File No. 2-94909
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 10
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 -
MULTI-STATE, SERIES 5
(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 : June 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 March 17, 1994.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
4,724 UNITS
PROSPECTUS
Part One
Dated May 18, 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 Massachusetts State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State - 5, Massachusetts
Trust, Series 3 (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 Massachusetts, 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 issuing governmental authorities, exempt
from all Federal income taxes and from Massachusetts State and local income
taxes under existing law. At April 18, 1994, each Unit represented a 1/4,724
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 3.0% of the Public Offering Price (3.093%
of the amount invested). At April 18, 1994, the Public Offering Price per
Unit was $576.16 plus net interest accrued to date of settlement (five
business days after such date) of $9.57 and $25.83 for the monthly 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 8.49% per annum on April 18, 1994, and 8.41% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 6.40% per annum on April 18, 1994, and 6.32%
under the monthly distribution plan. 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
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 18, 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 $2,555,000
Number of Units 4,724
Fractional Undivided Interest in the Trust per Unit 1/4,724
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,640,144
Aggregate Value of Bonds per Unit $558.88
Sales Charge 3.093% (3.0% of Public Offering Price) $17.28
Public Offering Price per Unit $576.16*
Redemption Price and Sponsor's Repurchase Price per Unit
($17.28 less than the Public Offering Price per Unit) $558.88*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $1,000,000
</TABLE>
Date Trust Established December 18, 1984
Mandatory Termination Date December 31, 2033
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
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 18, 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 Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $52.34 $52.34
Less: Estimated Annual Expense
Excluding Insurance $2.67 $2.20
Annual Premium on Portfolio Insurance $1.23 $1.23
Estimated Net Annual Interest Income $48.44 $48.91
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $48.44 $48.91
Divided by 12 and 2, Respectively $4.04 $24.46
Estimated Daily Rate of Net Interest Accrual $.1346 $.1359
Estimated Current Return Based on Public
Offering Price 8.41% 8.49%
Estimated Long-Term Return Based on Public
Offering Price 6.32% 6.40%
</TABLE>
Trustee's Annual Fee: $1.24 and $.69 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: First day of the month as follows: monthly--each month;
semi-annual--January and July.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust of
Insured Municipal Bonds - Multi-State - 5,
Massachusetts Trust, Series 3
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds - Multi-
State - 5, Massachusetts Trust, Series 3 as of January 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 January 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 - Multi-State - 5, Massachusetts Trust, Series 3 at January
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
Chicago, Illinois
April 15, 1994
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at value (cost $2,444,150)
(Notes 1 and 3) $2,700,273
Accrued interest 54,682
Cash 20,979
__________
2,775,934
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 18,979
__________
Net assets, applicable to 4,744 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,444,150
Net unrealized appreciation (Note 2) 256,123
Distributable funds 56,682
__________
$2,756,955
==========
Net asset value per unit $581.15
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS -
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
PORTFOLIO - See notes to portfolio.
January 31, 1994
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal
Name of issuer and title of bond(e) rate maturity provisions(a) rating(b) amount Value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Bay Transportation Authority, 1998 @ 100
General Transportation System, 1983 Series A 6.50% 3/01/2008 2006 @ 100 S.F. A+ $500,000 538,665
The Commonwealth of Massachusetts, General
Obligation, Consolidated Loan of 1984,
Series B (d) 10.75 6/01/2004 1994 @ 102.5 AAA 480,000 503,923
Massachusetts Convention Center Authority,
Hynes Convention Center, 1984 Series A(d) 10.00 9/01/2005 1994 @ 102 AAA 420,000 445,423
Massachusetts Health and Educational Facilities
Authority, Revenue, New England Baptist
Hospital Issue, Series A (d) 10.125 7/01/2004 1994 @ 102 NR 100,000 104,802
Massachusetts Health and Educational Facilities
Authority, Revenue, University Hospital Issue,
Series B (d) 10.625 7/01/2019 1994 @ 102 AAA 500,000 525,510
Massachusetts Housing Finance Agency, Housing 1994 @ 103
Revenue, 1984 Series B (MBIA Insured) (c) 10.375 12/01/2009 2006 @ 100 S.F. AAA 565,000 581,950
______________________
$2,565,000 2,700,273
======================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
NOTES TO PORTFOLIO
January 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. 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 subject to call within five years.
