File No. 2-81397
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 12
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 -
NEW YORK, SERIES 6
(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 : December 1, 1994
: : 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
September 14, 1994.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
15,234 UNITS
PROSPECTUS
Part One
Dated November 22, 1994
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. In addition, the interest income is, in the opinion of Special
Counsel, exempt to the extent indicated from New York State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - New York, Series 6 (the "Trust")
is an insured and fixed portfolio of interest-bearing obligations issued by or
on behalf of municipalities and other governmental authorities within the
State of New York, the interest on which is, in the opinion of recognized bond
counsel to the issuing governmental authorities, exempt from all Federal
income taxes and from New York State and local income taxes under existing
law. At October 17, 1994, each Unit represented a 1/15,234 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 4.1% of the Public Offering Price (4.275%
of the amount invested). At October 17, 1994, the Public Offering Price per
Unit was $360.24 plus net interest accrued to date of settlement (five
business days after such date) of $8.42, $11.01 and $18.94 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 8.92% per annum on October 17, 1994, and 8.83% and 8.88% under the
monthly and quarterly distribution plans, respectively. Estimated Long-Term
Return to Unit holders under the semi-annual distribution plan was 5.49% per
annum on October 17, 1994, and 5.40% and 5.45% 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; (2) takes into account the
expenses and sales charge associated with each Unit of the Trust; and
(3) takes into effect the tax-adjusted yield from potential capital gains at
the Date of Deposit. 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 - NEW YORK, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 17, 1994
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Bank of New York
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $5,030,000
Number of Units 15,234
Fractional Undivided Interest in the Trust per Unit 1/15,234
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $5,262,869
Aggregate Value of Bonds per Unit $345.47
Sales Charge 4.275% (4.1% of Public Offering Price) $14.77
Public Offering Price per Unit $360.24*
Redemption Price and Sponsor's Repurchase Price per Unit
($14.77 less than the Public Offering Price per Unit) $345.47*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust). $3,300,000
</TABLE>
Date Trust Established August 24, 1982
Mandatory Termination Date December 31, 2031
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 (five 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 - NEW YORK, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 17, 1994
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Bank of New York
<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 $33.47 $33.47 $33.47
Less: Estimated Annual Expense
Excluding Insurance $1.19 $1.01 $.86
Annual Premium on Portfolio Insurance $.47 $.47 $.47
Estimated Net Annual Interest Income $31.81 $31.99 $32.14
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $31.81 $31.99 $32.14
Divided by 12, 4 and 2, Respectively $2.65 $8.00 $16.07
Estimated Daily Rate of Net Interest Accrual $.0884 $.0889 $.0893
Estimated Current Return Based on Public
Offering Price 8.83% 8.88% 8.92%
Estimated Long-Term Return Based on Public
Offering Price 5.40% 5.45% 5.49%
</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: First day of the month as follows: monthly--each month;
quarterly--January, April, July and October; semi-annual--January and July.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
of Insured Municipal Bonds - New York, Series 6
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds - New
York, Series 6 as of July 31, 1994, 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
Trustee. 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 July 31, 1994, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Trustee, 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 - New York, Series 6 at July 31, 1994, 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
October 28, 1994
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at value (cost $5,389,874)
(Notes 1 and 3) $5,334,193
Accrued interest 229,715
Receivable from investment transactions 15,000
__________
5,578,908
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 66,737
Distributions payable and accrued to unit holders 41,068
Unit redemptions payable 4,169
Accrued liabilities 212
__________
112,186
__________
Net assets, applicable to 15,342 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $5,389,874
Net unrealized depreciation (Note 2) (55,681)
Distributable funds 132,529
__________
$5,466,722
==========
Net asset value per unit $356.32
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
PORTFOLIO - See notes to portfolio.
July 31, 1994
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal
Name of issuer and title of bond(d) rate maturity provisions(a) rating (b) amount Value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Chemung Health Facilities Corp. (New York),
Health Care Facilities Revenue, Series 1982
(FHA Insured Mortgage Loan - United Cerebral 1994 @ 105.5
Palsy House Project) 11.10% 8/01/2022 1995 @ 100 S.F. A $2,385,000 2,584,028
City of Yonkers Industrial Development Agency
(State of New York), Industrial Development
(McLean Avenue Plaza Corp. - Waldbaum Inc. 1994 @ 102
Project - Series 1983) 9.25 3/01/1998 1994 @ 100 S.F. AA 2,460,000 2,515,596
Power Authority of the State of New York,
General Purpose, Series C (c) 9.50 1/01/2001 1995 @ 100 S.F. AAA 215,000 234,569
______________________
$5,060,000 5,334,193
======================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
NOTES TO PORTFOLIO
July 31, 1994
(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 in effect at July 31, 1994.
Unless otherwise indicated, each issue continues to be redeemable at
declining prices thereafter (but not below par value). "S.F." indicates
a sinking fund is established with respect to an issue of bonds. In
addition, certain bonds are sometimes redeemable in whole or in part
other than by operation of the stated redemption or sinking fund
provisions under specified unusual or extraordinary circumstances. All
of the Bonds in the Trust are currently redeemable.
(b) The ratings shown are those effective at July 31, 1994.
(c) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(d) The Trust consists of three obligations of issuers located in New York.
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: Industrial, 1; Health Care, 1; and Electric, 1. Approximately
49% and 47% of the aggregate principal amount of the Bonds consist of
industrial revenue bonds and health care revenue bonds, respectively.
Each of two Bond issues represents 10% or more of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
96%. The largest such issue represents approximately 49%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended July 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $529,698 938,711 1,205,405
Expenses:
Trustee's fees and related expenses (14,700) (18,439) (20,144)
Insurance expense (Note 3) (7,623) (17,421) (22,178)
Evaluator's fees (3,900) (3,720) (3,795)
________________________________
Investment income - net 503,475 899,131 1,159,288
Net gain (loss) on investments:
Net realized gain (loss) 6,655 745,934 127,550
Change in unrealized appreciation
or depreciation (33,541) (1,000,546) (113,052)
________________________________
(26,886) (254,612) 14,498
________________________________
Net increase in net assets resulting
from operations $476,589 644,519 1,173,786
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended July 31,
1994 1993 1992
<S> <C> <C> <C>
Net increase in net assets resulting from
operations:
Investment income - net $503,475 899,131 1,159,288
Net realized gain (loss) on investments 6,655 745,934 127,550
Change in unrealized appreciation or
depreciation on investments (33,541) (1,000,546) (113,052)
__________________________________
476,589 644,519 1,173,786
Distributions to unit holders:
Investment income - net (592,567) (920,629) (1,165,620)
Principal from investment transactions (2,152,064) (5,226,163) (1,533,602)
__________________________________
(2,744,631) (6,146,792) (2,699,222)
Unit redemptions (755, 71 and 4 in 1994,
1993 and 1992, respectively):
Principal portion (267,737) (46,626) (3,683)
Net interest accrued (8,892) (1,345) (57)
__________________________________
(276,629) (47,971) (3,740)
__________________________________
Total increase (decrease) in net assets (2,544,671) (5,550,244) (1,529,176)
Net assets:
At the beginning of the year 8,011,393 13,561,637 15,090,813
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $132,529, $2,280,584
and $294,116 at July 31, 1994, 1993
and 1992, respectively) $5,466,722 8,011,393 13,561,637
==================================
Trust units outstanding at the end of
the year 15,342 16,097 16,168
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
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, March 24, 1983. 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 to The Bank of New York, which is based
on $1.24, $.98 and $.69 per $1,000 principal amount of Bonds for those
portions of the Trust under the monthly, quarterly and semi-annual
distribution plans, respectively. Additionally, a fee of $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 depreciation at July 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(111,022)
Unrealized appreciation 55,341
_________
$(55,681)
=========
</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 coverage acquired by the Trust 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 $7,200.
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 right 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 4.8% of the public offering price which is equivalent to
approximately 5.042% 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 July 31,
distribution
plan 1994 1993 1992
<S> <C> <C> <C>
Monthly $37.60 56.74 71.82
Quarterly 37.79 57.03 72.14
Semi-annual 37.94 57.34 72.43
</TABLE>
<PAGE>
Selected data for a unit of the Trust outstanding
throughout each year -
<TABLE>
<CAPTION>
Year ended July 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $33.78 58.06 74.55
Expenses (1.67) (2.45) (2.85)
___________________________
Investment income - net 32.11 55.61 71.70
Distributions to unit holders:
Investment income - net (37.77) (56.99) (72.09)
Principal from investment transactions (133.99) (323.96) (94.85)
Net gain (loss) on investments (1.72) (15.76) .89
___________________________
Total increase (decrease) in net assets (141.37) (341.10) (94.35)
Net assets:
Beginning of the year 497.69 838.79 933.14
___________________________
End of the year $356.32 497.69 838.79
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - NEW YORK, SERIES 6
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 Bank of New York
Unit Investment Trust Division
101 Barclay Street, 20 West
New York, New York 10286
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Siller, Wilk, Mencher & Simkin
TO TRUSTEE: 767 Third Avenue
New York, New York 10017
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 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 21, 1994 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 on the first day of each month to Unit
holders of record on the fifteenth day of the preceding 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 Corporation. (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 Bank of New York, as Trustee for Series
8 through 137 of the National Trust, all Series of the New York
Trust and Pennsylvania Trust and Series 1 through 9 of the Multi-State
Trust, and United States Trust Company of New York, as Trustee
for Series 138 and subsequent Series of the National Trust and
Series 10 and 11 of the Multi-State Trust.
