2000, and 5.01% and 5.07% under the monthly and quarterly
distribution plans, respectively. Estimated Current Return is calculated by
dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. 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 take into account and 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 a
compounding factor and the expenses and sales charge associated with each Unit
of the 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
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. 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. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,360,000
Number of Units 5,921
Fractional Undivided Interest in the Trust per Unit 1/5,921
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,560,114
Aggregate Value of Bonds per Unit $432.38
Sales Charge 5.708% (5.4% of Public Offering Price) $24.68
Public Offering Price per Unit $457.06*
Redemption Price and Sponsor's Repurchase Price per Unit
($24.68 less than the Public Offering Price per Unit) $432.38*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Securities in the Trust) $2,500,000
</TABLE>
Date Trust Established April 10, 1979
Mandatory Termination Date December 31, 2028
Evaluator's Fee: $2,648 annually. 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.
Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Quarterly Annual
<S> <C> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $29.71 $29.71 $29.71
Less: Estimated Annual Expense
Excluding Insurance $1.82 $1.54 $1.45
Annual Premium on Portfolio Insurance $.68 $.68 $.68
Estimated Net Annual Interest Income $27.21 $27.49 $27.58
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $27.21 $27.49 $27.58
Divided by 12, 4 and 2, Respectively $2.27 $6.87 $13.79
Estimated Daily Rate of Net Interest Accrual $.0756 $.0764 $.0766
Estimated Current Return Based on Public
Offering Price 5.95% 6.01% 6.04%
Estimated Long-Term Return Based on Public
Offering Price 5.01% 5.07% 5.09%
</TABLE>
Trustee's Annual Fee: $1.24, $.98 and $.69 per $1,000 principal amount of
Bonds for those portions of the Trust under the monthly, quarterly and semi-
annual distribution plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; quarterly--March, June, September and December; semi-annual--June and
December.
Distribution Dates: Last day of the month as follows: monthly--each month;
quarterly-- March, June September and December; semi-annual--June and
December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
of Insured Municipal Bonds, Series 41
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds, Series
41 as of March 31, 2000, and the related statements of operations and changes
in net assets for each of the three years in the period then ended. These
financial statements are the responsibility of the Trust's Sponsor. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 2000, by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust of Insured
Municipal Bonds, Series 41 at March 31, 2000, and the results of its
operations and changes in its net assets for each of the three years in the
period then ended in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
July 9, 2000
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,355,588)
(Note 1) $2,577,093
Accrued interest 68,848
Receivable from investment transactions 65,000
__________
2,710,941
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 20,420
Cash overdraft 18,496
Accrued liabilities 318
__________
39,234
__________
Net assets, applicable to 5,934 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,355,588
Net unrealized appreciation (Note 2) 221,505
Distributable funds 94,614
__________
$2,671,707
==========
Net asset value per unit $450.24
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
PORTFOLIO - See notes to portfolio.
March 31, 2000
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal Market
Name of issuer and title of bond(e) rate maturity provisions(a) Rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
The Health Care and Residential Facilities Board
of Jefferson County Arkansas, Single Family
Mortgage Revenue (Privately Insured Mortgage
Loans), 1978 Conventional Series (d) 7.40 % 12/01/2010 2000 @ 100 S.F. AAA $280,000 302,953
Hamilton County, Ohio, Hospital Facilities Revenue
(St. Francis-St. George Hospital, Inc.) (d) 7.75 2/15/2009 2002 @ 100 S.F. NR 555,000 610,116
Dauphin County, Pennsylvania, Industrial
Development Authority, Pollution Control 2000 @ 100
Revenue (Pennsylvania Electric Company) 6.125 12/01/2007 2002 @ 100 S.F. A2 (c) 205,000 205,339
Orangeburg County, South Carolina, Hospital
Facilities Revenue, Series 1979 (Orangeburg 2000 @ 100
Regional Hospital Project) (d) 7.625 4/01/2011 2001 @ 100 S.F. AAA 905,000 1,003,580
Cabell County, West Virginia, Putnam County,
West Virginia, and Wayne County, West Virginia,
Single Family Residence Mortgage Revenue
(Multiple Originators and Servicers)
1979 Series A (d) 7.375 4/01/2010 2001 @ 100 S.F. AAA 415,000 455,105
_____________________
$2,360,000 2,577,093
=====================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
NOTES TO PORTFOLIO
March 31, 2000
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in that year or, if
currently redeemable, the redemption price at March 31, 2000. Unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value). "S.F." indicates a sinking
fund is established with respect to an issue of bonds. In addition,
certain bonds are sometimes redeemable in whole or in part other than by
operation of the stated redemption or sinking fund provisions under
specified unusual or extraordinary circumstances. All of the bonds are
subject to call within two years.
(b) The ratings shown are those effective at March 31, 2000 ("NR" indicates
No Rating). All ratings are by Standard and Poor's Corporation unless
otherwise indicated.
(c) Rating by Moody's Investors Service, Inc.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) The Portfolio consists of five Bond issues from five states. One Bond
issue representing approximately 38%, and one Bond issue representing
approximately 24% of the aggregate principal amount of the Bonds are
obligations of issuers located in South Carolina and Ohio, respectively.
None of the Bonds in the Trust are general obligations of a governmental
entity. All issues are revenue bonds payable from the income of a
specific project or authority and are divided by purpose of issue as
follows: Health Care, 2; Housing, 2; and Pollution Control, 1.
Approximately 62% and 29% of the aggregate principal amount of the Bonds
consist of health care revenue bonds and residential mortgage revenue
bonds, respectively. Each of four Bond issues represents 10% or more of
the aggregate principal amount of the Bonds in the Trust or a total of
approximately 91%. The largest such issue represents approximately 38%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Interest income $185,819 196,732 221,863
Expenses:
Trustee's fees and related expenses (6,961) (8,049) (8,074)
Insurance expense (Note 3) (4,251) (4,526) (5,187)
Evaluator's fees (2,648) (2,648) (2,648)
________________________________
Investment income - net 171,959 181,509 205,954
Net gain (loss) on investments:
Net realized gain (loss) 8,640 17,111 23,358
Change in net unrealized appreciation
or depreciation (179,850) (14,120) 83,576
________________________________
(171,210) 2,991 106,934
________________________________
Net increase in net assets resulting
from operations $749 184,500 312,888
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $171,959 181,509 205,954
Net realized gain (loss) on investments 8,640 17,111 23,358
Change in net unrealized appreciation
or depreciation on investments (179,850) (14,120) 83,576
__________________________________
749 184,500 312,888
Distributions to unit holders:
Investment income - net (171,857) (184,156) (211,164)
Principal from investment transactions (24,786) - (449,660)
__________________________________
(196,643) (184,156) (660,824)
Unit redemptions (288, 442 and 412 in
2000, 1999 and 1998, respectively):
Principal portion (130,467) (211,148) (198,755)
Net interest accrued (3,248) (4,435) (3,603)
__________________________________
(133,715) (215,583) (202,358)
__________________________________
Total increase (decrease) in net assets (329,609) (215,239) (550,294)
Net assets:
At the beginning of the year 3,001,316 3,216,555 3,766,849
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $94,614, $66,859 and
$86,220 at March 31, 2000, 1999
and 1998,respectively) $2,671,707 3,001,316 3,216,555
==================================
Trust units outstanding at the
end of the year 5,934 6,222 6,664
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Securities Evaluation Service,
Inc. (the Evaluator), certain shareholders of which are officers of the
Sponsor. The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds, (3)
appraisal or (4) any combination of the above (see Note 3).
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, April 10, 1979. The premium or discount (including
original issue discount) existing at the Date of Deposit is not being
amortized. Realized gain (loss) from security transactions is reported on an
identified cost basis. Sales and redemptions of securities are recorded on
the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
In addition to insurance coverage acquired by the Trust (see Note 3), the
Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $1.24, $.98 and $.69 per $1,000 principal amount of Bonds for those
portions of the Trust under the monthly, quarterly and semi-annual
distribution plans, respectively. Additionally, a fee of $2,648 annually is
payable to the Evaluator and the Trust pays all related expenses of the
Trustee and recurring financial reporting costs.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at March 31, 2000 follows:
<TABLE>
<S> <C>
Unrealized appreciation $221,505
Unrealized depreciation -
________
$221,505
========
</TABLE>
<PAGE>
3. Insurance
The Trust has acquired insurance coverage which provides for the payment, when
due, of all principal and interest on bonds in its portfolio. The insurance
is effective only while the bonds are owned by the Trust and, in the event of
disposition of any bond by the Trustee, the insurance terminates as to such
bond on the date of disposition. Annual insurance premiums payable by the
Trust in future years, assuming no change in the portfolio, would be $4,027.
The valuation of securities did not include any amount attributable to the
insurance acquired by the Trust as there has been no default in the payment of
principal or interest on the securities in the portfolio as of the date of
these financial statements and, in the opinion of the Sponsor, the bonds are
being quoted in the market at a value which does not reflect a significant
risk of such default.
4. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the securities on the date of an investor's purchase, plus a
sales charge of 4.5% of the public offering price which is equivalent to
approximately 4.712% of the net amount invested.
Distributions of net interest income -
Distributions of net interest income to unit holders are made monthly,
quarterly or semi-annually. Such income distributions per unit, on an accrual
basis, were as follows:
<TABLE>
<CAPTION>
Type of Year ended March 31,
distribution
plan 2000 1999 1998
<S> <C> <C> <C>
Monthly $28.23 28.92 30.39
Quarterly 28.43 29.23 30.65
Semi-annual 28.65 29.37 30.81
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Interest income $30.39 30.67 32.20
Expenses (2.27) (2.37) (2.31)
___________________________
Investment income - net 28.12 28.30 29.89
Distributions to unit holders:
Investment income - net (28.35) (28.97) (30.72)
Principal from investment transactions (3.99) - (64.03)
Net gain (loss) on investments (27.91) .36 15.20
___________________________
Total increase (decrease) in net assets (32.13) (.31) (49.66)
Net assets:
Beginning of the year 482.37 482.68 532.34
___________________________
End of the year $450.24 482.37 482.68
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 41
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
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 statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
The First Trust (registered trademark) of Insured Municipal Bonds
The First Trust of Insured Municipal Bonds-Multi-State
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated April 28, 2000 AND PART THREE
The Fund. The First Trust of Insured Municipal Bonds and The First Trust
of Insured Municipal Bonds-Multi-State (collectively, the "Fund")
consist of underlying separate unit investment trusts (the "Trusts").
Each Trust is an insured portfolio of interest-bearing obligations (the
"Bonds") issued by or on behalf of municipalities and other governmental
authorities within the state for which the Trust is named, counties,
municipalities, authorities and political subdivisions thereof, the
Commonwealth of Puerto Rico, or its authorities, or other territories of
the United States or authorities thereof, the interest on which is, in
the opinion of recognized bond counsel to the respective issuing
governmental authorities, exempt from all Federal income taxes and,
where applicable, from state and local income taxes under existing law
at the date of issuance of such Bonds. The Bonds are referred to herein
as "Bonds" or "Securities." Each trust of the Fund owns an insured
portfolio of Bonds meeting the criteria described above. The objectives
of the Fund are Federal, state and local tax-exempt income and
conservation of capital through an investment in an insured portfolio of
tax-exempt Bonds. The payment of interest and the preservation of
principal are dependent upon the continuing ability of the issuers
and/or obligors of Bonds and of the insurers or reinsurers to meet their
respective obligations. The Portfolio, essential information based
thereon and financial statements, including a report of independent
auditors relating to the series of the Fund offered hereby, are
contained in Part One to which reference should be made for such
information.
IN THE OPINION OF COUNSEL, INTEREST INCOME TO EACH SERIES OF THE FUND
AND TO THE RESPECTIVE UNIT HOLDERS THEREOF, WITH CERTAIN EXCEPTIONS, IS
EXEMPT UNDER EXISTING LAW FROM ALL FEDERAL INCOME TAXES. IN ADDITION,
THE INTEREST INCOME TO EACH SERIES OF THE FUND 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 SERIES ARE LOCATED. CAPITAL GAINS, IF ANY, ARE SUBJECT TO
TAX.
Distributions. Distributions of interest received by the Fund, pro-rated
on an annual basis, are made monthly, quarterly (if applicable) or semi-
annually as the Unit holder has elected. Except as described herein,
distributions of funds from the Principal Account, if any, are made as
set forth in Part One for each Trust to Unit holders of record on the
fifteenth day of such month. Information respecting the estimated
current return and estimated long-term return to Unit holders is
contained in Part One.
Reinvestment. Distributions to Unit holders may be reinvested as
described herein (See "How Can Distributions to Unit Holders be
Reinvested?").
All Parts of the Prospectus Should be Retained for Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Portfolio Insurance. Insurance has been obtained from an independent
company, by each series of the Fund (except for The First Trust of
Insured Municipal Bonds-Multi-State: Pennsylvania Trust, Series 6)
and/or by the issuer of the Bonds involved, guaranteeing the payments of
principal and interest on the Securities in the Portfolio of each series
of the Fund. Insurance obtained by each series of the National Trust,
prior to Series 112 and for each Series of the New York and Pennsylvania
Trust, applies only while Bonds are retained in such Trust. For each
Series of the Multi-State Trust (except for Multi-State Trust:
Pennsylvania Trust, Series 6) and for Series 112 and subsequent Series
of the National Trust, the Trustee, upon the sale of a Bond in any such
Series, 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"]). For The
First Trust of Insured Municipal Bonds-Multi-State: Pennsylvania Trust,
Series 6 all of the Bonds are insured under policies of insurance
obtained by the issuers of the Bonds. See Part One for information
concerning Bonds insured by each series of the Fund and Bonds insured by
the issuers thereof. Insurance obtained by each series of the Fund
applies only while Bonds are retained in the Fund while insurance
obtained by a Bond issuer, if any, is effective so long as such Bonds
are outstanding. Such insurance relates only to the Securities in the
Fund and not to the Units. As a result of such insurance, the Units have
received a rating of "AAA" by Standard & Poor's Ratings Group, a
Division of McGraw-Hill, Inc. ("Standard & Poor's"). (See "Why and How
are the Trusts Insured?") No representation is made as to any insurer's
or reinsurer's ability to meet its commitments. For Series 112 and
subsequent Series of the National Trust and any Series of The First
Trust of Insured Municipal Bonds-Multi-State (except for Multi-State
Trust: Pennsylvania Trust, Series 6), pursuant to an irrevocable
commitment of Financial Guaranty Insurance Company, in the event of a
sale of a Bond insured by such Series of the National Trust and Multi-
State Trust, the Trustee has the right to obtain permanent insurance for
such Bond upon the payment of a single predetermined insurance premium
from the proceeds of the sale of such Bond.
Offering. The Units offered hereby are issued and outstanding Units
which have been reacquired either by purchase from the Trustee of Units
tendered for redemption or by purchase in the open market. The price
paid in each instance was not less than the value of the Securities per
Unit, plus net interest accrued to the date of settlement, determined as
provided herein under "How is the Public Offering Price Determined?" Any
profit or loss resulting from the sale of Units will accrue to the
Sponsor or other dealers selling the Units and no proceeds from any such
sale will be received by the Fund.
The Public Offering Price of the Units is equal to the value of the
Securities in the portfolio of the series of the Fund represented by the
Units being offered divided by the number of Units outstanding, plus a
sales charge as indicated in Part One for each Trust plus net interest
accrued to the date of settlement.
Market. The Sponsor, although not obligated to do so, intends to
maintain a market for Units in all series of the Fund at prices based
upon the value of the Securities in the related portfolio. In the
absence of such a market, a Unit holder will nonetheless be able to
dispose of Units by redemption at prices based upon the value of the
underlying Securities (see "Rights of Unit Holders-How May Units be
Redeemed?"). The value of neither the underlying Bonds nor the Units,
absent situations in which Bonds are in default in payment of principal
or interest or, in the Sponsor's opinion, in significant risk of such
default, include value attributable to the portfolio insurance obtained
by each series of the Fund. (See "Why and How are the Trusts Insured?")
Page 2
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
THE FIRST TRUST OF INSURED MUNICIPAL BONDS-MULTI-STATE
What are The First Trust of Insured Municipal Bonds and The First Trust
of Insured Municipal Bonds-Multi-State?
The Fund is a series of trusts of either The First Trust of Insured
Municipal Bonds (the "National Trust"), The First Trust of Insured
Municipal Bonds-New York Series (the "New York Trust"), The First Trust
of Insured Municipal Bonds-Pennsylvania Series (the "Pennsylvania
Trust") or The First Trust of Insured Municipal Bonds-Multi-State (the
"Multi-State Trust") all of which generally are similar but each of
which is separate and is designated by a different series number. Each
Series consists of underlying separate unit investment trusts (such
Trusts being collectively referred to herein as the "Fund") created
under the laws of the State of New York pursuant to a Trust Agreement
(the "Indenture") dated the Date of Deposit with Nike Securities L.P.,
as Sponsor, Securities Evaluation Service, Inc., as Evaluator, and The
Chase Manhattan Bank, as Trustee.
The objectives of the Fund and each series thereof are income exempt
from Federal income tax and, additionally, for all Series of the Fund
other than the National Trust from state and local income tax and
conservation of capital through an investment in an insured portfolio of
interest-bearing obligations (the "Bonds") (and in certain series,
Existing Fund Units representing an undivided interest in such
obligations) issued by or on behalf of states, counties, territories or
municipalities of the United States or authorities or political
subdivisions thereof, the interest on which is, in the opinion of
recognized bond counsel to the issuing governmental authorities, exempt
from all Federal income tax under existing law. The Bonds and the
Existing Fund Units are collectively referred to herein as "Securities."