(b) The ratings shown are those effective at January 31, 1994 ("NR"
indicates No Rating).
(c) Insurance has also been obtained by the bond issuer.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) The Trust consists of six obligations of issuers located in
Massachusetts. One of the Bonds in the Trust, representing
approximately 19% of the aggregate principal amount of the Bonds in the
Trust, is a general obligation of a governmental entity. The remaining
issues are revenue bonds payable from the income of a specific project
or authority and are divided by purpose of issue as follows: Health
Care, 2; Transportation, 1; Other Housing, 1; and Miscellaneous, 1.
Approximately 23% and 22% of the aggregate principal amount of the Bonds
consist of health care revenue bonds and multi-family residential
mortgage revenue bonds, respectively. Each of five 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 22%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $328,115 427,212 433,142
Expenses:
Trustee's fees and related expenses (9,409) (9,439) (8,853)
Insurance expense (Note 3) (7,680) (9,906) (10,079)
Evaluator's fees (3,720) (3,735) (3,795)
________________________________
Investment income - net 307,306 404,132 410,415
Net gain (loss) on investments:
Net realized gain (loss) 78,242 6,300 5,250
Change in unrealized appreciation
or depreciation (195,236) (104,884) 8,634
________________________________
(116,994) (98,584) 13,884
________________________________
Net increase in net assets resulting
from operations $190,312 305,548 424,299
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $307,306 404,132 410,415
Net realized gain (loss) on investments 78,242 6,300 5,250
Change in unrealized appreciation or
depreciation on investments (195,236) (104,884) 8,634
___________________________________
190,312 305,548 424,299
Distributions to unit holders:
Investment income - net (343,774) (404,538) (410,918)
Principal from investment transactions (1,754,795) (57,075) (54,018)
___________________________________
(2,098,569) (461,613) (464,936)
Unit redemptions (87 and 5 in 1994 and
1993, respectively):
Principal portion (54,274) (4,876) -
Net interest accrued (1,185) (86) -
___________________________________
(55,459) (4,962) -
___________________________________
Total increase (decrease) in net assets (1,963,716) (161,027) (40,637)
Net assets:
At the beginning of the year 4,720,671 4,881,698 4,922,335
___________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $56,682, $92,418 and
$94,861 at January 31, 1994, 1993
and 1992, respectively) $2,756,955 4,720,671 4,881,698
===================================
Trust units outstanding at the end of
the year 4,744 4,831 4,836
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
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, December 18, 1984. 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 and $.69 per $1,000 principal amount of bonds for those portions of
the Trust under the monthly 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 appreciation at January 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized appreciation $256,123
Unrealized depreciation -
________
$256,123
========
</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 and one issue
is also insured by insurance obtained by the issuer of the bonds (see Note (c)
to portfolio). While insurance coverage acquired by an issuer of bonds
continues in force so long as the bonds are outstanding and the insurer
remains in business, 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. Pursuant to an irrevocable commitment of Financial
Guaranty Insurance Company, in the event of a sale of a bond from the
portfolio, 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. Annual insurance premiums payable by the
Trust in future years, assuming no change in the portfolio, would be $5,817.
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.