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
Page 3
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 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 Corporation
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 Corporation 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
Page 4
located within the issuer's boundaries and owned by persons of
low or moderate income. Mortgage loans are generally partially
or completely prepaid prior to their final maturities as a result
of events such as sale of the mortgaged premises, default, condemnation
or casualty loss. Because these Bonds are subject to extraordinary
mandatory redemption in whole or in part from such prepayments
of mortgage loans, a substantial portion of such Bonds will probably
be redeemed prior to their scheduled maturities or even prior
to their ordinary call dates. The redemption price of such issues
may be more or less than the offering price of such Bonds. Extraordinary
mandatory redemption without premium could also result from the
failure of the originating financial institutions to make mortgage
loans in sufficient amounts within a specified time period or,
in some cases, from the sale by the Bond issuer of the mortgage
loans. Failure of the originating financial institutions to make
mortgage loans would be due principally to the interest rates
on mortgage loans funded from other sources becoming competitive
with the interest rates on the mortgage loans funded with the
proceeds of the single family mortgage revenue bonds. Additionally,
unusually high rates of default on the underlying mortgage loans
may reduce revenues available for the payment of principal of
or interest on such mortgage revenue bonds. Single family mortgage
revenue bonds issued after December 31, 1980 were issued under
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
Page 5
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 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
Page 6
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.
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
Page 7
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 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
Page 8
in the relative weightings of the market values, yields (which
takes into account the amortization of premiums and the accretion
of discounts) and estimated retirements of all of the Bonds in
the Trust; (2) takes into account the expenses and sales charge
associated with each Unit of a Trust; and (3) takes into effect
the tax-adjusted yield from potential capital gains at the Date
of Deposit. 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 the delay in the first payment to Unit holders.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest
on Bonds in the Fund generally is paid semi-annually to the Fund.
However, interest on the Bonds in the Fund is accounted for daily
on an accrual basis. Because of this, the Fund always has an amount
of interest earned but not yet collected by the Trustee because
of non-collected coupons. For this reason, the Public Offering
Price of Units will have added to it the proportionate share of
accrued and undistributed net interest to the date of settlement.
Except through an advance of its own funds, the Trustee has no
cash for distribution to Unit holders until it receives interest
payments on the Bonds in the Fund. The Trustee will recover its
advancements without interest or other costs to such Fund from
interest received on the Bonds in the Fund. When these advancements
have been recovered, regular distributions of interest to Unit
holders will commence. See "Rights of Unit Holders-How are Interest
and Principal Distributed?" Interest account balances are established
with generally positive cash balances so that it will not be necessary
on a regular basis for the Trustee to advance its own funds in
connection with interest distributions.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount
of interest actually received by the Fund and distributed to Unit
holders. Therefore, there will always remain an item of accrued
interest that is added to the value of the Units. If a Unit holder
sells or redeems all or a portion of his Units, he will be entitled
to receive his proportionate share of the net interest accrued
from the purchaser of his Units. Since the Trustee has the use
of the net interest accrued held in the Interest Account for distributions
to Unit holders and since such Account is non-interest-bearing
to Unit holders, the Trustee benefits thereby.
Why and How are the Trusts Insured?
AMBAC 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).
Page 9
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 through 111 of the National
Trust and all Series of the New York Trust and the Pennsylvania
Trust by the Trustee, the insurance terminates as to such Bond
on the date of sale.
Except as indicated below, insurance obtained by a Trust has no
effect on the price or redemption value of Units. It is the present
intention of the Evaluator to attribute a value to such insurance
for the purpose of computing the price or redemption value of
Units only if the Bonds covered by such insurance are in default
in payment of principal or interest or in the Sponsor's opinion
are being quoted in the market at values which reflect a significant
risk of such default. The value of the insurance will be equal
to the difference between the market value of a Bond in default
in payment of principal or interest or in the Sponsor's opinion
is being quoted in the market at a value which reflects a significant
risk of default and the market value of comparable bonds which
are not in such situations. However, the Evaluator will not assign
a value greater than par value to Bonds in default or in significant
risk of default. Except under limited circumstances, it is also
the present intention of the Trustee not to sell such Bonds to
effect redemptions or for any other reason but rather to retain
them in the portfolio because the value attributable to the insurance
cannot be realized upon sale. See "Public Offering-How is the
Public Offering Price Determined?" herein for a more complete
description of the Evaluator's method of valuing Bonds which are
in default in payment of principal or interest or in significant
risk of such default. Insurance obtained by the issuer of a Bond
is effective so long as such Bond is outstanding. Therefore, any
such insurance may be considered to represent an element of market
value in regard to the Bonds thus insured, but the exact effect,
if any, of this insurance on such market value cannot be predicted.
The insurance policy obtained by Series 8 through 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 $1,936,000,000
(unaudited) and statutory capital of approximately $1,096,000,000
(unaudited) as of September 30, 1993. 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 Corporation 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.
Page 10
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 through 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
Corporation has assigned to Series 8 through 111 of the National
Trust and any Series of the New York Trust and the Pennsylvania
Trust its "AAA" investment rating. This is the highest rating
assigned to securities by Standard & Poor's Corporation (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 Corporation 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 Corporation "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
Corporation 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 Corporation 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
Page 11
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 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
Page 12
such determination of taxability, and when referring to interest
on such Bond, the accrued interest at the rate provided in such
documentation to the date on which such Bond has been called for
such mandatory redemption, together with any applicable redemption
premium. The term "due for payment" will not include, when referring
to either the principal of a Bond or the interest on a Bond, any
acceleration of payment unless such acceleration is at the sole
option of Financial Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent
on the date such principal or interest becomes due for payment
or on the business day next following the day on which Financial
Guaranty shall have received notice of nonpayment, whichever is
later. The Fiscal Agent will disburse to the Trustee the face
amount of principal and interest which is then due for payment
but is unpaid by reason of nonpayment by the issuer but only upon
receipt by the Fiscal Agent of (i) evidence of the Trustee's right
to receive payment of the principal or interest due for payment
and (ii) evidence, including any appropriate instruments of assignment,
that all of the rights to payment of such principal or interest
due for payment shall thereupon vest in Financial Guaranty. Upon
such disbursement, Financial Guaranty shall become the owner of
the Bond, appurtenant coupon or right to payment of principal
or interest on such Bonds and shall be fully subrogated to all
of the Trustee's rights thereunder, including the right to payment
thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee upon the sale of a Bond in Series 112 and subsequent Series
of the National Trust and all Series of the Multi-State Trust
(except the Multi-State Trust: Pennsylvania Trust, Series 6) has
the right to obtain permanent insurance with respect to such Bond
(i.e. insurance to maturity of the Bonds regardless of the identity
of the holder thereof) (the "Permanent Insurance") upon the payment
of a single predetermined insurance premium from the proceeds
of the sale of such Bond. Accordingly, any Bond in such Trust
is eligible to be sold on an insured basis. It is expected that
the Trustee will exercise the right to obtain Permanent Insurance
only if upon such exercise a Trust would receive net proceeds
(sale of Bond proceeds less the insurance premium attributable
to the Permanent Insurance) from such sale in excess of the sale
proceeds if such Bonds were sold on an uninsured basis. The insurance
premium with respect to each Bond is determined based upon the
insurability of each Bond as of the Date of Deposit and will not
be increased or decreased for any change in the creditworthiness
of such Bond.
The policies obtained by Series 112 and subsequent Series of the
National Trust and each Series of the Multi-State Trust (except
the Multi-State Trust: Pennsylvania Trust, Series 6) were issued
by Financial Guaranty. Financial Guaranty is a wholly-owned subsidiary
of FGIC Corporation (the "Corporation"), a Delaware holding company.
The Corporation is a 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, 1993, the total capital and surplus
of Financial Guaranty was approximately $777,000,000.
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) 602-0389).
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.
Page 13
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 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 Corporation 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
Corporation. 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 Corporation
Page 14
or as a guarantee of the market value of a Trust or the Units.