Insurance has been obtained by each Series of the Fund and/or by the
issuer of the Bonds involved guaranteeing the payment of principal and
interest on the Bonds when such principal and interest shall become due
for payment. Insurance has been obtained by each Series of the Fund from
either Ambac Assurance Corporation ("Ambac Assurance") or Financial
Guaranty Insurance Company ("Financial Guaranty") (except for the Multi-
State Trust: Pennsylvania Trust, Series 6). For Series of the Multi-
State Trust (except for Multi-State Trust: Pennsylvania Trust, Series 6)
and for Series 112 and subsequent Series of the National Trust, the
Trustee upon sale of a Bond in any such Series has the right to obtain
Permanent Insurance for the Bond which is sold. All of the Bonds in the
Multi-State Trust: Pennsylvania Trust, Series 6 are insured under
policies of insurance obtained by the issuer of the Bonds. Insurance
obtained by Series 8-111 of the National Trust, and all Series of the
New York Trust and the Pennsylvania Trust is applicable only while the
Bonds thus insured are held in the Fund. Insurance obtained by each
series of the Fund from Financial Guaranty covers all Bonds in such
series. Insurance obtained by each series of the Fund from Ambac
Assurance covers all Bonds in such series which were not insured by the
issuer. The underlying Bonds represented by the Existing Fund Units have
been insured under substantially identical policies with Ambac Assurance
at the time of creation of the respective series (or in certain
instances some of such Bonds have been insured by the respective issuers
of such bonds through insurance obtained from Ambac Assurance). Thus,
the Bonds underlying the Existing Fund Units are not additionally
insured by the respective series. THERE IS, OF COURSE, NO GUARANTEE THAT
THE FUND'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT IN THE FUND SHOULD
BE MADE WITH AN UNDERSTANDING OF THE RISKS WHICH AN INVESTMENT IN FIXED
RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL, INCLUDING THE RISK THAT THE
VALUE OF THE UNITS WILL DECLINE WITH INCREASES IN INTEREST RATES.
Neither the Public Offering Price nor any evaluation of Units for
purposes of repurchases or redemptions reflects any element of value for
the insurance obtained by the Fund unless Bonds are in default in
payment of principal or interest or, in the Sponsor's opinion, are being
quoted in the market at values which reflect a significant risk of such
default. See "Public Offering-How is the Public Offering Price
Determined?" On the other hand, the value of insurance obtained by the
issuer of the Bonds is reflected and included in the market value of
such Bonds.
Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security
therefor. If an issue is accepted for insurance, a noncancellable policy
Page 3
for the scheduled payment of interest and principal on the Bonds is
issued by the insurer. A single premium is paid for any Bonds insured by
an issuer and a monthly premium is paid by each series of the Fund for
the insurance obtained by it. All Bonds insured by the issuer thereof by
Ambac Assurance and Financial Guaranty receive an "AAA" rating by
Standard & Poor's and an "Aaa" rating by Moody's Investors Service, Inc.
See "Why and How are the Trusts Insured?"
In selecting Bonds for the Fund, the following facts, among others, were
considered: (i) the Standard & Poor's rating of the Bonds was in no case
less than "BBB" or the Moody's Investors Service, Inc. rating of the
Bonds was in no case less than "Baa," at the date the series was
established, 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) the availability and cost of
insurance on the principal and interest of the Bonds and (iv) the
diversification of Bonds as to purpose of issue and location of issuer.
Subsequent to the Date of Deposit, a Bond may cease to be rated or its
rating may be reduced below the minimum required as of the Date of
Deposit. Neither event requires the 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 a Bond. See "Rights
of Unit Holders-How May Bonds be Removed from the Fund?" The Portfolio
appearing in Part One contains Bond ratings, if any, for the Bonds
listed at the date shown.
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 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
Page 4
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 are 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.
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; or
administrative or judicial actions which render contracts relating to
the projects void, unenforceable or impossible to perform or impose
unreasonable burdens or excessive liabilities.
Existing Fund Units have been deposited with the Trustee in three series
of the Fund. These Units at the respective dates of deposit represented
approximately 4% of the principal amount of the respective Trust's
portfolio. The investment objectives of all of the series of the Fund
are similar, and the Sponsor and Trustee of the series represented by
the Existing Fund Units have responsibilities and authority and receive
fees substantially identical to those described in this Prospectus. All
Existing Fund Units were purchased by the Sponsor in the secondary
market for inclusion in the respective Portfolio and were not taken from
the Sponsor's inventory.
Investors should be aware that many of the Bonds in each Portfolio are
subject to continuing requirements such as the actual use of Bond
Page 5
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 Fund 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 obligor
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 any series of the Fund will retain for any length of time
the size and composition which existed at the date of the information in
Part One. Neither the Sponsor nor either Trustee shall be liable in any
way for any default, failure or defect in any Bond. Certain of the Bonds
contained in each series of the Fund may be subject to being called or
redeemed in whole or in part prior to their stated maturities pursuant
to the optional redemption provisions and sinking fund provisions
described in the "Portfolio" in Part One or pursuant to special or
extraordinary redemption provisions. 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. 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 estimated current return
and estimated long-term 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 par value or the
accreted value. Unit holders may recognize capital gain or loss upon any
redemption or call.
To the best knowledge of the Sponsor, there is no litigation other than
that which is described in this Prospectus or any supplement thereto
pending as of the date hereof in respect of any Bonds which might
reasonably be expected to have a material adverse effect upon the Fund.
At any time, litigation may be initiated on a variety of grounds with
respect to Bonds in the Fund. Such litigation, as for example suits
challenging the issuance of pollution control revenue bonds under
recently-enacted environmental protection statutes, may affect the
validity of such 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, where applicable, state and local taxes.
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.
To the extent that Units are redeemed by the Trustee, the fractional
undivided interest represented by each unredeemed Unit in the related
Fund will increase, although the actual interest represented by such
fraction will remain substantially unchanged. Units will remain
outstanding until redeemed upon tender to a Trustee by any Unit holder,
which may include the Sponsor, or until termination of the related Trust
Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
At the date of this Prospectus, the Estimated Current Return and the
Estimated Long-Term Return, under the monthly, quarterly (if applicable)
and semi-annual distribution plans, are as set forth in Part One
attached hereto 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 the Estimated Net Annual Interest
Page 6
Income per Unit or the Public Offering Price will result in a change in
the Estimated Current Return. For each Fund, the Public Offering Price
will vary in accordance with fluctuations in the prices of the
underlying Bonds and the 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 indicated in Part One for each Fund
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 a Trust; and
(2) takes into account a compounding factor and 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 Fund will
change, there is no assurance that the Estimated Long-Term Return
indicated in Part One for each Fund 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. 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.
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 in
the Fund generally is paid semi-annually to the Fund. However, interest
on the Bonds in the Fund is accounted for daily on an accrual basis.
Because of this, the Fund always has an amount of interest earned but
not yet collected by the Trustee because of non-collected coupons. For
this reason, the Public Offering Price of Units will have added to it
the proportionate share of accrued and undistributed net interest to the
date of settlement.
Except through an advance of its own funds, the Trustee has no cash for
distribution to Unit holders until it receives interest payments on the
Bonds in the Fund. The Trustee will recover its advancements without
interest or other costs to such Fund from interest received on the Bonds
in the Fund. When these advancements have been recovered, regular
distributions of interest to Unit holders will commence. See "Rights of
Unit Holders-How are Interest and Principal Distributed?" Interest
account balances are established with generally positive cash balances
so that it will not be necessary on a regular basis for the Trustee to
advance its own funds in connection with interest distributions.
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 Fund and distributed to Unit holders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unit holder sells or redeems all
or a portion of his Units, he will be entitled to receive his
proportionate share of the net interest accrued from the purchaser of
his Units. Since the Trustee has the use of the net interest accrued
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.
Why and How are the Trusts Insured?
AMBAC ASSURANCE CORPORATION. THE FOLLOWING DISCUSSION CONCERNING AMBAC
ASSURANCE CORPORATION ("AMBAC ASSURANCE") AND INSURANCE POLICIES ISSUED
BY AMBAC ASSURANCE APPLIES TO SERIES 8-111 OF THE NATIONAL TRUST AND ALL
SERIES OF THE NEW YORK TRUST AND THE PENNSYLVANIA TRUST.
In an effort to protect Unit holders against any delay in payment of
interest and against principal loss, insurance has been obtained by each
series of the Fund or by the Bond issuer guaranteeing payment of
interest and principal, when such shall become due for payment, in
respect of the Bonds (bonds underlying the Existing Fund Units already
being covered by insurance). The insurance policy obtained by each
series of the Fund is noncancellable and will continue in force so long
as each series of the Fund is in existence, and the Bonds described in
the policy continue to be held by the Fund (see "Portfolio" in Part
One). Nonpayment of premiums on the policy obtained by each series of
the Fund will not result in the cancellation of insurance but will
permit the insurer to take action against the Trustee for the series
involved to recover premium payments due it. Premium rates for each
issue of Bonds protected by the policy obtained by each series of the
Fund are fixed for the life of the respective series. The underlying
bonds represented by the Existing Fund Units have been insured under
substantially identical policies with Ambac Assurance to those described
Page 7
herein at the time of creation of the respective series (or in certain
instances some of such bonds have been insured by the respective issuers
of such bonds through insurance obtained from Ambac Assurance). Thus,
the bonds underlying the Existing Fund Units are not additionally
insured by the series of the Fund holding the Existing Fund Units. The
premium for any insurance policy or policies obtained by an Existing
Fund or an issue of bonds underlying such Existing Fund Units is payable
on the same terms as the Fund's insurance policy or has been paid in
advance by such issuer. Any such policy or policies are noncancellable
and will continue in force so long as the bonds so insured are
outstanding (in the case of issuer acquired insurance) or so long as
such bonds are held by the Existing Fund (in the case of insurance
acquired by the Existing Fund) and the insurers referred to below remain
in business.