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 to unit holders -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Type of Year ended January 31,
distribution
plan 1994 1993 1992
<S> <C> <C> <C>
Monthly $71.26 83.53 84.72
Semi-annual 71.91 84.17 85.39
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $68.19 88.40 89.57
Expenses (4.32) (4.78) (4.70)
___________________________
Investment income - net 63.87 83.62 84.87
Distributions to unit holders:
Investment income - net (71.43) (83.70) (84.97)
Principal from investment transactions (364.14) (11.81) (11.17)
Net gain (loss) on investments (24.13) (20.40) 2.87
___________________________
Total increase (decrease) in net assets (396.01) (32.29) (8.40)
Net assets:
Beginning of the year 977.16 1,009.45 1,017.85
___________________________
End of the year $581.15 977.16 1,009.45
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MASSACHUSETTS TRUST, SERIES 3
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 3rd Avenue
New York, New York 10017
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 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.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
3,815 UNITS
PROSPECTUS
Part One
Dated May 18, 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 Minnesota State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State - 5, Minnesota Trust,
Series 2 (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 Minnesota, 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 issuing governmental authorities, exempt from all Federal
income taxes and from Minnesota State and local income taxes under existing
law. At April 18, 1994, each Unit represented a 1/3,815 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 3.8% of the Public Offering Price (3.950%
of the amount invested). At April 18, 1994, the Public Offering Price per
Unit was $762.18 plus net interest accrued to date of settlement (five
business days after such date) of $12.57 and $34.20 for the monthly 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 8.49% per annum on April 18, 1994, and 8.42% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 9.24% per annum on April 18, 1994, and 9.16%
under the monthly distribution plan. 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
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 18, 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 $2,730,000
Number of Units 3,815
Fractional Undivided Interest in the Trust per Unit 1/3,815
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,797,219
Aggregate Value of Bonds per Unit $733.22*
Sales Charge 3.950% (3.8% of Public Offering Price) $28.96*
Public Offering Price per Unit $762.18**
Redemption Price and Sponsor's Repurchase Price per Unit
($28.96 less than the Public Offering Price per Unit) $733.22**
Discretionary Liquidation Amount of the Trust (20% of
the original principal amount of Bonds in the Trust). $800,000
</TABLE>
Date Trust Established December 18, 1984
Mandatory Termination Date December 31, 2033
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]
*Includes $55,000 ($14.42 per Unit) attributable to the insurance obtained by
the Trust.
**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
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF APRIL 18, 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 Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $69.15 $69.15
Less: Estimated Annual Expense
Excluding Insurance $3.09 $2.55
Annual Premium on Portfolio Insurance $1.87 $1.87
Estimated Net Annual Interest Income $64.19 $64.73
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $64.19 $64.73
Divided by 12 and 2, Respectively $5.35 $32.37
Estimated Daily Rate of Net Interest Accrual $.1783 $.1798
Estimated Current Return Based on Public
Offering Price 8.42% 8.49%
Estimated Long-Term Return Based on Public
Offering Price 9.16% 9.24%
</TABLE>
Trustee's Annual Fee: $1.24 and $.69 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: First day of the month as follows: monthly--each month;
semi-annual--January and July.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
of Insured Municipal Bonds
Multi-State - 5, Minnesota Trust,
Series 2
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds - Multi-
State - 5, Minnesota Trust, Series 2 as of January 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 January 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 - Multi-State - 5, Minnesota Trust, Series 2 at January 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
Chicago, Illinois
April 15, 1994
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at value (cost $2,563,862)
(Notes 1 and 3) $2,835,545
Accrued interest 47,998
Receivable from Trustee 26,876
Cash 1,098
__________
2,911,517
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 20,416
Accrued liabilities 778
__________
21,194
__________
Net assets, applicable to 3,820 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,563,862
Net unrealized appreciation (Note 2) 271,683
Distributable funds 54,778
__________
$2,890,323
==========
Net asset value per unit $756.63
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS -
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
PORTFOLIO - See notes to portfolio.
January 31, 1994
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal
Name of issuer and title of bond(h) rate maturity provisions(a) Rating(b) amount Value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Minneapolis Community Development Agency and The
Housing and Redevelopment Authority of the City
of Saint Paul, Minnesota, Health Care System
Revenue (Healthone Obligated Group), Series
1984(c) (d) 10.50% 11/01/2013 1994 @ 102 AAA $475,000 511,081
City of Minneapolis, Hennepin County, Minnesota,
Tax Increment Revenue Refunding of 1984 (c)(d) 10.125 3/01/2003 1995 @ 100 AAA 130,000 139,450
Minnesota Housing Finance Agency, Housing 1994 @ 101
Development, 1980 Series A 10.125 2/01/2013 2001 @ 100 S.F. A+ 85,000 85,850
Puerto Rico Industrial, Medical and Environmental
Pollution Control Facilities Financing
Authority, Industrial Revenue (Renasa, Inc. - 1994 @ 100
Squibb Corporation Project) 6.50 7/01/2004 1995 @ 100 S.F. Aaa(e) 400,000 403,200
Port Authority of the City of Saint Paul
(Minnesota) Industrial Development Revenue, 1994 @ 102
Series 1984-K 10.50 12/01/2014 2001 @ 100 S.F. CCC (f) 300,000 300,000(g)
Port Authority of the City of Saint Paul
(Minnesota) Industrial Development Revenue, 1994 @ 102
Series 1984-J 10.50 12/01/2014 2001 @ 100 S.F. CCC (f) 300,000 300,000(g)
Port Authority of the City of Saint Paul
(Minnesota) Industrial Development Revenue, 1994 @ 102
Series 1984-H 10.75 12/01/2013 2000 @ 100 S.F. CCC (f) 500,000 500,000(g)
Southern Minnesota Municipal Power Agency Supply 11.00 1/01/2016 1995 @ 103 AAA 290,000 318,782
System Revenue, 1984 B (d) 7.00 1/01/2018 1998 @ 100 NR 250,000 277,182
______________________
$2,730,000 2,835,545
======================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
NOTES TO PORTFOLIO
January 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 at January 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 subject to call within five years.