Standard & Poor's Corporation 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 Corporation "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 Corporation 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 Corporation 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. 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-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
Page 15
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 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
Page 16
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 Series 8 through 44 of the Fund, the
Evaluator receives from each series of the Fund a weekly fee of
$35 plus $.25 for each issue of Bonds in excess of 50 issues (treating
separate maturities as separate issues and excluding Existing
Fund Units). For Series 45 and subsequent Series of the National
Trust and for all Series of the Multi-State Trust, New York Trust
and Pennsylvania Trust, the Evaluator receives the fee indicated
under "Summary of Essential Information" in Part One. The fees
of the Trustee for ordinary recurring services to the respective
series of a Trust which they serve are computed at $1.61, $1.12
and $.86 for Series 8 through 13 of the National Trust, $1.24,
$.98 and $.69 for Series 14 through Series 137 of the National
Trust; $1.05, $.80 and $.55 for Series 138 and series subsequent
thereto of the National Trust; $1.24, $.98 and $.69 for all Series
of the New York Trust and the Pennsylvania Trust; $1.24 and $.69
for Series 1-9 of the Multi-State Trust and $1.05 and $.55 for
Series 10 and 11 of the Multi-State Trust per annum per $1,000
principal amount of underlying Bonds, for those portions of a
Trust representing monthly, quarterly (if applicable) and semi-annual
distribution plans, respectively. The Trustee for Series 41, 42
and 43 of the National Trust also receives fees of $.54, $.425
and $.30 per annum per $1,000 face amount of Existing Fund Units
for those portions of the Fund represented by the respective plans.
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 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
Page 17
all series of the Multi-State Trust (except Multi-State Trust:
Pennsylvania Trust, Series 6), the premium payable for Permanent
Insurance will be paid solely from the proceeds of the sale of
a Bond in the event the Trustee exercises the right to obtain
Permanent Insurance on the Bond. The premiums for such Permanent
Insurance with respect to each Bond will decline over the life
of the Bond.
The following additional charges are or may be incurred by a Trust:
all expenses (including legal and auditing expenses) of the Trustee
incurred in connection with its responsibilities under the Indenture,
except in the event of negligence, bad faith or willful misconduct
on its part; the expenses and costs of any action undertaken by
the Trustee to protect the Trust and the rights and interests
of the Unit holders; fees of the Trustee for any extraordinary
services perform under the Indenture; indemnification of the Trustee
for any loss, liability or expense incurred by it without negligence,
bad faith or willful misconduct on its part, arising out of, or
in connection with, its acceptance or administration of the Trust;
indemnification of the Sponsor for any loss, of liability or expense
incurred without gross negligence, bad faith or willful misconduct
in acting as Depositor of the Trust; all taxes and other governmental
charges imposed upon the Securities or any part of the Trust (no
such taxes or charges are being levied or made or, to the knowledge
of the Sponsor, contemplated); and expenditures incurred in contacting
Unit holders upon termination of the Trust. The above expenses
and the Trustee's annual fee, when paying or owing to the Trustee,
are secured by a lien on the Trust. In addition, the Trustee is
empowered to sell Securities in order to make funds available
to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts of the Trust. The Trust
will be 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.
Page 18
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:
<TABLE>
<CAPTION>
Secondary Offering Period
Sales Charge
________________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ __________ __________
<S> <C> <C>
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
</TABLE>
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 initial and secondary
offering periods.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer except that with respect to purchases
of Units of $500,000 or more, the Sponsor will reimburse the selling
Underwriter or dealer in an amount equal to $2.50 per Unit (in
the case of a Discount Trust, .25% of the Public Offering Price).
The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any
one Underwriter or dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from such
Underwriter or dealer of units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser 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.
Underwriters, dealers and others who, in a single month, sell
Units of any Series of The First Trust GNMA, The First Trust of
Insured Municipal Bonds, The First Trust Combined Series or any
other unit investment trust of which Nike Securities L.P. is the
Sponsor (the "UIT Units"), which sale of UIT Units are in the
aggregate following dollar amounts, will receive additional concessions
as indicated in the following table:
Page 19
<TABLE>
<CAPTION>
Aggregate Monthly
Dollar Amount of
UIT Units Sold at Additional Concession
Public Offering Price (per $1,000 sold)
_____________________ _____________________
<S> <C>
$1,000,000 - $2,499,999 $ .50
$2,500,000 - $4,999,999 $1.00
$5,000,000 - $7,499,999 $1.50
$7,500,000 - $9,999,999 $2.00
$10,000,000 - or more $2.50
</TABLE>
Aggregate Monthly Dollar Amount of UIT Units Sold at Public Offering
Price is based on settled trades for a month, net of redemptions,
and excludes trades without a sales charge at net asset value.
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
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
Page 20
"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 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. 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
Page 21
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 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.
Page 22
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 on or shortly after
the first day of each month on a pro rata basis to Unit holders
of record as of the preceding Record Date who are entitled to
distributions at that time under the plan of distribution chosen.
All distributions 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 on or shortly after the first day of the following
month. Proceeds received from the disposition of any of the Securities
(less any premiums due with respect to Bonds in Series 112 and
subsequent Series of the National Trust and any Series of the
Multi-State Trust (except for the Multi-State Trust: Pennsylvania
Trust, Series 6) for which the Trustee has exercised the right
to obtain Permanent Insurance) after a Record Date and prior to
the following Distribution Date will be held in the Principal
Account and not distributed until the next Distribution Date.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Accounts of a Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds),
nor to make a distribution from the Principal Account unless the
amount available for distribution shall equal at least $1.00 per
Unit.
The Trustee will credit to the Interest Account of each Trust
all interest received by such Trust, including that part of the
proceeds (including insurance proceeds) of any disposition of
Securities which represents accrued interest. Other receipts will
be credited to the Principal Account of such Trust. The distribution
to the Unit holders as of each applicable Record Date will be
made on the following Distribution Date or shortly thereafter
and shall consist of an amount substantially equal to such portion
of the holder's pro rata share of the estimated annual income
after deducting estimated expenses as is consistent with the distribution
plan chosen. Because interest payments are not received by the
Fund at a constant rate throughout the year, such interest distribution
may be more or less than the amount credited to the Interest Account
as of the Record Date. For the purpose of minimizing fluctuations
in the distributions from the Interest Account, the Trustee is
authorized to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee
shall be reimbursed, without interest, for any such advances from
funds in the Interest Account on the ensuing Record Date. Persons
who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution
Date after the purchase under the applicable plan of distribution.
The Trustee is not required to pay interest on Funds held in the
Principal or Interest Account of a Trust (but may itself earn
interest thereon and therefore benefits from the use of such funds).
As of the fifteenth of each month, the applicable Trustee will
deduct from the Interest Account of each Trust and, to the extent
funds are not sufficient therein, from the Principal Account of
each Trust, amounts necessary to pay the expenses of such Trust.
A Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental
charges payable out of the Trust. Amounts so withdrawn shall not
be considered a part of the Trust's assets until such time as
the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, a Trustee may withdraw from
the Interest Account and the Principal Account of a Trust such
amounts as may be necessary to cover redemption of Units of such
Trust by the Trustee.
Record Dates for monthly distributions will be the fifteenth day
of each month, Record Dates for quarterly distributions (if applicable)
will be the fifteenth day of March, June, September and December
and Record Dates for semi-annual distributions will be the fifteenth
day of June and December. Distributions will be made on the first
day of the month subsequent to the respective Record Dates.
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
Page 23
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, capital gains 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, including capital gains, on his
Units automatically reinvested in shares of either the Oppenheimer
Intermediate Tax-Exempt Bond Fund (the "Intermediate Series")
or the Oppenheimer Insured Tax-Exempt Bond Fund (the "Insured
Series"). Oppenheimer Management Corporation is the investment
adviser of each Series which are open-end, diversified management
investment companies. The investment objective of the Intermediate
Series is to provide a high level of current interest income exempt
from Federal income tax through the purchase of investment grade
securities. The investment objective of the Insured Series is
to provide as high a level of current interest income exempt from
Federal income tax as is consistent with the assurance of the
scheduled receipt of interest and principal through insurance
and the preservation of capital (the income of either Series may
constitute an item of preference for determining the Federal alternative
minimum tax). The objectives and policies of each Series are presented
in more detail in the prospectus for each Series.
Each person who purchases Units of a Trust may use the card attached
to this prospectus to request a prospectus describing each Series
and a form by which such person may elect to become a participant
in Distribution Reinvestment Option with respect to a Series.
Each distribution of interest income or principal, including capital
gains, 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.
Page 24
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.
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 of
Unit will be determined on the basis of the bid price of the Securities
in the 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
the Trust or moneys in the process
Page 25
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.