The aforementioned insurance guarantees the payment of principal and
interest on the Bonds as they shall become due for payment. It does not
guarantee the market value of the Bonds or the value of the Units. The
insurance obtained by the Fund is effective only as to Bonds owned by
and held in the Fund. In the event of a sale of any such Bond in Series
8-111 of the National Trust and all Series of the New York Trust and the
Pennsylvania Trust by the Trustee, the insurance terminates as to such
Bond on the date of sale.
Except as indicated below, insurance obtained by a 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 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 are being quoted in the market at
values which reflect a significant risk of such default. The value of
the insurance will be equal to the difference between the market value
of a Bond in default in payment of principal or interest or in the
Sponsor's opinion is being quoted in the market at a value which
reflects a significant risk of default and the market value of
comparable bonds which are not in such situations. However, the
Evaluator will not assign a value greater than par value to Bonds in
default or in significant risk of default. Except under limited
circumstances, it is also the present intention of the Trustee not to
sell such Bonds to effect redemptions or for any other reason but rather
to retain them in the portfolio because the value attributable to the
insurance cannot be realized upon sale. See "Public Offering-How is the
Public Offering Price Determined?" herein for a more complete
description of the Evaluator's method of valuing Bonds which are in
default in payment of principal or interest or in significant risk of
such default. Insurance obtained by the issuer of a Bond is effective so
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 insurance policy obtained by Series 8-111 of the National Trust and
all Series of the New York Trust and the Pennsylvania Trust originally
issued by MGIC Indemnity Corporation ("MGIC Indemnity") and any other
policy obtained by a Bond issuer was originally issued either by
American Municipal Bond Assurance Corporation ("Ambac") or MGIC
Indemnity. MGIC Indemnity and Ambac were each subsidiaries of MGIC
Investment Corporation. MGIC Indemnity and Ambac were merged as of March
31, 1984. The surviving corporation, MGIC Indemnity Corporation, was
renamed Ambac Indemnity Corporation as of June 1, 1984. Effective July
14, 1997, Ambac Indemnity Corporation changed its name to Ambac
Assurance Corporation.
Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner
of Insurance of the State of Wisconsin and licensed to do business in 50
states, the District of Columbia, the Territory of Guam and the
Commonwealth of Puerto Rico, with admitted assets of approximately
$4,013,000,000 (unaudited) and statutory capital of approximately
$2,402,000,000 (unaudited) as of December 31, 1999. Statutory capital
consists of Ambac Assurance's policyholders' surplus and statutory
contingency reserve. Standard & Poor's Ratings Services, a Division of
The McGraw-Hill Companies, Moody's Investors Service and Fitch IBCA,
Inc. have each assigned a triple-A financial strength rating to Ambac
Assurance.
The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the
"Company"), is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information may
Page 8
be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the public reference section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, the aforementioned material may also be inspected at the
offices of the New York Stock Exchange, Inc. (the "NYSE") at 20 Broad
Street, New York, New York 10005. The Company's Common Stock is listed
on the NYSE.
Copies of Ambac Assurance's financial statements prepared in accordance
with statutory accounting standards are available from Ambac Assurance.
The address of Ambac Assurance'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 Assurance contained above has been
furnished by Ambac Assurance. 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.
To be in the Portfolio of Series 8-111 of the National Trust and of any
Series of the New York Trust and the Pennsylvania Trust, Bonds must have
been insured by Ambac Assurance or have been eligible for the insurance
obtained from Ambac Assurance. In determining eligibility for insurance,
Ambac Assurance applied its own standards which correspond generally to
the standards it normally uses in establishing the insurability of new
issue municipal bonds and which were not necessarily the same as the
criteria used in regard to the selection of Bonds by the Sponsor. To the
extent the standards of Ambac Assurance are more restrictive than those
of the Sponsor, the previously stated Fund investment criteria have been
limited with respect to the Bonds. This decision was made prior to the
Date of Deposit, as Bonds not eligible for such insurance (or not
already insured by the issuer thereof) were not deposited in the Fund.
Thus, all Bonds in each Portfolio of Series 8-111 of the National Trust
and any Series of the New York Trust and the Pennsylvania Trust are
insured, either by the respective series of the Trust or by the issuer
of the Bonds.
The contracts of insurance relating to the various Portfolios and the
negotiations in respect thereof represent the only significant
relationship between Ambac Assurance and the Sponsor or the Fund.
Otherwise neither Ambac Assurance nor its parent, Ambac Financial Group,
Inc., or any associate 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 for which a policy of insurance guaranteeing the
timely payment of interest and principal has been obtained from Ambac
Assurance.
Because the Bonds are insured by Ambac Assurance as to the timely
payment of principal and interest, when due, and on the basis of the
various reinsurance agreements in effect, Standard & Poor's has assigned
to Series 8-111 of the National Trust and any Series of the New York
Trust and the Pennsylvania 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 the Fund
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 the Fund or
the Units. 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 the Fund or sales by the Fund 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 the Fund is to obtain
higher yield on the Securities in the Portfolio 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 yet at the
same time to have the protection of insurance of prompt payment of
interest and principal, when due, on the Bonds. There is, of course, no
certainty that this result will be achieved. Bonds in the Fund which
have been insured by the issuer (all of which are 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 such Bonds for the Portfolio, the Sponsor applied the criteria
described above.
Page 9
In the event of nonpayment of interest or principal, when due, in
respect of a Bond, the appropriate insurer shall make such payment no
later than 30 days after it has been notified that such non-payment has
occurred. The insurer, as regards any payment it may make, will succeed
to the rights of the Trustee in respect thereof. All policies issued by
Ambac Assurance are substantially identical insofar as liability to the
Trust is concerned.
Chapman and Cutler, Counsel for the Sponsor, has given an opinion to the
effect that the payment of insurance proceeds representing maturing
interest on defaulted municipal obligations paid by Ambac Assurance or
another 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. See "What is the Federal Tax
Status of Unit Holders?"
Ambac Assurance is subject to regulation by the department of insurance
in each state in which it is qualified to do business. Such regulation,
however, is no guarantee that it will be able to perform its contract of
insurance in the event a claim should be made thereunder at some time in
the future. At the date hereof, it is reported that no claims have been
submitted or are expected to be submitted to Ambac Assurance which would
materially impair the ability of Ambac Assurance to meet its commitments
pursuant to any contract of bond or portfolio insurance.
To determine the Bonds in the Portfolio which are insured through
insurance obtained by the issuer thereof and the Bonds which are insured
under one of the Fund's portfolio insurance policies, see "Portfolio" in
Part One.
FINANCIAL GUARANTY INSURANCE COMPANY. THE FOLLOWING DISCUSSIONS
CONCERNING FINANCIAL GUARANTY INSURANCE COMPANY AND INSURANCE POLICIES
ISSUED BY FINANCIAL GUARANTY INSURANCE COMPANY APPLy TO SERIES 112 AND
SUBSEQUENT SERIES OF THE NATIONAL TRUST AND ALL SERIES OF THE MULTI-
STATE TRUST EXCEPT THE MULTI-STATE TRUST: PENNSYLVANIA TRUST, SERIES 6.
ALL OF THE BONDS IN THE MULTI-STATE TRUST: PENNSYLVANIA TRUST, SERIES 6
ARE INSURED UNDER POLICIES OF INSURANCE OBTAINED BY THE ISSUERS OF THE
BONDS FROM FINANCIAL GUARANTY INSURANCE COMPANY ("FINANCIAL GUARANTY"),
AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION, MUNICIPAL BOND INSURANCE
ASSOCIATION AND BOND INVESTORS GUARANTY INSURANCE COMPANY. THE PREMIUMS
FOR THE INSURANCE POLICIES OBTAINED BY THE ISSUERS OF THE BONDS IN THE
MULTI-STATE TRUST: PENNSYLVANIA TRUST, SERIES 6 HAVE BEEN PAID IN
ADVANCE BY SUCH ISSUERS AND SUCH POLICIES ARE NONCANCELLABLE AND WILL
CONTINUE IN FORCE SO LONG AS THE BONDS SO INSURED ARE OUTSTANDING.
BECAUSE OF THE INSURANCE OBTAINED BY THE ISSUERS OF THE BONDS IN THE
MULTI-STATE TRUST: PENNSYLVANIA TRUST, SERIES 6, STANDARD & POOR'S
CORPORATION HAS RATED THE UNITS OF SUCH TRUST "AAA."
