File No. 2-68907
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 16
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 57
(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 : January 31, 1997
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
November 14, 1996.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
8,927 UNITS
PROSPECTUS
Part One
Dated January 28, 1997
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 57 (the "Trust ") is an
insured and fixed portfolio of 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 December 16, 1996, each Unit represented a 1/8,927 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 5.8% of the Public Offering Price (6.157%
of the amount invested). At December 16, 1996, the Public Offering Price per
Unit was $413.73 plus net interest accrued to date of settlement (three
business days after such date) of $4.73, $4.73 and $4.73 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_____________________________________________________________________________
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 6.64% per annum on December 16, 1996, and 6.56% and 6.61% under the
monthly and quarterly distribution plans, respectively. Estimated Long-Term
Return to Unit holders under the semi-annual distribution plan was 5.46% per
annum on December 16, 1996, and 5.38% and 5.43% 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 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 57
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 16, 1996
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 $2,640,000
Number of Units 8,927
Fractional Undivided Interest in the Trust per Unit 1/8,927
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $3,479,097
Aggregate Value of Bonds per Unit $389.73
Sales Charge 6.157% (5.8% of Public Offering Price) $24.00
Public Offering Price per Unit $413.73*
Redemption Price and Sponsor's Repurchase Price per Unit
($24.00 less than the Public Offering Price per Unit) $389.73*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $2,400,000
</TABLE>
Date Trust Established October 1, 1980
Mandatory Termination Date December 31, 2029
Evaluator's Fee: $15 per evaluation. Evaluations for purposes of sale,
purchase or redemption of Units are made as of the close of trading (4:00 p.m.
Eastern time) on the New York Stock Exchange on each day on which it is open.
[FN]
*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 57
SUMMARY OF ESSENTIAL INFORMATION AS OF DECEMBER 16, 1996
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 $29.52 $29.52 $29.52
Less: Estimated Annual Expense
Excluding Insurance $1.68 $1.48 $1.33
Annual Premium on Portfolio Insurance $.71 $.71 $.71
Estimated Net Annual Interest Income $27.13 $27.33 $27.48
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $27.13 $27.33 $27.48
Divided by 12, 4 and 2, Respectively $2.26 $6.83 $13.74
Estimated Daily Rate of Net Interest Accrual $.0754 $.0759 $.0763
Estimated Current Return Based on Public
Offering Price 6.56% 6.61% 6.64%
Estimated Long-Term Return Based on Public
Offering Price 5.38% 5.43% 5.46%
</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 57
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds, Series
57 as of September 30, 1996, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1996,
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 57 at September 30, 1996, 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 generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 3, 1997
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,534,167)
(Notes 1 and 3) $3,484,231
Accrued interest 67,829
Cash 15,992
Receivable from investment transaction 25,000
Prepaid expense 1,800
__________
3,594,852
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 27,842
Unit redemptions payable 2,724
__________
30,566
__________
Net assets, applicable to 8,994 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,534,167
Net unrealized appreciation (Note 2) 950,064
Distributable funds 80,055
__________
$3,564,286
==========
Net asset value per unit $396.30
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
PORTFOLIO - See notes to portfolio.
September 30, 1996
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(d) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Santa Rosa, California, Hospital Revenue
(Santa Rosa Memorial Hospital), Series A (c) 10.30% 3/01/2011 1997 @ 100 S.F. AAA $1,215,000 1,589,567
State of Indiana, Indiana Toll Road Commission,
East-West Toll Road Revenue, 1980 Series (c) 9.00 1/01/2015 2011 @ 100 S.F. AAA 615,000 833,780
Tarrant County Hospital Authority (Fort Worth,
Texas), Hospital Revenue, Series 1980 (Adventist
Health System/Sunbelt Project) (c) 10.25 10/01/2010 1996 @ 100 S.F. AAA 825,000 1,060,884
______________________
$2,655,000 3,484,231
======================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
NOTES TO PORTFOLIO
September 30, 1996
(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 September 30, 1996.
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.
Approximately 77% of the aggregate principal amount of the Bonds is
subject to call within one year.
(b) The ratings shown are those effective at September 30, 1996.