The Trustee is empowered to sell underlying Securities in a Trust
in order to make funds available for redemption. To the extent
that Securities are sold, the size and diversity of such Trust
will be reduced. Such sales may be required at a time when Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. Under the provisions for insurance
obtained by each series of the National Trust prior to Series
112 and each series of the New York Trust and the Pennsylvania
Trust the insurance may not be transferred by any such Trust.
For Series 112 and subsequent Series of the National Trust and
all Series of the Multi-State Trust (except for the Multi-State
Trust: Pennsylvania Trust, Series 6), the Trustee may obtain Permanent
Insurance on the Bonds. Accordingly, any Bonds in a series of
the Fund prior to Series 112 of the National Trust and any Series
of the New York Trust and the Pennsylvania Trust must be sold
on an uninsured basis, while Bonds sold from Series 112 and subsequent
Series of the National Trust and all Series of the Multi-State
Trust (except for the Multi-State Trust: Pennsylvania Trust, Series
6) for which Permanent Insurance has been obtained will be sold
on an insured basis (as will Bonds on which insurance has been
obtained by the issuer thereof).
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or an emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances,
the Sponsor may apply to the Securities and Exchange Commission
for an order permitting a full or partial suspension of the right
of Unit holders to redeem their Units.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 12:00 p.m. Eastern
time on the next succeeding business day and by making payment
therefor to the Unit holder not later than the day on which the
Units would otherwise have been redeemed by the Trustee. Units
held by the Sponsor may be tendered to the Trustee for redemption
in the same manner as any other Units.
Page 26
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.
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 $8 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, 1993, the total partners' capital of Nike Securities
L.P. was $12,743,032 (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
Page 27
obligations. More detailed financial information will be made
available by the Sponsor upon request.)
Who are the Trustees?
The Trustee for Series 8 through 137 of the National Trust and
Series 1-9 of the Multi-State Trust, and all Series of the New
York Trust and the Pennsylvania Trust is The Bank of New York,
a trust company organized under the banking laws of New York.
The Bank of New York has its offices at 101 Barclay Street, 20
West, New York, New York 10286 (212) 530-7900. The Bank of New
York is subject to supervision and examination by the Superintendent
of Banks of the State of New York and the Board of Governors of
the Federal Reserve System, and its deposits are insured by the
Federal Deposit Insurance Corporation to the extent permitted
by law. The Trustee commenced operations on February 3, 1986 when
it acquired the unit investment trust division of Fidata Trust
Company New York and assumed the position as Trustee of Series
8-137 of the National Trust, Series 1-9 of the Multi-State Trust,
and all Series of the New York Trust and the Pennsylvania Trust
on June 16, 1986 following the resignation of Fidata Trust Company
New York on such date.
The Trustee for Series 138 and subsequent Series of the National
Trust and Series 10 and 11 of the Multi-State Trust is United
States Trust Company of New York with its principal place of business
at 45 Wall Street, New York 10005 and its unit investment 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 Trustees, 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 Trustees 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.
A 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 a Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over by public
authorities, the Sponsor may remove such Trustee and appoint a
successor as provided in the Indenture. If upon resignation of
a 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 a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any state and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
United States Trust Company of New York and the Bank of New York
are collectively referred to herein as the "Trustees"and each
is separately referred to as the Trustee.
Limitations on Liabilities of Sponsor and Trustees
The Sponsor and the Trustees 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.
A Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by such Trustee of any of the Securities.
In the event of the failure of the Sponsor to act under the Indenture,
a Trustee may act thereunder and shall not be liable for any action
taken by it in good faith under the Indenture.
Page 28
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 a 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 applicable
Trustee may (a) appoint a successor Sponsor at rates of compensation
deemed by the applicable 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 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
Page 29
(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 through 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 through 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, 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*
* As published by the rating companies.
Standard & Poor's Corporation. A brief description of the applicable
Standard & Poor's Corporation 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.
Page 30
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.**
** 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 Corporation.
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:
Page 31
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Their safety
is so absolute that with the occasional exception of oversupply
in a few specific instances, characteristically, their market
value is affected solely by money market fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat large than in Aaa
securities. Their market value is virtually immune to all but
money market influences, with the occasional exception of oversupply
in a few specific instances.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future. The market value of A-rated
bonds may be influenced to some degree by economic performance
during a sustained period of depressed business conditions, but,
during periods of normalcy, A-rated bonds frequently move in parallel
with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the
maximum in security within their quality group, can be bought
for possible upgrading in quality, and additionally, afford the
investor an opportunity to gauge more precisely the relative attractiveness
of offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well. The market
value of Baa-rated bonds is more sensitive to changes in economic
circumstances, and aside from occasional speculative factors applying
to some bonds of this class, Baa market valuations will move in
parallel with Aaa, Aa, and A obligations during periods of economic
normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of
a generic rating classification. The modifier 1 indicates that
the bond ranks at the high end of its category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Con.(---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments
to which some other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion of construction
or elimination of basis of condition.
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Page 35
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
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? 9
Why and How are the Trusts Insured? 9
What is the Federal Tax Status of Unit Holders? 15
Certain Considerations 15
What are the Expenses and Charges? 17
Public Offering:
How is the Public Offering Price Determined? 18
How are Units Distributed? 22
What are the Sponsor's Profits? 22
Rights of Unit Holders:
How are Certificates Issued and Transferred? 22
How are Interest and Principal Distributed? 23
How Can Distributions to Unit Holders be
Reinvested? 24
What Reports will Unit Holders Receive? 25
How May Units be Redeemed? 25
How May Units be Purchased by the Sponsor? 26
How May Bonds be Removed from the Fund? 27
Information as to Sponsor, Trustees and Evaluator:
Who is the Sponsor? 27
Who are the Trustees? 28
Limitations on Liabilities of Sponsor and Trustees 28
Who is the Evaluator? 29
Other Information:
How May the Indenture be Amended or
Terminated? 29
Legal Opinions 30
Experts 30
Description of Bond Ratings 30
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
THE FIRST TRUST OF INSURED MUNICIPAL
BONDS-MULTI-STATE
Prospectus
Part Two
April 21, 1994
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
United States Trust Company
of New York
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 36
New York Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-New York Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
The First Trust Advantage-New York Discount
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated June 27, 1994 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. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
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. Tax-exempt interest received
by each of the Trusts on Bonds deposited therein will retain its
status as tax-exempt interest, for Federal income tax purposes,
when distributed to a Unit holder except that the alternative
minimum tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
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
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest received, if any, on Bonds delivered
after the date the Unit holders pay for their Units and, consequently,
such Unit holders may have an increase in taxable gain or reduction
in capital loss upon the disposition of such Units. Gain or loss
upon the sale or redemption of Units is measured by comparing
the proceeds of such sale or redemption with the adjusted basis
of the Units. If the Trustee disposes of Bonds (whether by sale,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder. The amount of any such gain or
loss is measured by comparing the Unit holder's pro rata share
of the total proceeds from such disposition with his basis for
his fractional interest in the asset disposed of. In the case
of a Unit holder who purchases his Units, such basis is determined
by apportioning the tax basis for the Units among each of the
Trust assets ratably according to value as of the date of acquisition
of the Units. The basis of each Unit and of each Bond which was
issued with original issue discount must be increased by the amount
of accrued original issue discount and the basis of each Unit
and of each Bond which was purchased by a Trust at a premium must
be reduced by the annual amortization of Bond premium. The tax
cost reduction requirements of said Code relating to amortization
of bond premium may, under some circumstances, result in the Unit
holder realizing a taxable gain when his Units are sold or redeemed
for an amount equal to or less than his original cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
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 compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
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). 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 the 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
Page 2
the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. THE TRUSTS DO NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
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. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI
Page 3
(before such adjustment item and the alternative tax net operating
loss deduction). Although tax-exempt interest received by the
Trusts on Bonds deposited therein will not be included in the
gross income of corporations for Federal income tax purposes,
"adjusted current earnings" includes all tax-exempt interest,
including interest on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Booth & Baron, Special Counsel to
Series 1-3 of The First Trust Combined Series 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 1-3 of The First Trust Combined Series
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.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of The First Trust
Combined Series 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 First Trust Combined Series is not an association taxable
as a corporation and the income of each Trust in Series 4-125
of The First Trust Combined Series 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 First Trust Combined Series for New York tax matters
for Series 126 and subsequent Series of The First Trust Combined
Series, 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.
Booth & Baron has served as Special Counsel to Series 1-9 of The
First Trust of Insured Municipal Bonds-Multi-State, inclusive,
and to all Series of the New York Trust included in a Series of
The First Trust of Insured Municipal Bonds-New York. Winston &
Strawn (previously named Cole & Deitz) has served as Special Counsel
to Series 10 and 11 of The First Trust of Insured Municipal Bonds-Multi-State
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.