In an effort to protect Unit holders against any delay in payment of
interest and against principal loss, insurance has been obtained for
Series 112 and subsequent Series of the National Trust and all Series of
the Multi-State Trust (except the Multi-State Trust: Pennsylvania Trust,
Series 6) from Financial Guaranty Insurance Company ("Financial
Guaranty"), a New York stock insurance company, guaranteeing the
scheduled payment of interest and principal in respect of the Bonds
deposited in and delivered to each series of the Trust. The insurance
policy obtained by each such series of the Trust is noncancellable and
will continue in force so long as such series of the Trust is in
existence and the Bonds described in the policy continue to be held by
the Trust (see "Portfolio" in Part One for each Trust). Nonpayment of
premiums on the policies obtained by the Trust will not result in the
cancellation of insurance but will permit Financial Guaranty 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 a
Series of the Fund are fixed for the life of the respective series. The
premium for any insurance policy or policies obtained by an issuer of
Bonds has been paid in advance by such issuer 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.
Under the provisions of the aforementioned insurance, Financial Guaranty
unconditionally and irrevocably agrees to pay State Street Bank and
Trust Company, N.A. or its successor, as its agent (the "Fiscal Agent"),
that portion of the principal of and interest on the Bonds 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
Page 10
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 Bonds 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 in Series 112 and subsequent Series of the
National Trust and all Series of the Multi-State Trust (except the Multi-
State Trust: Pennsylvania Trust, Series 6) 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 such 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 a 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 is determined based upon the
insurability of each Bond as of the Date of Deposit and will not be
increased or decreased for any change in the creditworthiness of such
Bond.
The policies obtained by Series 112 and subsequent Series of the
National Trust and each Series of the Multi-State Trust (except the
Multi-State Trust: Pennsylvania Trust, Series 6) were issued by
Financial Guaranty. Financial Guaranty is a wholly-owned subsidiary of
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay
the debts of or the claims against Financial Guaranty. Financial
Guaranty is a monoline financial guaranty insurer domiciled in the State
of New York and subject to regulation by the State of New York Insurance
Department. As of December 31, 1999, the total capital and surplus of
Financial Guaranty was $1,271,707,045. Financial Guaranty prepares
financial statements on the basis of both statutory accounting
principles and generally accepted accounting principles. Copies of such
financial statements 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 25 Beaver Street, New York, New York 10004-2319,
Attention: Financial Condition Property/Casualty Bureau (telephone
number: 212-480-5187).
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.
In order to be in Series 112 and subsequent Series of the National Trust
and any Series of the Multi-State Trust (except the Multi-State Trust:
Page 11
Pennsylvania Trust, Series 6), Bonds must be covered by the insurance
obtained from Financial Guaranty by the Fund. In determining whether to
insure bonds, Financial Guaranty 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. The decision was made prior to the Date of
Deposit, as bonds not covered by such insurance are not deposited in a
Trust. The insurance obtained by Series 112 and subsequent Series of the
National Trust and any Series of the Multi-State Trust (except the Multi-
State Trust: Pennsylvania Trust, Series 6) covers Bonds deposited in the
respective series 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 register bonds or
registered in the name of the Trustee or its nominee in the case of
Bonds held in book-entry form.
Insurance obtained by Series 112 and subsequent Series of the National
Trust and any Series of the Multi-State Trust or by the Bond issuer does
not guarantee the market value of the Bonds or the value of the Units.
The insurance obtained by each series of a Trust is effective only as to
Bonds owned by and held in the respective series. 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 held in
Series 112 and subsequent Series of the National Trust and any Series of
the Multi-State 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
a 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 the
insurance obtained by a 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, are being
quoted in the market at values which reflect a significant risk of such
default. The value of the insurance will be equal to the difference
between (i) the market value of a Bond assuming the exercise of the
right to obtain Permanent Insurance (less the insurance premium
attributable to the purchase of Permanent Insurance) which is in default
in payment of principal or interest or in significant risk of such
default 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 more complete description of the Evaluator's
method of valuing defaulted Bonds and Bonds which have a significant
risk of such default. Insurance obtained by the issuer of a Bond is
effective so 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 contract of insurance obtained by Series 112 and subsequent Series
of the National Trust and any Series of the Multi-State Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Fund. Otherwise neither Financial Guaranty
nor its parent, FGIC Corporation, or 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, or participate in
secondary market transactions involving municipal bonds, in which the
investors or the affiliates of FGIC Corporation 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. Neither the Fund nor the Units nor the Portfolio is
insured directly or indirectly by FGIC Corporation.
Because the Bonds are insured by Financial Guaranty as to the scheduled
payment of principal and interest and on the basis of the financial
condition and the method of operation of Financial Guaranty, Standard &
Poor's has assigned to Series 112 and subsequent Series of the National
Trust and each Series of the Multi-State 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 a 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 a
Trust or the Units. 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 a Trust or sales by a Trust of
Bonds for less than the purchase price paid by a Trust will reduce
payment to Unit holders of the interest and principal required to be
Page 12
paid on such Bonds. There is no guaranty that the "AAA" investment
rating with respect to the Units will be maintained.
An objective of portfolio insurance obtained by a Trust is to obtain a
higher yield on the Securities in the portfolio 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 issuer (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 Trust, the Sponsor has applied
the criteria hereinbefore described.
Chapman and Cutler, Counsel for the Sponsor, have given an opinion to
the effect that such payment of insurance proceeds representing maturing
interest on defaulted municipal obligations paid by Financial Guaranty
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?"
Except for the Multi-State Trust: Pennsylvania Trust, Series 6, all
Bonds in the National Trust and the Multi-State Trust are insured under
one of the Trust's portfolio insurance policies. Certain Bonds in the
portfolio may also be insured through insurance obtained by the issuer
thereof. See "Portfolio" in Part One.
What is the Federal Tax Status of Unit Holders?
See Part Three for each Trust.
Certain Considerations
Certain Trusts of the Fund may contain Bonds of issuers which will be
affected by general economic conditions of Puerto Rico or Guam. For
additional considerations, if any, pertaining to each Trust, see Part
Three for each Trust.
Puerto Rico. Trusts of the Fund may contain Bonds of issuers which will
be affected by general economic conditions in Puerto Rico. The economy
of Puerto Rico is closely integrated with that of mainland United
States. During fiscal 1999 approximately 89% of Puerto Rico's $34
billion in exports were to the U.S. mainland, which was also the source
of approximately 65% of Puerto Rico's $23 billion in imports. The
economy of Puerto Rico is dominated by the manufacturing and service
sectors. The manufacturing sector has experienced fundamental changes
over the years as a result of increased emphasis on higher wage, high
technology industries such as pharmaceuticals, electronics, computers,
microprocessors, professional and scientific instruments, and certain
high technology machinery and equipment. The service sector, including
finance, insurance and real estate, also plays a major role in the
economy. It ranks second only to manufacturing in contribution to the
gross domestic product and leads all sectors in providing employment. In
recent years, the service sector has experienced significant growth in
response to the expansion of the manufacturing sector.
Puerto Rico's more than decade-long economic expansion continued
throughout the six-year period from fiscal 1994 through fiscal 1999.
Almost every sector of the economy participated and record levels of
employment were achieved. Factors behind this expansion included
government-sponsored economic development and hurricane aid programs,
periodic declines in the exchange value of the U.S. dollar, increases in
the level of federal transfers and the relatively low cost of borrowing.
Further growth in the Puerto Rico economy in fiscal 1999 depends on
several factors, including the strength of the U.S. economy, the
relative stability in the price of oil imports, increases in the number
of visitors to the island, the level of exports, the exchange value of
the U.S. dollar, the level of federal transfers and the cost of borrowing.
Economic activity in Puerto Rico increased again during 1999. The growth
in Puerto Rico's gross domestic product (GDP) was 4.19%. The driving
forces behind this growth were continuous economic growth in the United
States, the funds received after Hurricane George, growth in the
construction industry and low interest rates.
Page 13
Puerto Rico's unemployment, although at relatively low historical
levels, remains above the average for the United States. The average
unemployment rate decreased from 13.6% in 1998 to 12.5% in 1999. The
U.S. average in 1998 was 4.5%.
The Puerto Rican economy is affected by a number of Commonwealth and
federal investment incentive programs. 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 further reduction in transfer
payment programs such as food stamps, curtailment of military spending
and policies which could lead to a stronger dollar. One of the factors
assisting the development of the Puerto Rican economy has been the tax
incentives offered by the federal and Puerto Rico governments.
Puerto Rico's future will be determined by the leadership and
initiatives of both the private and public sector to compensate for the
loss of the federal tax credit under Section 936 of the U.S. tax code.
This important credit which enabled companies to repatriate profits at a
40-60% reduction in federal taxes was terminated as of July 1996.
Existing U.S. companies operating in Puerto Rico were given a ten year
grace period, but new U.S. manufacturing companies coming to Puerto Rico
will have to pay U.S. deferral taxes when repatriating their profits to
the mainland.