(c) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(d) The Portfolio consists of three Bond issues from three states. One Bond
issue representing approximately 46%, one Bond issue representing
approximately 31% and one Bond issue representing approximately 23% of
the aggregate principal amount of the Bonds in the Trust are obligations
of issuers located in California, Texas and Indiana, 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; and Turnpike and Toll Road, 1. Approximately
77% and 23% of the aggregate principal amount of the Bonds consist of
health care revenue bonds and turnpike and toll road revenue bonds,
respectively. Each of the Bond issues represent 10% or more of the
aggregate principal amount of the Bonds in the Trust. The largest such
issue represents approximately 46%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended September 30,
1996 1995 1994
<S> <C> <C> <C>
Interest income $275,076 291,401 360,634
Expenses:
Trustee's fees and related expenses (7,264) (10,096) (10,504)
Insurance expense (Note 3) (6,644) (7,082) (8,520)
Evaluator's fees (3,720) (3,720) (3,720)
________________________________
Investment income - net 257,448 270,503 337,890
Net gain (loss) on investments:
Net realized gain (loss) 44,282 67,885 88,069
Change in net unrealized appreciation
or depreciation (33,702) (106,473) (516,158)
________________________________
10,580 (38,588) (428,089)
________________________________
Net increase (decrease) in net assets
resulting from operations $268,028 231,915 (90,199)
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended September 30,
1996 1995 1994
<S> <C> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $257,448 270,503 337,890
Net realized gain (loss) on investments 44,282 67,885 88,069
Change in net unrealized appreciation
or depreciation on investments (33,702) (106,473) (516,158)
__________________________________
268,028 231,915 (90,199)
Distributions to unit holders:
Investment income - net (252,920) (268,868) (392,986)
Principal from investment transactions - - (2,612,499)
__________________________________
(252,920) (268,868) (3,005,485)
Unit redemptions (497, 623 and 339 in
1996, 1995 and 1994, respectively):
Principal portion (193,174) (242,033) (151,996)
Net interest accrued (4,506) (5,375) (3,647)
__________________________________
(197,680) (247,408) (155,643)
__________________________________
Total increase (decrease) in net assets (182,572) (284,361) (3,251,327)
Net assets:
At the beginning of the year 3,746,858 4,031,219 7,282,546
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $80,055, $71,930 and
$64,150 at September 30, 1996, 1995
and 1994, respectively) $3,564,286 3,746,858 4,031,219
==================================
Trust units outstanding at the end of
the year 8,994 9,491 10,114
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
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, October 1, 1980. The premium or discount (including
original issue discount) existing at the Date of Deposit is not being
amortized. Realized gain (loss) from bond transactions is reported on an
identified cost basis. Sales and redemptions of bonds 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, 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. Prior to
June 19, 1995, The Trustee was The Bank of New York. Effective June 19, 1995,
United States Trust Company of New York succeeded The Bank of New York as
Trustee and effective September 1, 1995, The Chase Manhattan Bank succeeded
United States Trust Company of New York as Trustee. Additionally, a fee of
$15 per evaluation 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 September 30, 1996 follows:
<TABLE>
<S> <C>
Unrealized appreciation $950,064
Unrealized depreciation -
________
$950,064
========
</TABLE>
<PAGE>
3. Insurance
The Trust has acquired insurance coverage which provides for the scheduled
payments of principal and interest on all bonds in its portfolio. The
insurance is effective only while the bonds are owned by the Trust and, in the
event of disposition of such a 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
$6,389.
The valuation of bonds does 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 bonds 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. If, in the future, the value of specific Bonds were to include
an amount attributable to the insurance acquired by the Trust, (a) it is the
present intent of the Sponsor to instruct the Trustee not to dispose of such
Bonds and (b) 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 rights of unit holders to redeem their units.
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 bonds 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 September 30,
distribution
plan 1996 1995 1994
<S> <C> <C> <C>
Monthly $27.29 27.53 37.91
Quarterly 27.53 27.75 38.02
Semi-annual 27.65 27.90 38.41
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended September 30,
1996 1995 1994
<S> <C> <C> <C>
Interest income $29.71 29.80 35.05
Expenses (1.90) (2.14) (2.21)
___________________________
Investment income - net 27.81 27.66 32.84
Distributions to unit holders:
Investment income - net (27.46) (27.65) (38.27)
Principal from investment transactions - - (251.13)
Net gain (loss) on investments 1.17 (3.81) (41.55)
___________________________
Total increase (decrease) in net assets 1.52 (3.80) (298.11)
Net assets:
Beginning of the year 394.78 398.58 696.69
___________________________
End of the year $396.30 394.78 398.58
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 57
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 29, 1996 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
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 "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 (National Association), 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 Indemnity Corporation ("AMBAC Indemnity") 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
Indemnity 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 Indemnity
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 Indemnity). 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 Indemnity 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.
Certain of the Bonds in certain series of the Fund may be general
obligations of governmental entities that are backed by the taxing power
of such entities. The number and percentage of the aggregate principal
amount of Bonds in the Portfolio of each series of the Fund which are
general obligations of governmental entities are indicated in Part One.