New York Tax Status of Unit Holders
At the time of the closing for Series 1, 2 and 3 of The First
Trust Combined Series; Series 1-9 of The First Trust of Insured
Municipal Bonds-Multi-State; and all Series of the New York Trust
included in a Series of The First Trust of Insured Municipal Bonds-New
York; Booth & Baron, Special Counsel to these Series for New York
tax matters, rendered an opinion under then existing New York
income tax law applicable to taxpayers whose income is subject
to New York income taxation substantially to the effect that:
Each New York Trust is not an association taxable as a corporation
and the income of a New York Trust will be treated as the income
of the Unit holders under the existing income tax laws of the
State and City of New York;
Individuals who reside in New York State or City will not be subject
to State and City personal income tax on interest income which
is exempt from Federal income tax under section 103 of the Internal
Revenue Code of 1986 and derived from the Bonds, although they
will be subject to New York State and City tax with respect to
any gains realized when such obligations are sold, redeemed or
paid at maturity or when any such Units are sold or redeemed;
and
Page 4
Any proceeds paid under the insurance policy to the Trustee of
a New York Trust which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from New York
State or City personal income tax if, and to the same extent as,
such interest would have been so excludable if paid by the issuer
of the defaulted obligations.
At the time of the closing for Series 4-125 of The First Trust
Combined Series and Series 10-11 of The First Trust Insured Municipal
Bonds-Multi-State, Winston & Strawn (previously named Cole & Deitz),
New York, Special Counsel to these Series for New York tax matters,
rendered an opinion under then existing New York income tax law
applicable to taxpayers whose income is subject to New York income
taxation substantially to the effect that:
Each New York Trust is not an association taxable as a corporation
and the income of a New York Trust will be treated as the income
of the Unit holders under the existing income tax laws of the
State and City of New York 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); and
Individuals who reside in New York State or City will not be subject
to State and City personal income tax on interest income which
is excludable from Federal gross income tax under section 103
of the Internal Revenue Code of 1986 and derived from the Bonds,
although they will be subject to New York State and City personal
income tax with respect to any gains realized when such obligations
are sold, redeemed or paid at maturity or when any such Units
are sold or redeemed; and
For individuals who reside in New York State or City, any proceeds
paid to the Trustee under the applicable insurance policies which
represent maturing interest on defaulted obligations held by the
Trustee will be excludable from New York State or City personal
income tax if, and to the same extent as, such interest would
have been so excludable from Federal gross income tax under section
103 of the Internal Revenue Code of 1986 if paid by the issuer
of the defaulted obligations.
At the time of the closing for Series 126 and subsequent Series
of The First Trust Combined Series, Carter, Ledyard & Milburn,
Special Counsel to Series 126 and subsequent Series of The First
Trust Combined Series for New York tax matters, rendered an opinion
under then existing New York income tax law applicable to taxpayers
whose income is subject to New York income taxation substantially
to the effect that:
Each New York Trust is not an association taxable as a corporation
and the income of a New York Trust will be treated as the income
of the Unit holders under the existing income tax laws of the
State and City of New York 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);
Individuals holding Units of a New York Trust who reside in New
York State or City will not be subject to State and City personal
income tax on interest income which is excludable from Federal
gross income under section 103 of the Internal Revenue Code of
1986 and derived from any obligation of New York State or a political
subdivision thereof, or of the Government of Puerto Rico or a
political subdivision thereof, or of the Government of Guam or
by its authority, although they will be subject to New York State
and City personal income tax with respect to any gains realized
when such obligations are sold, redeemed or paid at maturity or
when any such Units are sold or redeemed; and
For individuals holding Units of a New York Trust who reside in
New York State or City, any proceeds paid to the Trustee under
the applicable insurance policies which represent maturing interest
on defaulted obligations held by the Trustee will not be subject
to New York State or City personal income tax if, and to the same
extent as, such interest would not have been subject to New York
State or City personal income tax if paid by the issuer of the
defaulted obligations.
Page 5
Certain Considerations
Each New York Trust includes obligations issued by New York State
(the "State"), by its various public bodies (the "Agencies"),
and/or by other entities located within the State, including the
City of New York (the "City").
Some of the more significant events and conditions relating to
the financial situation in New York are summarized below. This
section provides only a brief summary of the complex factors affecting
the financial situation in New York and is derived from sources
that are generally available to investors and is believed to be
accurate. It is based in part on Official Statements and prospectuses
issued by, and on other information reported by the State, the
City, and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that current or future statewide or
regional economic difficulties, and the resulting impact on State
or local government finances generally, will not adversely affect
the market value of New York Municipal Obligations held in the
portfolio of the Trust or the ability of particular obligors to
make timely payments of debt service on (or relating to) those
obligations.
The State. The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy
has grown more slowly than that of the nation as a whole, gradually
eroding the State's relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration
of the more affluent to the suburbs and an influx of generally
less affluent residents. Regionally, the older Northeast cities
have suffered because of the relative success that the South and
the West have had in attracting people and business. The City
has also had to face greater competition as other major cities
have developed financial and business capabilities which make
them less dependent on the specialized services traditionally
available almost exclusively in the City.
The State has for many years had a very high state and local tax
burden relative to other states. The burden of State and local
taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate
within, the State.
Slowdown of Regional Economy. A national recession commenced
in mid-1990. The downturn continued throughout the State's 1990-91
fiscal year and was followed by a period of weak economic growth
during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to
grow faster than in 1992, but still at a very moderate rate, as
compared to other recoveries. The national recession has been
more severe in the State because of factors such as significant
retrenchment in the financial services industry, cutbacks in defense
spending, and an overbuilt real estate market.
1993-94 Fiscal Year. On April 5, 1993, the State Legislature
approved a $32.08 billion budget. Following enactment of the budget
the 1993-94 State Financial Plan was formulated on April 16, 1993.
This Plan projects General Fund receipts and transfers from other
funds at $32.367 billion and disbursements and transfers to other
funds at $32.300 billion. In comparison to the Governor's recommended
Executive Budget for the 1993-94 fiscal year, as revised on February
18, 1993, the 1993-94 State Financial Plan reflects increases
in both receipts and disbursements in the General Fund of $811
million.
While a portion of the increased receipts was the result of a
$487 million increase in the State's 1992-93 positive year-end
margin at March 31, 1993 to $671 million, the balance of such
increased receipts is based upon (i) a projected $269 million
increase in receipts resulting from improved 1992-93 results and
the expectation of an improving economy, (ii) projected additional
payments of $200 million from the Federal government as reimbursements
for indigent medical care, (iii) the early payment of $50 million
of personal tax returns in 1992-93 which otherwise would have
been paid in 1993-94; offset by (iv) the State Legislature's failure
to enact $195 million of additional revenue-raising recommendations
proposed by the Governor. There can be no assurances that all
of the projected receipts referred to above will be received.
Despite the $811 million increase in disbursements included in
the 1993-94 State Financial Plan, a reduction in aid to some local
government units can be expected. To offset a portion of such
reductions, the 1993-94
Page 6
State Financial Plan contains a package of mandate relief, cost
containment and other proposals to reduce the costs of many programs
for which local governments provide funding. There can be no assurance,
however, that localities that suffer cuts will not be adversely
affected, leading to further requests for State financial assistance.
There can be no assurance that the State will not face substantial
potential budget gaps in the future resulting from a significant
disparity between tax revenues projected from a lower recurring
receipts base and the spending required to maintain State programs
at current levels. To address any potential budgetary imbalance,
the State may need to take significant actions to align recurring
receipts and disbursements.
1992-93 Fiscal Year. Before giving effect to a 1992-93 year-end
deposit to the refund reserve account of $671 million, General
Fund receipts in 1992-93 would have been $716 million higher than
originally projected. This year-end deposit effectively reduced
1992-93 receipts by $671 million and made those receipts available
for 1993-94.
The State's favorable performance primarily resulted from income
tax collections that were $700 million higher than projected which
reflected both stronger economic activity and tax-induced one-time
acceleration of income into 1992. In other areas larger than projected
business tax collections and unbudgeted receipts offset the loss
of $200 million of anticipated Federal reimbursement and losses
of, or shortfalls in, other projected revenue sources.
For 1992-93 disbursements and transfers to other funds (including
the deposit to the refund reserve account discussed above) totalled
$30.829 billion, an increase of $45 million above projections
in April 1992. After adjusting for a $150 million payment from
the Medical Malpractice Insurance Association to health insurers
pursuant to legislation adopted in January 1993, actual disbursements
were $105 million lower than projected.
Fiscal year 1992-93 was the first time in four years that the
State did not incur a cash-basis operating deficit in the General
Fund requiring the issuance of deficit notes or other bonds, spending
cuts or other revenue raising measures.