(b) The ratings shown are those effective at January 31, 1994. All ratings
are by Standard & Poor's Corporation unless otherwise indicated. ("NR"
indicates No Rating).
(c) Insurance has also been obtained by the Bond issuer.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) Rating by Moody's Investors Service, Inc.
(f) Standard & Poor's Corporation states:
"Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions."
(g) The value of these bonds includes an amount attributable to the
insurance obtained by the Trust; such bonds, in the Sponsor's opinion,
were being quoted in the market at a value which reflected a significant
risk of default in payment of principal or interest (see Note 3).
(h) The Trust consists of seven obligations of issuers located in Minnesota
and one obligation of an issuer located in Puerto Rico. None of the
Bonds in the Trust are general obligations of a governmental entity. All
of the issues are revenue bonds payable from the income of a specific
project or authority and are divided by purpose of issue as follows:
Industrial, 4; Electric, 1; Health Care, 1; Housing, 1; and
Miscellaneous, 1. Approximately 55% and 20% of the aggregate principal
amount of the Bonds consist of industrial development revenue bonds and
electric revenue bonds, respectively. Each of six Bond issues
represents 10% or more of the aggregate principal amount of the Bonds in
the Trust or a total of approximately 92%. The largest such issue
represents approximately 20%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $316,176 348,318 374,250
Expenses:
Trustee's fees and related expenses (6,846) (7,429) (7,449)
Insurance expense (Note 3) (8,687) (9,139) (9,298)
Evaluator's fees (3,825) (3,735) (3,795)
________________________________
Investment income - net 296,818 328,015 353,708
Net gain (loss) on investments:
Net realized gain (loss) 275 (3,238) -
Change in unrealized appreciation
or depreciation (79,651) (93,195) (124,904)
________________________________
(79,376) (96,433) (124,904)
________________________________
Net increase in net assets resulting
from operations $217,442 231,582 228,804
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $296,818 328,015 353,708
Net realized gain (loss) on investments 275 (3,238) -
Change in unrealized appreciation or
depreciation on investments (79,651) (93,195) (124,904)
__________________________________
217,442 231,582 228,804
Distributions to unit holders:
Investment income - net (309,313) (330,128) (354,181)
Principal from investment transactions (622,163) (448,544) -
__________________________________
(931,476) (778,672) (354,181)
Unit redemptions (3 in 1993):
Principal portion - (3,179) -
Net interest accrued - (128) -
__________________________________
- (3,307) -
__________________________________
Total increase (decrease) in net assets (714,034) (550,397) (125,377)
Net assets:
At the beginning of the year 3,604,357 4,154,754 4,280,131
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $54,778, $67,286 and
$66,175 at January 31, 1994, 1993
and 1992, respectively) $2,890,323 3,604,357 4,154,754
==================================
Trust units outstanding at the end of
the year 3,820 3,820 3,823
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
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, December 18, 1984. 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
currently based on $1.24 and $.69 per $1,000 principal amount of bonds for
those portions of the Trust under the monthly 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 appreciation at January 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized appreciation $281,683
Unrealized depreciation (10,000)
________
$271,683
========
</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 and two
issues are also insured by insurance obtained by the issuers of the bonds (see
Note (c) to portfolio). While insurance coverage acquired by an issuer of
bonds continues in force so long as the bonds are outstanding and the insurer
remains in business, 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. Pursuant to an irrevocable commitment of Financial
Guaranty Insurance Company, in the event of a sale of a bond from the
portfolio, 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. Annual insurance premiums payable by the
Trust in future years, assuming no change in the portfolio, would be $7,148.