The remaining Bonds are revenue bonds payable from the income of a
specific project or authority and are not supported by the issuer's
power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. There are, of course, variations in
the security of the different Bonds in the Fund, both within a
particular classification and between classifications, depending on
numerous factors.
Certain of the Bonds in certain series of the Fund may be health care
revenue bonds. Ratings of bonds issued for health care facilities are
sometimes based on feasibility studies that contain projections of
occupancy levels, revenues and expenses. A facility's gross receipts and
net income available for debt service may be affected by future events
and conditions including, among other things, demand for services, the
ability of the facility to provide the services required, physicians'
confidence in the facility, management capabilities, competition with
other hospitals, efforts by insurers and governmental agencies to limit
rates, legislation establishing state rate-setting agencies, expenses,
government regulation, the cost and possible unavailability of
malpractice insurance and the termination or restriction of governmental
financial assistance, including that associated with Medicare, Medicaid
and other similar third party payor programs. Pursuant to recent Federal
legislation Medicare reimbursements are currently calculated on a
prospective basis utilizing a single nationwide schedule of rates. Prior
to such legislation Medicare reimbursements were based on the actual
costs incurred by the health facility. The current legislation may
adversely affect reimbursements to hospitals and other facilities for
services provided under the Medicare program.
Certain of the Bonds in certain series of the Fund may be single family
mortgage revenue bonds, which are issued for the purpose of acquiring
from originating financial institutions notes secured by mortgages on
residences located within the issuer's boundaries and owned by persons
of low or moderate income. Mortgage loans are generally partially or
completely prepaid prior to their final maturities as a result of events
such as sale of the mortgaged premises, default, condemnation or
casualty loss. Because these Bonds are subject to extraordinary
mandatory redemption in whole or in part from such prepayments of
mortgage loans, a substantial portion of such Bonds will probably be
redeemed prior to their scheduled maturities or even prior to their
ordinary call dates. The redemption price of such issues may be more or
less than the offering price of such Bonds. Extraordinary mandatory
redemption without premium could also result from the failure of the
originating financial institutions to make mortgage loans in sufficient
Page 4
amounts within a specified time period or, in some cases, from the sale
by the Bond issuer of the mortgage loans. Failure of the originating
financial institutions to make mortgage loans would be due principally
to the interest rates on mortgage loans funded from other sources
becoming competitive with the interest rates on the mortgage loans
funded with the proceeds of the single family mortgage revenue bonds.
Additionally, unusually high rates of default on the underlying mortgage
loans may reduce revenues available for the payment of principal of or
interest on such mortgage revenue bonds. Single family mortgage revenue
bonds issued after December 31, 1980 were issued under Section 103A of
the Internal Revenue Code, which Section contains certain ongoing
requirements relating to the use of the proceeds of such Bonds in order
for the interest on such bonds to retain its tax-exempt status. In each
case, the issuer of the bonds has covenanted to comply with applicable
ongoing requirements and bond counsel to such issuer has issued an
opinion that the interest on the Bonds is exempt from Federal income tax
under existing laws and regulations. There can be no assurances that the
ongoing requirement will be met. The failure to meet these requirements
could cause the interest on the Bonds to become taxable, possibly
retroactively from the date of issuance.
Certain of the Bonds in certain series of the Fund may be obligations of
issuers whose revenues are primarily derived from mortgage loans to
housing projects for low to moderate income families. The ability of
such issuers to make debt service payments will be affected by events
and conditions affecting financed projects, including, among other
things, the achievement and maintenance of sufficient occupancy levels
and adequate rental income, increases in taxes, employment and income
conditions prevailing in local labor markets, utility costs and other
operating expenses, the managerial ability of project managers, changes
in laws and governmental regulations, the appropriation of subsidies and
social and economic trends affecting the localities in which the
projects are located. The occupancy of housing projects may be adversely
affected by high rent levels and income limitations imposed under
Federal and state programs. Like single family mortgage revenue bonds,
multi-family mortgage revenue bonds are subject to redemption and call
features, including extraordinary mandatory redemption features, upon
prepayment, sale or non-origination of mortgage loans as well as upon
the occurrence of other events. Certain issuers of single or multi-
family housing bonds have considered various ways to redeem bonds they
have issued prior to the stated first redemption dates for such bonds.
In one situation the New York City Housing Development Corporation, in
reliance on its interpretation of certain language in the indenture
under which one of its bond issues was created, redeemed all of such
issue at par in spite of the fact that such indenture provided that the
first optional redemption was to include a premium over par and could
not occur prior to 1992. In connection with the housing Bonds held by
the Fund, the Sponsor has not had any direct communications with any of
the issuers thereof, but at the date hereof it is not aware that any of
the respective issuers of such Bonds are actively considering the
redemption of such Bonds prior to their respective stated initial call
dates. However, there can be no assurance that an issuer of a Bond in
the Fund will not attempt to so redeem a Bond in the Fund.