Indebtedness. As of March 31, 1993, the total amount of long-term
State general obligation debt authorized but unissued stood at
$2.4 billion. As of the same date, the State had approximately
$5.4 billion in general obligation bonds. The State issued $850
million in tax and revenue anticipation notes ("TRANS") on April
28, 1993. The State does not project the need to issue additional
TRANS during the State's 1993-94 fiscal year.
The State anticipates that its borrowings for capital purposes
during the State's 1993-94 fiscal year will consist of $460 million
in general obligation bonds and $140 million in bonds for the
purpose of redeeming outstanding bond anticipation notes. The
Legislature has authorized the issuance of up to $85 million in
certificates of participation during the State's 1993-94 fiscal
year for personal and real property acquisitions. The projection
of the State regarding its borrowings for the 1993-94 fiscal year
may change if actual receipts fall short of State projections
or if other circumstances require.
In June 1990, legislation was enacted creating the New York Local
Government Assistance Corporation (LGAC), a public benefit corporation
empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's
annual seasonal borrowing. To date, LGAC has issued its bonds
to provide net proceeds of $3.28 billion. LGAC has been authorized
to issue additional bonds to provide net proceeds of $703 million
during the State's 1993-94 fiscal year.
Ratings. The $850 million in TRANS issued by the State in April
1993 were rated SP-1-Plus by S&P on April 26, 1993, and MIG-1
by Moody's on April 23, 1993, which represents the highest ratings
given by such agencies and the first time the State's TRANS have
received these ratings since its May 1989 TRANS issuance. Both
agencies cited the State's improved fiscal position as a significant
factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at
A on April 23, 1993, and S&P's rating stood at A- with a stable
outlook on April 26, 1993, an improvement from S&P's negative
outlook prior to April 1993. Previously, Moody's lowered its rating
to A on June 6, 1990, its rating having been A1 since May 27,
Page 7
1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992,
AA - from August 1987 to March 1990 and A+ from November 1982
to August 1987.
Moody's, in confirming its rating of the State's general obligation
bonds, and S&P, in improving its outlook on such bonds from negative
to stable, noted the State's improved fiscal condition and reasonable
revenue assumptions contained in the 1993-94 State budget.
The City and the Municipal Assistance Corporation ("MAC"). The
City accounts for approximately 41% of the State's population
and personal income, and the City's financial health affects the
State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took
a number of steps to assist the City in returning to fiscal stability.
Among other actions, the State Legislature (i) created MAC to
assist with long-term financing for the City's short-term debt
and other cash requirements and (ii) created the State Financial
Control Board (the "Control Board") to review and approve the
City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the
"Covered Organizations")).
Over the past three years, the rate of economic growth in the
City has slowed substantially, and the City's economy is currently
in recession. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial
plan. The City Comptroller has issued reports concluding that
the recession of the City's economy will be more severe and last
longer than is assumed in the financial plan.
Fiscal Year 1993 and 1993-1996 and 1994-1997 Financial Plan.
The City's 1993 fiscal year results are projected to be balanced
in accordance with generally accepted accounting principles ("GAAP").
The City was required to close substantial budget gaps in its
1990, 1991 and 1992 fiscal years in order to maintain balanced
operating results.
The City's modified 1993-1996 Financial Plan dated February 9,
1993 covering fiscal years 1993-1996 projects budget gaps for
1994 through 1996, and is dependent upon a gap-closing program,
certain elements of which the staff of Control Board identified
on March 25, 1993 to be at risk due to projected levels of State
and Federal aid and revenue and expenditures estimates which may
not be achievable. On June 4, 1993, the Office of the State Deputy
Comptroller ("OSDC") reported that expenditures for the 1994 fiscal
year could be $280 million higher than projected in May 1993 by
the City and revenues for the same period could be $111 million
lower than projected. The OSDC also noted possible increases in
budget gaps forecast by the City.
The City Council adopted a balanced budget for Fiscal Year 1993-1994
on June 14, 1993. The State Comptroller on that date criticized
efforts by the Mayor and the City Council to balance the City's
budget which rely primarily on one-shot revenues. The State Comptroller
added that the City's budget should be based on "recurring revenues
that fund recurring expenditures." In a report issued on June
15, 1993, the Control Board also criticized the reliance by the
City on $1 billion of such one-shot revenues to balance the budget.
On June 30, 1993, S&P announced that it was concerned with budget
gaps in post-1994 fiscal years and the inability of the City to
restrain spending and, due to this concern, it was reviewing the
rating of the City's general obligation bonds.
In response to S&P's announcement, the Mayor's Office and the
City Comptroller met with staff of S&P and proposed $130 million
of additional cuts in the recently adopted budget for fiscal year
1994 through reduced spending for capital projects, savings through
workforce attrition and other measures. In addition, the Mayor
proposed $400 million in cuts from the City's fiscal year 1995
budget. Following review of the proposed cuts, S&P announced on
July 2, 1993 that it would maintain its current A- rating of the
City's general obligation bonds, but S&P indicated that it remains
concerned about budgets for fiscal year 1995 and thereafter.
On July 6, 1993, the City prepared its Financial Plan for fiscal
years 1994-1997 which projects a balanced budget for fiscal year
1994 and identifies approximately $2.0 billion in gap-closing
measures including productivity savings, service reductions, sale
of delinquent real property tax receivables, transfers from fiscal
year 1993, reduced debt service costs, increased State and Federal
aid, a continuation of the personal income
Page 8
tax surcharge and other actions to reduce expenditures and increase
revenues. This 1994-1997 Financial Plan projects budget gaps of
$1.3 billion, $1.8 billion and $2.0 billion in fiscal years 1995
through 1997, respectively. On August 4, 1993, the City Comptroller
in a report on the 1994-1997 Financial Plan identified risks of
$340 million, $1.5 billion, $2.0 billion, and $2.2 billion in
fiscal years 1994 through 1997, respectively, which could negatively
affect gap-closing efforts. The City Comptroller noted uncertainties
associated with anticipated Federal aid, projected proceeds from
the sale or reorganization of Off Track Betting operations and
approval of certain productivity savings relating to teachers.
An August 5, 1993 report of the Control Board on the 1994-1997
Financial Plan also identified risks in the City's proposed budget
gap reductions, including items identified by the City Comptroller
and uncertainties associated with the level of State aid and the
City's revenue and expenditure estimates. The Control Board estimated
gap-closing risks to be slightly higher than indicated in the
City Comptroller's report, $687 million, $1.9 billion, $2.4 billion
and $2.5 billion in fiscal years 1994 through 1997, respectively.
OSDC's report on the 1994-1997 Financial Plan released on August
10, 1993, also projected that budget gaps could be higher than
those set forth in such Plan. The OSDC report stated that in fiscal
year 1994 expenditures could be $240 million higher and revenues
$182 million lower than projected by the City. OSDC also noted
that budget gaps could increase by $556 million, $561 million
and $515 million in fiscal years 1995 through 1997, respectively,
above City projections as the result of higher payments to Covered
Organizations, higher overtime costs, and lower than anticipated
lottery and tax receipts. Given the foregoing factors, there can
be no assurance that the City will continue to maintain a balanced
budget, or that it can maintain a balanced budget without additional
tax or other revenue increases or reductions in City services,
which could adversely affect the City's economic base.
Pursuant to State law, the City prepares a four-year annual financial
plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections.
The City is required to submit its financial plans to review bodies,
including the Control Board. If the City were to experience certain
adverse financial circumstances, including the occurrence or the
substantial likelihood and imminence of the occurrence of an annual
operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and
seasonal financial requirements, the Control Board would be required
by State law to exercise certain powers, including prior approval
of City financial plans, proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements.
If the State experiences revenue shortfalls or spending increases
beyond its projections during its 1993 fiscal year or subsequent
years, such developments could result in reductions in projected
State aid to the City. In addition, there can be no assurance
that State budgets in future fiscal years will be adopted by the
April 1 statutory deadline and that there will not be adverse
effects on the City's cash flow and additional City expenditures
as a result of such delays.
The City projections set forth in its financial plan are based
on various assumptions and contingencies which are uncertain and
which may not materialize. Changes in major assumptions could
significantly affect the City's ability to balance its budget
as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include
the timing of any regional and local economic recovery, the absence
of wage increases in excess of the increases assumed in its financial
plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets,
levels of education expenditures as may be required by State law,
adoption of future City budgets by the New York City Council,
and approval by the Governor or the State Legislature and the
cooperation of MAC with respect to various other actions proposed
in such financial plan.
The City's ability to maintain a balanced operating budget is
dependent on whether it can implement necessary service and personnel
reduction programs successfully. As discussed above, the City
must identify additional expenditure reductions and revenue sources
to achieve balanced operating budgets for fiscal years 1994 and
thereafter. Any such proposed expenditure reductions will be difficult
to implement because
Page 9
of their size and the substantial expenditure reductions already
imposed on City operations in the past two years.