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.
Guam. The Trusts of the Fund may contain Bonds of issues which may be
affected by economic conditions in Guam. Guam is an unincorporated
territory of the United States; legislation currently being considered
in the U.S. Congress would make Guam a U.S. commonwealth.
Guam's economy is heavily dependent on tourism and U.S. military
activity. Tourism, representing over 60% of the Guam economy, is
affected by general economic conditions and by the value of the U.S.
dollar. The number of visitors to the island leveled off in 1998, due in
part to a massive rebuilding effort following the devastation left in
December 1997 by Supertyphoon Paka. Since over 80% of Guam's tourists in
recent years have been from Japan, Guam's economy may be significantly
affected by a decline in the value of the Japanese yen relative to the
U.S. dollar and any decline in the Asian economy.
The U.S. military, which accounts for 20% of all employment in Guam and
occupies approximately one-third of Guam's land area, affects Guam's
economy through the spending of military personnel and their dependents,
the employment of civilian personnel, construction contracts and other
purchases of materials and services and the refunding to the government
of Guam of Federal income taxes paid by military personnel. Any
reduction in U.S. military spending generally or any reallocation of
that spending away from Guam could, therefore have a substantial effect
on Guam's economy.
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 Guam and various agencies and political
subdivisions located in Guam. 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.
What are the Expenses and Charges?
The Sponsor does not charge the Fund any advisory fee. At no cost to the
Trusts, the Sponsor has borne all the expenses of creating and
establishing the Fund, including the cost of the initial preparation,
Page 14
printing and execution of the Indenture and the certificates for the
Units, legal and accounting expenses, expenses of the Trustee and other
out-of-pocket expenses. Legal and regulatory filing fees and expenses
associated with annually updating the Trusts' registration statements
are also now chargeable to each Trust. Historically, the Sponsor paid
these fees and expenses.
For valuations of Bonds in each series of the Fund, the Evaluator
receives from each series of the Fund a fee as indicated in Part One of
each Trust. The fees of the Trustee for ordinary recurring services to
the respective series of a Trust which they serve are as indicated in
Part One of each Trust. The Trustee's and Evaluator's fees are payable
monthly on or before each Distribution Date from the Interest Account to
the extent funds are available and then from the Principal Account.
Since a 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 a Trust is expected to result from the
use of these funds. Both fees may be increased without approval of the
Unit holders by amounts not to exceed to 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 annualized cost of portfolio insurance is set forth in Part One for
each series of the Fund other than the Multi-State Trust: Pennsylvania
Trust, Series 6. The portfolio insurance continues so long as a Trust
retains the Bonds thus insured. Premiums are payable monthly in advance
by the Trustee on behalf of the Trust. As Bonds in the Portfolio are
redeemed by their respective issuers or sold by the Trustee, the amount
of the premium will be reduced in respect of those Bonds no longer owned
by or held in a series of the Trust which were insured by insurance
obtained by the Trust. Except with respect to the Multi-State Trust:
Pennsylvania Trust, Series 6, Bonds for which insurance has been
obtained by the issuer from Financial Guaranty are also insured by the
Multi-State Trust but no premium is charged for the insurance obtained
by the Multi-State Trust on such Bonds. Bonds for which insurance has
been obtained by the issuer from insurance companies other than
Financial Guaranty are also insured by the Multi-State Trust (except
with respect to the Multi-State Trust: Pennsylvania Trust, Series 6) but
the premiums for insurance obtained by the Multi-State Trust on such
Bonds reflect the existence of the insurance obtained by the issuer from
such other insurance companies. In the case of Bonds for which insurance
has been obtained by the issuer, the Trust either incurs no cost
(because such Bonds were not additionally insured under the policy
obtained by the Trust) or a cost which reflects the existence of such
insurance if the Bonds are covered by the policy obtained by the Trust.
The Fund does not incur any cost for insurance which relates to bonds
underlying Existing Fund Units, since the premium or premiums for such
insurance has been paid either by the Existing Funds or by the
respective issuer of such bonds. Bonds insured by the issuer, for Series
111 and prior series of the National Trust, and all Series of the New
York and Pennsylvania Trust, and Existing Fund Units are not
additionally insured by the series of the Fund. For Series 112 and
subsequent series of the National Trust and all series of the Multi-
State Trust (except Multi-State Trust: Pennsylvania Trust, Series 6),
the premium payable for Permanent Insurance will be paid solely from the
proceeds of the sale of a Bond in the event the Trustee exercises the
right to obtain Permanent Insurance on the Bond. The premiums for such
Permanent Insurance with respect to each Bond will decline over the life
of the Bond.
The following additional charges are or may be incurred by a Trust: all
expenses (including legal and auditing expenses) of the Trustee incurred
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 perform 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, of liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; all taxes and other governmental charges imposed upon the
Securities or any part of the Trust (no such taxes or charges are being
levied or made or, to the knowledge of the Sponsor, contemplated); and
expenditures incurred in contacting Unit holders upon termination of the
Trust. The above expenses and the Trustee's annual fee, when paying or
owing to the Trustee, are secured by a lien on the Trust. In addition,
the Trustee is empowered to sell Securities in order to make funds
available to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts of the Trust. The Trust will be
Page 15
audited on an annual basis at the expense of the Trust by independent
auditors selected by the Sponsor. The Trustee shall not be required,
however, to cause such an audit to be performed if its cost to a Trust
shall exceed $.50 per Unit on an annual basis. Unit holders of a Trust
covered by an audit may obtain a copy of the audited financial
statements upon request.
PUBLIC OFFERING
How is the Public Offering Price Determined?
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
market, other than the fees of the Evaluator, the costs of the Trustee
in transferring and recording the ownership of Units, and costs incurred
in annually updating each Trust's registration statement, will be borne
by the Sponsor. If the supply of Units exceeds demand, or for some other
business reason, the Sponsor may 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. 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. The purchase price per unit of such bond
funds will depend primarily on the value of the securities in the
Portfolio of the applicable Trust.
The Public Offering Price of Units of a Trust 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 below, 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 effect of this method of sales charge computation will be that
different sales charge rates will be applied to each of the various
Bonds in the Trusts based upon the maturities of such bonds, in
accordance with the following schedule:
Secondary Offering Period Sales Charge
______________________________________
Percentage of Public Percentage of Net
Years to Maturity Offering Price Amount 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. 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.
With respect to the employees, officers and directors (including their
immediate families and trustees, custodians or a fiduciary for the
Page 16
benefit of such person) of Nike Securities L.P. and its subsidiaries the
sales charge is reduced by 2% of the Public Offering Price for purchases
of Units during the secondary offering period.
Units may be purchased in the 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.
From time to time the Sponsor may implement programs under which 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 a
dealer may be eligible to win other nominal awards for certain sales
efforts, or under which the Sponsor will allow to any 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 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.
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. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank CDs
and money market accounts are insured by an agency of the federal
government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
The aggregate price of the Securities in each Trust is determined by
whoever from time to time is acting as evaluator (the "Evaluator"), on
the basis of bid prices, as of the close of trading on the New York
Stock Exchange on each day on which it is open, (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. For
purposes of such determinations, the close of trading on the New York
Stock Exchange is 4:00 p.m. Eastern time. Unless Bonds are in default in
payment of principal or interest or, in the Sponsor's opinion, are being
quoted in the market at values which reflect a significant risk of such
default, the Evaluator will not attribute any value to the insurance
obtained by the Trust. On the other hand, the value of insurance
obtained by the issuer of Bonds is reflected and included in the market
value of such Bonds.
The Evaluator will consider in its evaluation of Bonds deposited in a
Series of the National Trust prior to Series 112 and Bonds deposited in
any Series of the New York Trust and the Pennsylvania Trust which are,
in the Sponsor's opinion, being quoted in the market at values which
reflect a significant risk of such default (the "Defaulted Bonds") and
which are covered by insurance obtained by such series of the Trust, the
value of the insurance guaranteeing interest and principal payments as
well as the market value of the Defaulted Bonds and the market value of
bonds of issuers whose bonds, if identifiable, are of the same purpose
of issue as the Defaulted Bonds, carry identical interest rates and
maturities and are of a creditworthiness comparable to the Defaulted
Bonds before the Defaulted Bonds went into default or became subject to
a significant risk of such default. If such other bonds are not
identifiable, the Evaluator will compare prices of bonds not subject to
Page 17
a significant risk of default that have, to the extent possible, similar
characteristics as to purpose of issue, interest rates, maturities and
creditworthiness. In any case the Evaluator will consider the ability of
an insurer to meet its commitments under the Trust's insurance policy.
For example, if the Trust were to hold the defaulted Bonds of a
municipality, the Evaluator would first consider in its evaluation the
market price of the defaulted Bonds. The Evaluator would also attribute
a value to the insurance feature of the defaulted Bonds which would be
equal to the difference between the market value of the Defaulted Bonds
insured by the Trust and the market value of comparable bonds which were
not in default in payment of principal or interest or in significant
risk of such default. The Evaluator intends to use a similar valuation
method with respect to Bonds insured by such series of the Trust if
there is a significant risk of default and a resulting decrease in the
market value. However, the Evaluator will not assign a value greater
than par value to Bonds in default or in significant risk of default.