Certain of the Bonds in certain series of the Fund may be obligations of
issuers whose revenues are derived from the sale of water and/or
sewerage services. Water and sewerage bonds are generally payable from
user fees. Problems faced by such issuers include the ability to obtain
timely and adequate rate increases, population decline resulting in
decreased user fees, the difficulty of financing large construction
programs, the limitations on operations and increased costs and delays
attributable to environmental considerations, the increasing difficulty
of obtaining or discovering new supplies of fresh water, the effect of
conservation programs and the impact of "no-growth" zoning ordinances.
All of such issuers have been experiencing certain of these problems in
varying degrees.
Certain of the Bonds in certain series of the Fund may be obligations of
issuers whose revenues are primarily derived from the sale of electric
energy. Utilities are generally subject to extensive regulation by state
utility commissions which, among other things, establish the rates which
may be charged and the appropriate rate of return on an approved asset
base. The problems faced by such issuers include the difficulty in
obtaining approval for timely and adequate rate increases from the
governing public utility commission, the difficulty of financing large
construction programs, increased competition, recent reductions in
estimates of future demand for electricity in certain areas of the
country, the limitations on operations and increased costs and delays
attributable to environment considerations, the difficulty of the
Page 5
capital market in absorbing utility debt, the difficulty in obtaining
fuel at reasonable prices and the effect of energy conservation. All of
such issuers have been experiencing certain of these problems in varying
degrees. In addition, Federal, state and municipal governmental
authorities may from time to time review existing, and impose
additional, regulations governing the licensing, construction and
operation of nuclear power plants, which may adversely affect the
ability of the issuers of certain of the Bonds in the Fund to make
payments of principal and/or interest on such Bonds.
Certain of the Bonds in certain series of the Fund may be industrial
revenue bonds ("IRBs"), including pollution control revenue bonds, which
are tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. These projects
are usually operated by corporate entities. Issuers are obligated only
to pay amounts due on the IRBs to the extent that funds are available
from the unexpended proceeds of the IRBs or receipts or revenues of the
issuer under an arrangement between the issuer and the corporate
operator of a project. The arrangement may be in the form of a lease,
installment sale agreement, conditional sale agreement or loan
agreement, but in each case the payments to the issuer are designed to
be sufficient to meet the payments of amounts due on the IRBs.
Regardless of the structure, payment of IRBs is solely dependent upon
the creditworthiness of the corporate operator of the project or
corporate guarantor. Corporate operators or guarantors may be affected
by many factors which may have an adverse impact on the credit quality
of the particular company or industry. These include cyclicality of
revenues and earnings, regulatory and environmental restrictions,
litigation resulting from accidents or environmentally-caused illnesses,
extensive competition and financial deterioration resulting from
leveraged buy-outs or takeovers. The IRBs in a Fund may be subject to
special or extraordinary redemption provisions which may provide for
redemption at par or, with respect to original issue discount bonds, at
issue price plus the amount of original issue discount accreted to the
redemption date plus, if applicable, a premium. The Sponsor cannot
predict the causes or likelihood of the redemption of IRBs or other
Bonds in the Fund prior to the stated maturity of such Bonds.
Certain of the Bonds in certain series of the Fund may be obligations
which are payable from and secured by revenues derived from the
ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
Bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected
by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Certain of the Bonds in certain series of the Fund may be obligations of
issuers which are, or which govern the operation of, schools, colleges
and universities and whose revenues are derived mainly from ad valorem
taxes or, for higher education systems, from tuition, dormitory
revenues, grants and endowments. General problems relating to school
bonds include litigation contesting the state constitutionality of
financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in
wealthy areas and schools in poor areas. Litigation or legislation on
this issue may affect the sources of funds available for the payment of
school bonds in the Fund. General problems relating to college and
university obligations would include the prospect of a declining
percentage of the population consisting of "college" age individuals,
possible inability to raise tuitions and fees sufficiently to cover
increased operating costs, the uncertainty of continued receipt of
Federal grants and state funding and new government legislation or
regulations which may adversely affect the revenues or costs of such
issuers. All of such issuers have been experiencing certain of these
problems in varying degrees.