Attaining a balanced budget is also dependent upon the City's
ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1994 through
1997 contemplates capital spending of $16.2 billion, which will
be financed through issuance of $10.5 billion of general obligation
bonds, $4.3 billion of Water Authority Revenue Bonds and the balance
by Covered Organization obligations, and will be utilized primarily
to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. A significant
portion of such bond financing is used to reimburse the City's
general fund for capital expenditures already incurred. In addition,
the City issues revenue and tax anticipation notes to finance
its seasonal working capital requirements. The terms and success
of projected public sales of City general obligation bonds and
notes will be subject to prevailing market conditions at the time
of the sale, and no assurance can be given that the credit markets
will absorb the projected amounts of public bond and note sales.
In addition, future developments concerning the City and public
discussion of such developments, the City's future financial needs
and other issues may affect the market for outstanding City general
obligation bonds and notes. If the City were unable to sell its
general obligation bonds and notes, it would be prevented from
meeting its planned operating and capital expenditures.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced
operating results as reported in accordance with GAAP for the
1992 fiscal year. During the 1990 and 1991 fiscal years, the City
implemented various actions to offset a projected budget deficit
of $3.2 billion for the 1991 fiscal year, which resulted from
declines in City revenue sources and increased public assistance
needs due to the recession. Such actions included $822 million
of tax increases and substantial expenditure reductions.
The City is a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, actions commenced
and claims asserted against the City arising out of alleged constitutional
violations, torts, breaches of contracts, and other violations
of law and condemnation proceedings. While the ultimate outcome
and fiscal impact, if any, on the proceedings and claims are not
currently predictable, adverse determinations in certain of them
might have a material adverse effect upon the City's ability to
carry out its financial plan. As of June 30, 1992, legal claims
in excess of $341 billion were outstanding against the City for
which the City estimated its potential future liability to be
$2.3 billion.
Ratings. As of the date of this prospectus, Moody's rating of
the City's general obligation bonds stood at Baa1 and S&P's rating
stood at A-. On February 11, 1991, Moody's had lowered its rating
from A.
On June 30, 1993, in confirming its Baa1 rating, Moody's noted
that:
The recent trend of declining reliance on [one-shot revenues]
is notable, and it is too early to predict that the increased
reliance on one-shots in the fiscal 1994 budget represents the
beginning of a continuing upward movement in the use of one-shots
. . . Moody's recognized in February of 1991, when the [C]ity's
rating was lowered from an A to Baa1, that the [C]ity faced structural
budgetary imbalances which were unlikely to be cured in the near
term. Moody's continues to expect the [C]ity's progress toward
achieving structural balance to be slow and uneven, but that the
[C]ity will be diligent and prudent in closing each year's gap,
factors which are consistent with the Baa1 rating level.
On August 11, 1993, Moody's confirmed the City's Baa1 rating in
connection with the City's $300 million general obligation bond
issue on that date.
On March 30, 1993, S&P affirmed its A- rating with a negative
outlook, stating that:
The City's key credit factors are marked by a high and growing
debt burden, and taxation levels that are relatively high, but
stable. The City's economy is broad-based and diverse, but currently
is in prolonged recession, with slow growth prospects for the
foreseeable future.
The rating outlook is negative, reflecting the continued fiscal
pressure facing the City, driven by continued weakness in the
local economy, rising spending pressures for eduction and labor
costs of city employees, and increasing costs associated with
rising debt for capital construction and repair.
Page 10
The current financial plan for the City assumes substantial increases
in aid from national and state governments. Maintenance of the
current rating, and stabilization of the rating outlook, will
depend on the City's success in realizing budgetary aid from these
governments, or replacing those revenues with ongoing revenue-raising
measures or spending reductions under the City's control. However,
increased reliance on non-recurring budget balancing measures
that would support current spending, but defer budgetary gaps
to future years, would be viewed by S&P as detrimental to New
York City's single A- rating.
As discussed above under Fiscal Year 1993 and 1993-1996 Financial
Plan, on July 2, 1993 after a review of the City's budget for
fiscal year 1994, its proposed budget for fiscal year 1995 and
certain additional cuts in both proposed by the Mayor and the
City Comptroller, S&P confirmed its A- rating with a negative
outlook of the City's general obligation bonds.
On May 9, 1990, Moody's revised downward its rating on outstanding
City revenue anticipation notes from MIG-1 to MIG-2 and rated
the $900 million Notes then being sold MIG-2. On April 30, 1991
Moody's confirmed its MIG-2 rating for the outstanding revenue
anticipation notes and for the $1.25 billion in notes then being
sold. On April 29, 1991, S&P revised downward its rating on City
revenue anticipation notes from SP-1 to SP-2.
As of December 31, 1992, the City and MAC had, respectively, $20.3
billion and $4.7 billion of outstanding net long-term indebtedness.
The State Agencies. Certain Agencies of the State have faced
substantial financial difficulties which could adversely affect
the ability of such Agencies to make payments of interest on,
and principal amounts of, their respective bonds. The difficulties
have in certain instances caused the State (under so-called "moral
obligation" provisions which are non-binding statutory provisions
for State appropriations to maintain various debt service reserve
funds) to appropriate funds on behalf of the Agencies. Moreover,
it is expected that the problems faced by these Agencies will
continue and will require increasing amounts of State assistance
in future years. Failure of the State to appropriate necessary
amounts or to take other action to permit those Agencies having
financial difficulties to meet their obligations could result
in a default by one or more of the Agencies. Such default, if
it were to occur, would be likely to have a significant adverse
effect on investor confidence in, and therefore the market price
of, obligations of the defaulting Agencies. In addition, any default
in payment on any general obligation of any Agency whose bonds
contain a moral obligation provision could constitute a failure
of certain conditions that must be satisfied in connection with
Federal guarantees of City and MAC obligations and could thus
jeopardize the City's long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen
Agencies that each had outstanding debt of $100 million or more.
These eighteen Agencies had an aggregate of $62.2 billion of outstanding
debt, including refunding bonds, of which the State was obligated
under lease-purchase, contractual obligation or moral obligation
provisions on $25.3 billion.
State Litigation. The State is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance
of routine governmental operations. Such litigation includes,
but is not limited to, claims asserted against the State arising
from alleged torts, alleged breaches of contracts, condemnation
proceedings, and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number
of cases challenging the constitutionality or the adequacy and
effectiveness of a variety of significant social welfare programs
primarily involving the State's mental hygiene programs. Adverse
judgments in these matters generally could result in injunctive
relief coupled with prospective changes in patient care which
could require substantial increased financing of the litigated
programs in the future.
The State is also engaged in a variety of claims wherein significant
monetary damages are sought. Actions commenced by several Indian
nations claim that significant amounts of land were unconstitutionally
taken from the Indians in violation of various treaties and agreements
during the eighteenth and nineteenth
Page 11
centuries. The claimants seek recovery of approximately six million
acres of land as well as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993, referred to a Special
Master for determination of damages an action by the State of
Delaware to recover certain unclaimed dividends, interest and
other distributions made by issuers of securities held by New
York based-brokers incorporated in Delaware (State of Delaware
v. State of New York). The State had taken such unclaimed property
under its Abandoned Property Law. The State expects that it may
pay a significant amount in damages during fiscal year 1993-94
but it has indicated that it has sufficient funds on hand to pay
any such award, including funds held in contingency reserves.
The State's 1993-94 Financial Plan includes the establishment
of a $100 million contingency reserve fund which would be available
to fund such an award which some reports have estimated at $100-$300
million.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz
1993"), petitioners have challenged the constitutionality of mass
transportation bonding programs of the New York State Thruway
Authority and the Metropolitan Transportation Authority. On May
24, 1993, the Supreme Court, Albany County, temporarily enjoined
the State from implementing those bonding programs. In previous
actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation
and the New York Local Government Assistance Corporation. While
there have been no decisions on the merits in such previous actions,
by an opinion dated May 11, 1993, the New York Court of Appeals
held in a proceeding commenced on April 29, 1991 in the Supreme
Court, Albany County (Schulz v. State of New York), that petitioners
had standing as voters under the State Constitution to bring such
action.
Petitioners in Schulz 1993 have asserted that issuance of bonds
by the two Authorities is subject to approval by statewide referendum.
At this time there can be no forecast of the likelihood of success
on the merits by the petitioners, but a decision upholding this
constitutional challenge could restrict and limit the ability
of the State and its instrumentalities to borrow funds in the
future. The State has not indicated that the temporary injunction
issued by the Supreme Court in this action will have any immediate
impact on its financial condition or interfere with projects requiring
immediate action.