The Evaluator will consider in its evaluation of Bonds, deposited in
Series 112 and subsequent Series of the National Trust and all Series of
the Multi-State Trust, which are in default in payment of principal or
interest or, in the Sponsor's opinion, in significant risk of such
default and which are covered by insurance obtained by Series 112 and
subsequent Series of the National Trust and all Series of the Multi-
State 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
Financial Guaranty to meet its commitments under the Trust's insurance
policy, including the commitments to issue Permanent Insurance. It is
the position of the Sponsor that these methods are fair methods of
valuing the Bonds and the insurance obtained by the Trust and reflect a
proper valuation method in accordance with the provisions of the
Investment Company Act of 1940.
The Evaluator may be attributing value to insurance for the purpose of
computing the price or redemption value of Units for certain series of
the Fund. See Part One for further information as to whether value is
being attributed to insurance in determining the value of Units for that
series of the Trust. For a description of the circumstances under which
a full or partial suspension of the right of Unit holders to redeem
their Units may occur, see "How May Units be Redeemed?"
The Evaluator shall determine daily the valuation of the Securities as
of the close of trading on the New York Stock Exchange (generally 4:00
p.m. Eastern time) on each day on which the Exchange is open. For
transactions occurring prior to the close of trading on the New York
Stock Exchange, the Public Offering Price will be computed as of the
close of trading on the Exchange on that day. For transactions occurring
after the close of trading on the New York Stock Exchange (generally
4:00 p.m. Eastern time), or on a day when the New York Stock Exchange is
closed, the Public Offering Price will be computed as of the close of
trading on the Exchange on the next day that such Exchange is open for
trading. The price so determined will be the basis for purchases or
sales of outstanding Units during the period of time any such price is
effective.
The secondary market Public Offering Price of the Units will be equal to
the BID price per Unit of the Bonds in the Trust, plus (less) any
balance (overdraft) in the principal cash account of such Trust, plus
the applicable sales charge.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. A person will
become owner of the 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 five
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?
Sales will be made to dealers and others at prices which represent a
concession or agency commission of 4.0% of the Public Offering Price per
Unit for each State, Discount or National Trust, 3.0% of the Public
Page 18
Offering Price for an Intermediate or Long Intermediate Trust, and 2.5%
of the Public Offering Price per Unit for a Short Intermediate Trust,
but the Sponsor reserves the right to change the amount of the
concession to dealers and others from time to time. Certain commercial
banks are making Units of the Trust 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 in the
second preceding sentence. In Texas and in certain other states, any
banks making Units available must be registered as broker/dealers under
state law.
What are the Sponsor's Profits?
The Sponsor and participating dealers will receive a gross sales
commission as indicated in Part One for each Trust less any reduced
sales charge for quantity purchases as described under "How is the
Public Offering Price Determined?"
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
Securities in each Trust) and the price at which Units are resold (which
price includes the sales charge) or redeemed (based on the bid prices of
the Securities in each Trust). The secondary market public offering
price of Units may be greater or less than the cost of such Units to the
Sponsor.
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 five business days following such
order or shortly thereafter. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or
accompanied by written instrument or instruments of transfer.
Certificates to be redeemed must be 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.
Certificates will be issued in fully registered form, transferable only
on the books of the applicable 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 appropriate Trustee and a new certificate issued to
reflect the then 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 must
follow procedures established by the Trustee, including furnishing
indemnity satisfactory to the Trustee and paying such expenses as the
Trustee may incur. Mutilated certificates must be surrendered to the
appropriate Trustee for replacement.
How are Interest and Principal Distributed?
Interest from each Trust will be distributed as set forth in Part One
for each Trust 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 will be net of
applicable expenses for such Trust.
The pro rata share of cash in the Principal Account of each Trust will
be computed monthly as of the fifteenth day of each month, and
distributions to the Unit holders as of the applicable Record Date will
Page 19
be made as set forth in Part One for each Trust. Proceeds received from
the disposition of any of the Securities (less any premiums due with
respect to Bonds in Series 112 and subsequent Series of the National
Trust and any Series of the Multi-State Trust (except for the Multi-
State Trust: Pennsylvania Trust, Series 6) for which the Trustee has
exercised the right to obtain Permanent Insurance) after a Record Date
and prior to the following Distribution Date will be held in the
Principal Account and not distributed until the next Distribution Date.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Accounts of a Trust (but may itself earn interest
thereon and therefore benefit from the use of such funds), nor to make a
distribution from the Principal Account 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) of any disposition of Securities which
represents accrued interest. Other receipts will be credited to the
Principal Account of such Trust. The distribution to the Unit holders as
of each applicable 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 after deducting estimated expenses as is
consistent with the distribution plan chosen. Because interest payments
are not received by the Fund at a constant rate throughout the year,
such interest distribution may be more or less than the amount credited
to the Interest Account as of the Record Date. For the purpose of
minimizing fluctuations in the distributions from the Interest Account,
the Trustee is authorized to advance such amounts as may be necessary to
provide interest distributions of approximately equal amounts. The
Trustee shall be reimbursed, without interest, for any such advances
from funds in the Interest Account 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
benefits from the use of such funds).
As of the fifteenth of each month, the applicable 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. A 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, a 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.
Record Dates for monthly distributions will be the fifteenth day of each
month, Record Dates for quarterly distributions (if applicable) will be
the fifteenth day of March, June, September and December and Record
Dates for semi-annual distributions will be the fifteenth day of June
and December. Distributions will be made as set forth in Part One for
each Trust.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the applicable Trustee will furnish each Unit holder a card to be
returned to such Trustee not more than 30 nor less than 10 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.
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
Page 20
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 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 use the card attached to
this prospectus to request a prospectus describing each Series and a
form by which such person may elect to become a participant in
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 any of the Trusts 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 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 end of each calendar year, the Trustee will furnish to each person
who at any time during the calendar year was a Unit holder of record, a
statement as to (1) the Interest Account: interest received (including
amounts representing interest received upon any disposition of
Securities of such Trust), the amount of such interest representing
insurance proceeds, deductions for payment of applicable taxes and fees
and expenses of the Fund, 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 Securities of
such Trust and the net proceeds received therefrom (excluding any
portion representing interest, and in the case of Series 112 and
subsequent Series of the National Trust and any Series of the Multi-
State Trust (except for the Multi-State Trust: Pennsylvania Trust,
Series 6), the premium attributable to the exercise of the right to
obtain Permanent Insurance), deductions 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
Page 21
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 Securities 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 applicable Trustee,
evaluations of the Bonds in their Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information in
respect of all plans of distribution so that Unit holders may be
informed regarding the results of other plan or plans of distribution.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
applicable 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 applicable
Trustee of such tender of Units. The "date of tender" is deemed to be
the date on which Units are received by the applicable Trustee (if such
day is a day on which the New York Stock Exchange is open for trading),
except that as regards Units received after the close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time or as of any
earlier closing time on a day on which the New York Stock Exchange is
scheduled in advance to close at such earlier time), 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 applicable Trustee on
such day for redemption at the redemption price computed on that day.
Units so redeemed shall be canceled.
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 (and the Public Offering Price per Unit)
will be determined on the basis of the bid price of the Securities in a
Trust, as of the close of trading on the New York Stock Exchange on the
date any such determination is made. The Redemption Price per Unit is
the pro rata share of each Unit determined by the applicable Trustee on
the basis of (1) the cash on hand in a Trust or moneys in the process of
being collected, (2) the value of the Securities in the Trust based on
the bid prices of the Bonds in such Trust, except for those cases in
which the value of insurance has been added, and (3) interest accrued
thereon, less (a) amounts representing taxes or other governmental
charges payable out of such Trust and (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 Securities in the Trust (1) on the basis of
current bid prices of the Bonds (and bonds underlying Existing Fund
Units) 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 Securities by appraisal,
or (4) by any combination of the above. In determining the Redemption
Price per Unit no value will be attributed to the portfolio insurance
obtained by each series of the Trust unless the Bonds insured by such
portfolio insurance are in default in payment of principal or interest
or, in the Sponsor's opinion, in significant risk of such default. On
the other hand, any Bonds insured under a policy obtained by the issuer
thereof 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 "Why and How are the Trusts Insured?" For a description of
the situation in which the Evaluator may value the insurance obtained by
the Trust, see "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,
Page 22
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 Securities in a Trust in
order to make funds available for redemption. To the extent that
Securities are sold, the size and diversity of such Trust will be
reduced. Such sales may be required at a time when Securities would not
otherwise be sold and might result in lower prices than might otherwise
be realized. Under the provisions for insurance obtained by each series
of the National Trust prior to Series 112 and each series of the New
York Trust and the Pennsylvania Trust the insurance may not be
transferred by any such Trust. For Series 112 and subsequent Series of
the National Trust and all Series of the Multi-State Trust (except for
the Multi-State Trust: Pennsylvania Trust, Series 6), the Trustee may
obtain Permanent Insurance on the Bonds. Accordingly, any Bonds in a
series of the Fund prior to Series 112 of the National Trust and any
Series of the New York Trust and the Pennsylvania Trust must be sold on
an uninsured basis, while Bonds sold from Series 112 and subsequent
Series of the National Trust and all Series of the Multi-State Trust
(except for the Multi-State Trust: Pennsylvania Trust, Series 6) for
which Permanent Insurance has been obtained will be sold on an insured
basis (as will Bonds on which insurance has been obtained by the issuer
thereof).