Page 6
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
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 refunding is a method by which a bond issue is
redeemed, at or before maturity, by the proceeds of a new bond issue. 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. Generally, events that may permit the
extraordinary optional redemption of Bonds or may require mandatory
redemption of Bonds include, among others: a final determination that
the interest on the Bonds is taxable; the substantial damage or
destruction by fire or other casualty of the project for which the
proceeds of the Bonds were used; an exercise by a local, state or
Federal governmental unit of its power of eminent domain to take all or
substantially all of the project for which the proceeds of the Bonds
were used; changes in the economic availability of raw materials,
operating supplies or facilities or technological or other changes which
render the operation of the project, for which the proceeds of the Bonds
were used, uneconomic; changes in law or an administrative or judicial
decree which renders the performance of the agreement under which the
proceeds of the Bonds were made available to finance the project
impossible or which creates unreasonable burdens or which imposes
excessive liabilities, such as taxes, not imposed on the date the Bonds
are issued on the issuer of the Bonds or the user of the proceeds of the
Bonds; an administrative or judicial decree which requires the cessation
of a substantial part of the operations of the project financed with the
proceeds of the Bonds; an overestimate of the costs of the project to be
financed with the proceeds of the Bonds resulting in excess proceeds of
the Bonds which may be applied to redeem Bonds; or an underestimate of a
source of funds securing the Bonds resulting in excess funds which may
be applied to redeem Bonds. See the discussion of single family mortgage
and multi-family mortgage revenue bonds above for more information on
the call provisions of such bonds. 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
Page 7
interest distributions; it may also affect the estimated current return
and estimated long-term return on Units of the Fund. 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
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
Page 8
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 INDEMNITY. THE FOLLOWING DISCUSSION CONCERNING AMBAC INDEMNITY AND
INSURANCE POLICIES ISSUED BY AMBAC INDEMNITY APPLIES TO SERIES 8 THROUGH
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 Indemnity to those described
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 Indemnity). 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
Page 9
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 ("AMBAC Indemnity") as of June 1,
1984. AMBAC Indemnity is a Wisconsin-domiciled stock insurance company
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin, and licensed to do business in fifty states, the District of
Columbia and the Commonwealth of Puerto Rico, with admitted assets of
approximately $2,145,000,000 (unaudited) and statutory capital of
approximately $782,000,000 (unaudited) as of December 31, 1994.
Statutory capital consists of AMBAC Indemnity's policyholders' surplus
and statutory contingency reserve. AMBAC Indemnity is a wholly-owned
subsidiary of AMBAC, Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's have both assigned a
triple-A claims-paying ability rating to AMBAC Indemnity.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York, New
York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has been
furnished by AMBAC Indemnity. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any
adverse changes in such information, subsequent to the date hereof.
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 Indemnity or have been eligible for the insurance
obtained from AMBAC Indemnity. In determining eligibility for insurance,
AMBAC Indemnity 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 Indemnity 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 Indemnity and the Sponsor or the Fund.
Otherwise neither AMBAC Indemnity nor its parent, AMBAC 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 Indemnity.
Because the Bonds are insured by AMBAC Indemnity 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
Page 10
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.
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 Indemnity 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 Indemnity 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 Indemnity 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 Indemnity which would
materially impair the ability of AMBAC Indemnity 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. THE FOLLOWING DISCUSSIONS CONCERNING FINANCIAL
GUARANTY INSURANCE COMPANY AND INSURANCE POLICIES ISSUED BY FINANCIAL
GUARANTY INSURANCE COMPANY APPLIES 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
Page 11
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 Citibank, 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 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
Page 12
FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a wholly-owned subsidiary of General Electric Capital
Corporation ("GECC"). Neither the Corporation nor GECC is obligated to
pay the debts of or the claims against Financial Guaranty. Financial
Guaranty is domiciled in the State of New York and is subject to
regulation by the State of New York Insurance Department. As of December
31, 1995, the total capital and surplus of Financial Guaranty was
approximately $1,000,520,000.
Financial Guaranty is currently authorized to write insurance in all
fifty states and in the District of Columbia. Copies of Financial
Guaranty's financial statements, prepared on the basis of statutory
accounting principles, and the Corporation's financial statements,
prepared on the basis of generally accepted accounting principles, may
be obtained by writing to Financial Guaranty at 115 Broadway, New York,
New York 10006, Attention: Communications Department (telephone number
is (212) 312-3000) or to the New York State Insurance Department at 160
West Broadway, 18th Floor, New York, New York 10013, Attention: Property
Companies Bureau (telephone number (212) 621-0389).