On July 1, 1993, the Appellate Division of the State Supreme Court
affirmed the decision of the Supreme Court, Albany County in three
actions, declaring unconstitutional State legislation affecting
actuarial funding methods for determining State and local contributions
to the State employee retirement system. The State Comptroller's
office has projected that the impact of the decision with respect
to 1990-91 fiscal year contributions alone could require additional
State and local employer contributions of approximately $800 million.
A final adverse decision in these three actions could have a material
adverse effect on the financial condition of the State and its
local governments.
Adverse developments in the foregoing proceedings or new proceedings
could adversely affect the financial condition of the State in
the future.
Other Municipalities. Certain localities in addition to New York
City could have financial problems leading to requests for additional
State assistance. The potential impact on the State of such actions
by localities is not included in projections of State receipts
and expenditures in the State's 1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the
City of Yonkers (the "Yonkers Board") by the State in 1984. The
Yonkers Board is charged with oversight of the fiscal affairs
of Yonkers. Future actions taken by the Governor or the State
Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1991, the total indebtedness
of all localities in the State was approximately $31.6 billion,
of which $16.8 billion was debt of New York City (excluding $6.7
billion in MAC debt). State law requires the Comptroller to review
and make recommendations concerning the budgets of those local
government units other than New York City authorized by State
law to issue debt to finance deficits during the period that such
deficit financing is outstanding. Fifteen localities had outstanding
indebtedness for state financing at the close of their
Page 12
fiscal year ending in 1991. In 1992, an unusually large number
of local government units requested authorization for deficit
financings. According to the Comptroller, ten local government
units have been authorized to issue deficit financing in the aggregate
amount of $131.1 million.
Certain proposed Federal expenditure reductions could reduce,
or in some cases eliminate, Federal funding of some local programs
and accordingly might impose substantial increased expenditure
requirements on affected localities. If the State, New York City
or any of the Agencies were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets,
the marketability of notes and bonds issued by localities within
the State, including notes or bonds in the New York Insured Trust,
could be adversely affected. Localities also face anticipated
and potential problems resulting from certain pending litigation,
judicial decisions, and long-range economic trends. The longer-range
potential problems of declining urban population, increasing expenditures,
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Other Issuers of New York Municipal Obligations. There are a
number of other agencies, instrumentalities and political subdivisions
of the State that issue Municipal Obligations, some of which may
be conduit revenue obligations payable from payments from private
borrowers. These entities are subject to various economic risks
and uncertainties, and the credit quality of the securities issued
by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.
The following information applies to all Series of the First Trust
Advantage: New York Discount Trust.
The current yields of discount bonds will be lower than the current
yields of comparably rated bonds of similar type newly issued
at current interest rates because discount bonds tend to increase
in market value as they approach maturity and the full principal
amount becomes payable. A discount bond held to maturity will
have a larger portion of its total return in the form of capital
gain and less in the form of tax-exempt interest income than a
comparable bond newly issued at current market rates. Discount
bonds with a longer term to maturity tend to have a higher current
yield and a lower current market value than otherwise comparable
bonds with a shorter term to maturity. If interest rates rise,
the value of discount bonds will decrease; and if interest rates
decline, the value of discount bonds will increase. The discount
does not necessarily indicate a lack of market confidence in the
issuer.
Certain of the Bonds in the Discount Trusts may be original issue
discount bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at
maturity and the issue price of the Bonds, is deemed to accrue
on a daily basis and the accrued portion is treated as tax-exempt
interest income for Federal income tax purposes. On sale or redemption,
any gain realized that is in excess of the earned portion of original
issue discount will be taxable as capital gain unless the gain
is attributable to market discount, in which case the accretion
of market discount is taxable as ordinary income. The current
value of an original issue discount bond reflects the present
value of its stated redemption price at maturity. The market value
tends to increase in greater increments as the Bonds approach
maturity.
Certain of the original issue discount bonds in the Discount Trusts
may be Zero Coupon Bonds (including bonds known as multiplier
bonds, money multiplier bonds, capital appreciation bonds, capital
accumulator bonds, compound interest bonds and discount maturity
payment bonds). Zero Coupon Bonds may be subject to more price
volatility than conventional bonds. While some types of Zero Coupon
Bonds, such as multipliers and capital appreciation bonds, define
par as the initial offering price rather than the maturity value,
they share the basic Zero Coupon Bond features of (1) not paying
interest on a semi-annual basis and (2) providing for the reinvestment
of the bond's semi-annual earnings at the bond's stated yield
to maturity. While Zero Coupon Bonds are frequently marketed on
the basis that their fixed rate of return minimizes reinvestment
risk, this benefit can be negated in large part by weak call protection,
i.e., a bond's provision for redemption at only a modest premium
over the accreted value of the bond.
Certain of the Bonds in the Discount Trusts may have been acquired
at a market premium from par value at maturity. Certain of these
Bonds are subject to redemption pursuant to call provisions in
approximately 5-8 years after the Date of Deposit and may be currently
redeemable. The coupon interest rates on the premium bonds at
the time they were purchased and deposited in the Trusts were
higher than the current market
Page 13
interest rates for newly issued bonds of comparable rating and
type. If such interest rates for newly issued and otherwise comparable
bonds decrease, the market premium of previously issued bonds
will be increased, and if such interest rates for newly issued
comparable bonds increase, the market premium of previously issued
bonds will be reduced, other things being equal. The current returns
of bonds trading at a market premium are initially higher than
the current returns of comparable bonds of a similar type issued
at currently prevailing interest rates because premium bonds tend
to decrease in market value as they approach maturity when the
face amount becomes payable. Because part of the purchase price
is thus returned not at maturity but through current income payments,
early redemption of a premium bond at par or early prepayments
of principal will result in a reduction in yield. Redemption pursuant
to call provisions generally will, and redemption pursuant to
sinking fund provisions may, occur at times when the redeemed
Bonds have an offering side valuation which represents a premium
over par or for original issue discount Bonds a premium over the
accreted value. To the extent that the Bonds were deposited in
the Fund at a price higher than the price at which they are redeemed,
this will represent a loss of capital when compared to the original
Public Offering Price of the Units. Because premium Bonds generally
pay a higher rate of interest than Bonds priced at or below par,
the effect of the redemption of premium Bonds would be to reduce
Estimated Net Annual Unit Income by a greater percentage than
the par amount of such Bonds bears to the total par amount of
Bonds in a Trust. Although the actual impact of any such redemptions
that may occur will depend upon the specific Bonds that are redeemed,
it can be anticipated that the Estimated Net Annual Unit Income
will be significantly reduced after the dates on which such Bonds
are eligible for redemption. See "Part One" for each Trust for
the earliest scheduled call date and the current redemption price
for each Bond.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
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.
Page 14
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 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 New York 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 New York Trusts to pay interest on or principal of the
Bonds.
Page 15
New York Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-New York Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
The First Trust Advantage-New York Discount
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: United States Trust Company of New York
770 Broadway
New York, New York 10003
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
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 16
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 - New
York, Series 6, 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 December 1,
1994.
THE FIRST TRUST OF INSURED MUNICIPAL
BONDS - NEW YORK, SERIES 6
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) December 1, 1994
the General Partner )
of Nike Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
*The title of the person named herein represents his capacity in
and relationship to Nike Securities L.P., Depositor.
**An executed copy of the related power of attorney was filed wi
th the Securities and Exchange Commission in connection with
the Amendment No. 1 to Form S-6 of The First Trust Special
Situations Trust, Series 18 (File No. 33-42683) and the same
is hereby incorporated herein by this reference.
S-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 October 28, 1994 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Insured Municipal Bonds -
New York Series dated November 22, 1994.
ERNST & YOUNG LLP
Chicago, Illinois
November 21, 1994
<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> 006
<NAME> MUNI NEW YORK
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-START> AUG-1-1993
<PERIOD-END> JUL-31-1994
<INVESTMENTS-AT-COST> 5,389,874
<INVESTMENTS-AT-VALUE> 5,334,193
<RECEIVABLES> 244,715
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,578,908
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112,186
<TOTAL-LIABILITIES> 112,186
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,389,874
<SHARES-COMMON-STOCK> 15,342
<SHARES-COMMON-PRIOR> 16,097
<ACCUMULATED-NII-CURRENT> 132,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (55,681)
<NET-ASSETS> 5,466,722
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 529,698
<OTHER-INCOME> 0
<EXPENSES-NET> 26,223
<NET-INVESTMENT-INCOME> 503,475
<REALIZED-GAINS-CURRENT> 6,655
<APPREC-INCREASE-CURRENT> (33,541)
<NET-CHANGE-FROM-OPS> 476,589
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 592,567
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 2,152,064
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 755
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,544,671)
<ACCUMULATED-NII-PRIOR> 2,280,584
<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>