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 Securities 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 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 in the same manner as any other Units.
The offering price of any Units acquired by the Sponsor will be
determined in accordance with the Public Offering Price described in the
then currently effective prospectus describing such 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, for the purpose of redeeming Units
tendered by any Unit holder and for the payment of expenses for which
funds may not be available, such of the Bonds in each Trust on a list
furnished by the Sponsor as the Trustee in its sole discretion may deem
necessary. As described in the following paragraph and in certain other
unusual circumstances for which it is determined by the Trustee to be in
the best interests of the Unit holders or if there is no alternative,
the Trustee is empowered to sell Bonds in a Trust which are in default
in payment of principal or interest or, in the Sponsor's opinion, in
significant risk of such default and for which value has been attributed
to the insurance obtained by the Trust. See "Rights of Unit Holders-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 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
Page 23
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, the
acquisition by a Trust of any securities other than the Securities
initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEES 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 $27 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 (630) 241-4141. As of
December 31, 1999, the total partners' capital of Nike Securities L.P.
was $19,881,035 (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.
Code of Ethics. The Sponsor and each Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to a Trust.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust offices at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Fund may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of The Federal Reserve System.
The Trustee, whose duties are ministerial in nature, did not participate
in the selection of the portfolio of each series of the Fund. For
information relating to the responsibilities of the Trustee under the
Indenture, reference is made to the material set forth under "Rights of
Unit Holders-How are Certificates Issued and Transferred?" and
subsequent sections.
The Trustee or any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of the trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of the trustee becomes effective
Page 24
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the 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 Securities. 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 Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust 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 a 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, (b) terminate the Indenture and
liquidate the Trust as provided therein 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 and 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 30 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 the 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 an Indenture without
the consent of any of the Unit holders when such an amendment is (1) to
cure an 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
Securities initially deposited in a Trust, except for the substitution
of certain refunding securities for such Securities. In the event of any
amendment, a Trustee is obligated to notify promptly all Unit holders of
the substance of such amendment.
Page 25
A Series of 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 aggregate
principal amount of the Securities in the Fund is less than 20% of the
aggregate principal amount of the Securities initially deposited in the
Trust. The Indenture will terminate upon the redemption, sale or other
disposition of the last Securities held thereunder, but in no event
shall it continue beyond the end of the calendar year preceding the
fiftieth anniversary of its execution. 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 Securities remaining in the Trust, and after paying all
expenses and charges incurred by the 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 the Fund, all as provided in the Indenture. Because the
portfolio insurance obtained by each Series of the National Trust prior
to Series 112 and each series of the New York Trust and the Pennsylvania
Trust is applicable only while Bonds (or bonds underlying Existing Fund
Units) so insured are held by each Series of the National Trust prior to
Series 112 and any series of the New York Trust and the Pennsylvania
Trust (and does not apply to Bonds or bonds underlying Existing Fund
Units which are disposed of), the price to be received by any series of
the National Trust prior to Series 112 and any Series of the New York
Trust or the Pennsylvania Trust upon the disposition of any Bond which
is in default in payment of principal or interest or whose market value
has deteriorated because of a significant risk of such default will not
reflect any value based on such insurance. Therefore, in connection with
any liquidation of the National Trust prior to Series 112 or the New
York Trust or the Pennsylvania Trust, it shall not be necessary for the
Trustee to dispose of any Securities, if retention of such Securities,
until due, shall be deemed to be in the best interests of Unit holders
including, but not limited to, situations in which Bond or Bonds so
insured are in default in payment of principal or interest and
situations in which a Bond or Bonds so insured reflect deteriorated
market price resulting from a significant risk of such default. Since
the Bonds which are insured by insurance obtained by the Bond issuer
will reflect the value of the related insurance, it is the present
intention of the Sponsor not to direct the Trustee to hold any of such
Bonds after the date of termination. All proceeds received, less
applicable expenses, from insurance on Bonds which are in default in
payment of principal or interest not disposed of at the date of
termination will ultimately be distributed to Unit holders of record as
of such date of termination as soon as practicable after the date such
defaulted Bonds (or bonds underlying Existing Fund Units) become due and
applicable insurance proceeds have been received by the Trustee of each
Trust.
Legal Opinions
The legality of the Units offered hereby was passed upon at the time of
closing for each series of each Trust, by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
LeBoeuf, Lamb, Leiby & MacRae, 520 Madison Avenue, New York, New York
10022, acts as counsel for Fidata Trust Company New York and as Special
Counsel for Series 8-81 of the National Trust for New York tax matters.
Booth & Baron, 122 East 42nd Street, Suite 1507, New York, New York
10168, acts as counsel for The Bank of New York and as Special Counsel
for Series 82-137 of the National Trust, Series 1-9 of the Multi-State
Trust and all Series of the New York Trust and the Pennsylvania Trust
for New York tax matters. Carter, Ledyard & Milburn, 2 Wall Street, New
York, New York 10005, acts as counsel for United States Trust Company of
New York. Winston & Strawn (previously named Cole & Deitz) acted as
Special Counsel for Series 138 and subsequent Series of the National
Trust and Series 10 and 11 of the Multi-State Trust for New York tax
matters.
For information with respect to state and local tax matters, including
the special counsel to the Fund for such matters, see the section of the
Prospectus describing the state tax status of Unit holders appearing
therein.
Experts
The financial statements, including the Portfolio of each Trust
appearing in Part One of the Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere therein, 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.
Page 26
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 arrangement under the
laws of bankruptcy and other laws affecting creditor's rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.**
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
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 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 rating. 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.
_____________
* As published by the rating companies.
** Bonds insured by FInancial Guaranty Insurance Company, Ambac
Assurance Corporation, Municipal Bond Investors Assurance Corporation,
Financial Security Assurance and Capital Guaranty Insurance Company are
automatically rated "AAA" by Standard & Poor's.
Page 27
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 large 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
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.
Page 28
CONTENTS:
The First Trust of Insured Municipal Bonds
The First Trust of Insured Municipal Bonds-
Multi-State:
What are The First Trust of Insured Municipal
Bonds and The First Trust of Insured Municipal
Bonds-Multi-State? 3
What are Estimated Long-Term Return and
Estimated Current Return? 6
How is Accrued Interest Treated? 7
Why and How are the Trusts Insured? 7
What is the Federal Tax Status of Unit Holders? 13
Certain Considerations 13
What are the Expenses and Charges? 14
Public Offering:
How is the Public Offering Price Determined? 16
How are Units Distributed? 18
What are the Sponsor's Profits? 19
Rights of Unit Holders:
How are Certificates Issued and Transferred? 19
How are Interest and Principal Distributed? 19
How Can Distributions to Unit Holders be
Reinvested? 20
What Reports will Unit Holders Receive? 21
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, Trustees 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
Description of Bond Ratings 27
__________
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 OF INSURED MUNICIPAL BONDS
THE FIRST TRUST OF INSURED MUNICIPAL BONDS-MULTI-STATE
Prospectus
Part Two
April 28, 2000
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE
AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 29
NATIONAL TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated March 31, 2000 PART ONE AND PART TWO
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. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
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 the opinions rendered in connection therewith. If the 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 includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) 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 (subject to various non-recognition
provisions of the Code). 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 the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
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 in the normal course by the issuer of the defaulted Bonds 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.
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 previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 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
Page 2
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 statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 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 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 his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
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).
Also, 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 to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and 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 or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
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 are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "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 1993 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 or her Social Security benefits in gross income whether or not he or
Page 3
she 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. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 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 (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) 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 of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors 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.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
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.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Certain Considerations
The foregoing information constitutes only a brief summary of some of
the general factors 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 Bonds held by the National Trusts are
subject. Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within the
control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the National Trusts to pay interest on or
principal of the Bonds.
Page 5
National Trust Series
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
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 TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 6
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement comprises
the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust of Insured Municipal Bonds,
Series 41, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment of its Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized
in the Village of Lisle and State of Illinois on July 31, 2000.
THE FIRST TRUST OF INSURED MUNICIPAL
BONDS, SERIES 41
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
David J. Allen Sole Director of )
Nike Securities )
Corporation, ) July 31, 2000
the General Partner )
of Nike Securities L.P. )
)
) Robert M. Porcellino
) 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
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated July 9, 2000 in this
Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Insured Municipal Bonds
dated July 26, 2000.
ERNST & YOUNG LLP
Chicago, Illinois
July 25, 2000