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:
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
Page 13
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
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. Puerto Rico's
unemployment rate remains significantly higher than the U.S.
unemployment rate. Furthermore, the economy is largely dependent for its
development upon U.S. policies and programs that are being reviewed and
may be eliminated
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output is shipped
to the mainland United States, which is also the chief source of semi-
Page 14
finished manufactured articles on which further manufacturing operations
are performed in Puerto Rico. Since World War II the economic importance
of agriculture for Puerto Rico, particularly in the dominance of sugar
production, has declined. Nevertheless, the Commonwealth-controlled
sugar monopoly remains an important economic factor and is largely
dependent upon Federal maintenance of sugar prices, the discontinuation
of which could severely affect Puerto Rico sugar production. The level
of tourism is affected by various factors including the strength of the
U.S. dollar. During periods when the dollar is strong, tourism in
foreign countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth and
Federal investment incentive programs. For example, Section 936 of the
Internal Revenue Code provides for a credit against Federal income taxes
for U.S. companies operating on the island if certain requirements are
met. The Omnibus Budget Reconciliation Act of 1993 imposes limits on
such credit, effective for tax years beginning after 1993. In addition,
from time to time proposals are introduced in Congress which, if enacted
into law, would eliminate some or all of the benefits of Section 936.
Although no assessment can be made at this time of the precise effect of
such limitation, it is expected that the limitation of Section 936
credits would have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily on
Federal programs, and current Federal budgetary policies suggest that an
expansion of aid to Puerto Rico is unlikely. An adverse effect on the
Puerto Rican economy could result from other U.S. policies, including a
reduction of tax benefits for distilled products, further reduction in
transfer payment programs such as food stamps, curtailment of military
spending and policies which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate chose
to continue Puerto Rico's Commonwealth status. Previously proposed
legislation, which was not enacted, would have preserved the federal tax
exempt status of the outstanding debts of Puerto Rico and its public
corporations regardless of the outcome of the referendum, to the extent
that similar obligations issued by the states are so treated and subject
to the provisions of the Internal Revenue Code currently in effect.
There can be no assurance that any pending or future legislation finally
enacted will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to have both
direct and indirect consequences on such matters as the basic
characteristics of future Puerto Rico debt obligations, the markets for
these obligations, and the types, levels and quality of revenue sources
pledged for the payment of existing and future debt obligations. Such
possible consequences include, without limitation, legislative proposals
seeking restoration of the status of Section 936 benefits otherwise
subject to the limitations discussed above. However, no assessment can
be made at this time of the economic and other effects of a change in
federal laws affecting Puerto Rico as a result of the November 1993
plebiscite.
The foregoing information constitutes only a brief summary of some of
the financial difficulties which may impact certain issuers of Bonds and
does not purport to be a complete or exhaustive description of all
adverse conditions to which the issuers of the Bonds are subject.
Additionally, many factors including national economic, social and
environmental policies and conditions, which are not within the control
of the issuers of Bonds, could affect or could have an adverse impact on
the financial condition of Puerto Rico and various agencies and
political subdivisions located in Puerto Rico. The Sponsor is unable to
predict whether or to what extent such factors or other factors may
affect the issuers of Bonds, the market value or marketability of the
Bonds or the ability of the respective issuers of the Bonds acquired by
the Trusts to pay interest on or principal of the Bonds.
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 is affected by general economic conditions and by the
value of the U.S. dollar. 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 Japanese 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
Page 15
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,
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.
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
Page 16
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
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 and the costs of the
Trustee in transferring and recording the ownership of Units, 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:
Page 17
Secondary Offering Period
Sales Charge
___________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ __________ __________
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
There will be no reduction of the sales charges for volume purchases. 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.
An investor may aggregate purchases of Units of two consecutive series
of a particular State, National, Discount, Intermediate, Long
Intermediate or Short Intermediate Trust for purposes of calculating the
discount for volume purchases listed above. Additionally, with respect
to the employees, officers and directors (including their immediate
families and trustees, custodians or a fiduciary for the 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.
Any such reduced sales charge shall be the responsibility of the selling
Underwriter or dealer except that with respect to purchases of Units of
$500,000 or more, the Sponsor will reimburse the selling Underwriter or
dealer in an amount equal to $2.50 per Unit (in the case of a Discount
Trust, .25% of the Public Offering Price). The reduced sales charge
structure will apply on all purchases of Units in a Trust by the same
person on any one day from any one Underwriter or dealer and, for
purposes of calculating the applicable sales charge, purchases of Units
in the Fund will be aggregated with concurrent purchases by the same
person from such Underwriter or dealer of units in any series of tax-
exempt unit investment trusts sponsored by Nike Securities L.P.
Additionally, Units purchased in the name of the spouse of a purchaser
or in the name of a child of such purchaser under 21 years of age will
be deemed, for the purpose of calculating the applicable sales charge,
to be additional purchases by the purchaser. The reduced sales charges
will also be applicable to a trustee or other fiduciary purchasing
securities for a single trust estate or single fiduciary account.
Units may be purchased in the 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
Underwriters and dealers of the Fund may receive nominal awards from the
Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of an Underwriter or dealer may be eligible to win other
nominal awards for certain sales efforts, or under which the Sponsor
will allow to any such Underwriter or dealer that sponsors sales
contests or recognition programs conforming to criteria established by
the Sponsor, or participates in sales programs sponsored by the Sponsor,
an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
Page 18
programs. Also, the Sponsor in its discretion may from time to time
pursuant to objective criteria established by the Sponsor pay fees to
qualifying Underwriters or dealers for certain services or activities
which are primarily intended to result in sales of Units of the Trusts.
Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trusts. These programs will not change the price
Unit holders pay for their Units or the amount that the Trusts will
receive from the Units sold.
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
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
Page 19
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 (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 (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 five 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
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. Under the Glass-Steagall Act, banks are
prohibited from underwriting Fund Units, however, the Glass-Steagall Act
does permit certain agency transactions and the banking regulators have
not indicated that these particular agency transactions are not
permitted under such Act. In Texas and in certain other states, any
banks making Units available must be registered as broker-dealers under
state law.
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
Page 20
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. Record ownership may occur before settlement.
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 may be
required to furnish indemnity satisfactory to the Trustee and pay such
expenses as the Trustee may incur. Mutilated certificates must be
surrendered to the 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
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
Page 21
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
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
Page 22
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
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.
Page 23
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 corporate 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 seventh calendar day following such tender, or
if the seventh calendar day is not a business day, on the first business
day prior thereto, the Unit holder will be entitled to receive in cash
an amount for each Unit 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, except that as regards Units
received after the close of trading on the New York Stock Exchange (4:00
p.m. Eastern 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,
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
Page 24
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
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.
Page 25
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 $9 billion in First Trust
unit investment trusts have been deposited. The Sponsor's employees
include a team of professionals with many years of experience in the
unit investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141. As of
December 31, 1995, the total partners' capital of Nike Securities L.P.
was $9,033,760 (audited). (This paragraph relates only to the Sponsor
and not to the Trust or to any series thereof or to any other
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank (National Association) a
national banking association with its principal executive office located
at 1 Chase Manhattan Plaza, New York, New York 10081 and its unit
investment trust offices at 770 Broadway, New York, New York 10003. Unit
holders who have questions regarding the Fund may call the Customer
Service Help Line at 1-800-682-7520. The Trustee is a member of the New
York Clearing House Association and is subject to supervision and
examination by the comptroller of the Currency, 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
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 Trustees
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
Page 26
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.
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
Page 27
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.
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.
____________________
* As published by the rating companies.
Page 28
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.
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.
_______________
** Bonds insured by FInancial Guaranty Insurance Company, AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation,
Financial Security Assurance and Capital Guaranty Insurance Company are
automatically rated "AAA" by Standard & Poor's.
Page 29
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 30
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Page 31
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? 8
How is Accrued Interest Treated? 8
Why and How are the Trusts Insured? 9
What is the Federal Tax Status of Unit Holders? 14
Certain Considerations 14
What are the Expenses and Charges? 16
Public Offering:
How is the Public Offering Price Determined? 17
How are Units Distributed? 20
What are the Sponsor's Profits? 20
Rights of Unit Holders:
How are Certificates Issued and Transferred? 21
How are Interest and Principal Distributed? 21
How Can Distributions to Unit Holders be
Reinvested? 22
What Reports will Unit Holders Receive? 23
How May Units be Redeemed? 24
How May Units be Purchased by the Sponsor? 25
How May Bonds be Removed from the Fund? 25
Information as to Sponsor, Trustees and Evaluator:
Who is the Sponsor? 26
Who are the Trustees? 26
Limitations on Liabilities of Sponsor and
Trustees 26
Who is the Evaluator? 27
Other Information:
How May the Indenture be Amended or Terminated? 27
Legal Opinions 28
Experts 28
Description of Bond Ratings 28
__________
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 29, 1996
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE
AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 32
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 29, 1996 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. Neither the Sponsor, Chapman and Cutler, nor any of
the Special Counsel to the Fund for State tax matters have made any
special review for the Fund of the proceedings relating to the issuance
of the Bonds or of the bases for such opinions. If 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,
however, includable in gross income for Federal income tax purposes and
may be includable in gross income for state tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) 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.
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 are excludable from gross income under the Internal Revenue
Code of 1986 (the "Code") will retain its status when distributed to a
Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax, an additional tax on branches of
foreign corporations and the environmental tax (the "Superfund Tax").
See "Certain Tax Matters Applicable to Corporate Unit Holders";
(2) each Unit holder is considered to be the owner of a pro rata
portion 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 Units. 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 delivered
after the date the Unit holders pay for their Units to the extent that
such interest accrued on such Bonds during the period from the Unit
holder's settlement date to the date such Bonds are delivered to the
respective Trust and, consequently, such Unit holders may have
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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
an increase in taxable gain or reduction in capital loss upon the
disposition of such Units. Gain or loss upon the sale or redemption of
Units is measured by comparing the proceeds of such sale or redemption
with the adjusted basis of the Units. If the Trustee disposes of Bonds
(whether by sale, payment on maturity, redemption or otherwise), gain or
loss is recognized to the Unit holder. The amount of any such gain or
loss is measured by comparing the Unit holder's pro rata share of the
total proceeds from such disposition with 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
accrual 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. 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 Units are sold or redeemed for an amount equal to or less than his
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.
The application of these rules will also vary depending on the value of
the Bond on the date a Unit holder acquires his Unit, and the price the
Unit holder pays for his Unit. Unit holders should consult their tax
advisers 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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to 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 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 advisers 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. On December 7, 1995, the
U.S. Treasury Department released proposed legislation that, if adopted,
would generally extend the financial institution rules to all
corporations effective for obligations acquired after the date of the
announcement. Investors with questions regarding these issues should
consult with their tax advisers.
Page 2
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 tax adviser.
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 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his Social Security benefits in gross income whether or not he receives
any tax-exempt interest. A taxpayer whose modified adjusted gross income
(after inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
In the case of corporations, the alternative tax rate applicable to long-
term capital gains is 35%, effective for long-term capital gains
realized in taxable years beginning on or after January 1, 1993. For
taxpayers other than corporations, net capital gains are subject to a
maximum stated marginal tax rate of 28%. However, it should be noted
that legislative proposals are introduced from time to time that affect
tax rates and could affect relative differences at which ordinary income
and capital gains are taxed. Under the Code, taxpayers must disclose to
the Internal Revenue Service the amount of tax-exempt interest earned
during the year. 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, 1996
is included as an item of tax preference.
Certain Tax Matters Applicable to Corporate Unit Holders. The
alternative minimum tax and the Superfund Tax for taxable years
beginning after December 31, 1986 depends 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 and the Superfund Tax of a corporation (other
than an S Corporation, Regulated Investment Company, Real Estate
Investment Trust, or REMIC) is an amount equal to 75% of the excess of
such corporation's "adjusted current earnings" over an amount equal to
its AMTI (before such adjustment item and the alternative tax net
operating loss deduction). "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. However, the Superfund Tax
could be extended retroactively. 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 advisers with respect to the particular tax
consequences to them, including the corporate alternative minimum tax,
the Superfund Tax and the branch profits tax imposed by Section 884 of
the Code.
Page 3
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to either the environmental tax or 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 advisers 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
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.
LeBoeuf, Lamb, Leiby & MacRae has served as Special Counsel to Series 8-
81, inclusive, of The First Trust of Insured Municipal Bonds, Booth &
Baron has served as Special Counsel to Series 82-147 of The First Trust
of Insured Municipal Bonds and Winston & Strawn (previously named Cole &
Deitz) has served as Special Counsel to Series 148 and subsequent Series
of The First Trust Insured Municipal Bonds for New York tax matters. In
the opinion of such Special Counsels, under the existing income tax laws
of the State and City of New York, each Trust is not an association
taxable as a corporation and the income of each such Trust will be
treated as the income of the Unit holder.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are to be so
construed.
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 4
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 5
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
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust of Insured Municipal Bonds,
Series 57, 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 January 31,
1997.
THE FIRST TRUST OF INSURED MUNICIPAL
BONDS, SERIES 57
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
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
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) January 31, 1997
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 wi
th 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 January 3, 1997 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Insured Municipal Bonds
dated January 28, 1997.
ERNST & YOUNG LLP
Chicago, Illinois
January 27, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
Post Effective Amendment to form S-6 and is qualified in its entirety
by reference to such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 057
<NAME> NATIONAL TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 2,534,167
<INVESTMENTS-AT-VALUE> 3,484,231
<RECEIVABLES> 92,829
<ASSETS-OTHER> 17,792
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,594,852
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,566
<TOTAL-LIABILITIES> 30,566
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,534,167
<SHARES-COMMON-STOCK> 8,994
<SHARES-COMMON-PRIOR> 9,491
<ACCUMULATED-NII-CURRENT> 80,055
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 950,064
<NET-ASSETS> 3,564,286
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 275,076
<OTHER-INCOME> 0
<EXPENSES-NET> 17,628
<NET-INVESTMENT-INCOME> 257,448
<REALIZED-GAINS-CURRENT> 44,282
<APPREC-INCREASE-CURRENT> (33,702)
<NET-CHANGE-FROM-OPS> 268,028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 252,920
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 497
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (182,572)
<ACCUMULATED-NII-PRIOR> 71,930
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