Except as indicated in the following paragraph, 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.
The portfolio contains three issues (aggregating $1,100,000 principal amount)
of Port Authority of the City of Saint Paul, Minnesota, Industrial Development
Revenue Bonds ("the Bonds"). At January 31, 1994, 1993 and 1992, in the
opinion of the Sponsor, the Bonds were being quoted in the market at a value
which reflects a significant risk of default in the payment of principal or
interest, although no such default had occurred.
Accordingly, the Evaluator is currently attributing value to the insurance
obtained by the Trust for purposes of valuing the Bonds. In its valuation of
the Bonds, the Evaluator is considering the value of the insurance
guaranteeing interest and principal payments (less the applicable permanent
insurance premium) as well as the market value of the Bonds and the market
value 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 and maturities and are of a creditworthiness comparable to the Bonds
before the Bonds became subject to a significant risk of default. The
valuation of the portfolio included the following applicable to the Bonds:
<TABLE>
<CAPTION>
Portion
Total value attributable
of the Bonds to insurance
<S> <C> <C>
January 31, 1994:
Total $1,100,000 $55,000
Per unit 287.96 14.40
January 31, 1993:
Total 1,100,000 117,875
Per unit 287.96 30.86
January 31, 1992:
Total 1,100,000 33,000
Per unit 287.73 8.63
</TABLE>
<PAGE>
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 to unit holders -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Type of Year ended January 31,
distribution
plan 1994 1993 1992
<S> <C> <C> <C>
Monthly $80.76 86.21 92.40
Semi-annual 81.40 86.85 93.12
</TABLE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $82.77 91.16 97.89
Expenses (5.07) (5.31) (5.37)
___________________________
Investment income - net 77.70 85.85 92.52
Distributions to unit holders:
Investment income - net (80.97) (86.42) (92.64)
Principal from investment transactions (162.87) (117.42) -
Net gain (loss) on investments (20.78) (25.24) (32.67)
___________________________
Total increase (decrease) in net assets (186.92) (143.23) (32.79)
Net assets:
Beginning of the year 943.55 1,086.78 1,119.57
___________________________
End of the year $756.63 943.55 1,086.78
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, MINNESOTA TRUST, SERIES 2
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 3rd Avenue
New York, New York 10017
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 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.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
4,945 UNITS
PROSPECTUS
Part One
Dated May 18, 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 Ohio State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State - 5, Ohio Trust,
Series 3 (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 Ohio, 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
issuing governmental authorities, exempt from all Federal income taxes and
from Ohio State and local income taxes under existing law. At April 18, 1994,
each Unit represented a 1/4,945 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 3.4% of the Public Offering Price (3.520%
of the amount invested). At April 18, 1994, the Public Offering Price per
Unit was $570.10 plus net interest accrued to date of settlement (five
business days after such date) of $9.05 and $25.12 for the monthly 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 8.29% per annum on April 18, 1994, and 8.20% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 6.51% per annum on April 18, 1994, and 6.42%
under the monthly distribution plan. 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
MULTI-STATE - 5, OHIO TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF April 18, 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 $2,625,000
Number of Units 4,945
Fractional Undivided Interest in the Trust per Unit 1/4,945
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,723,318
Aggregate Value of Bonds per Unit $550.72
Sales Charge 3.520% (3.4% of Public Offering Price) $19.38
Public Offering Price per Unit $570.10*
Redemption Price and Sponsor's Repurchase Price per Unit
($19.38 less than the Public Offering Price per Unit) $550.72*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $1,000,000
</TABLE>
Date Trust Established December 18, 1984
Mandatory Termination Date December 31, 2033
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
MULTI-STATE - 5, OHIO TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF April 18, 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 Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $50.71 $50.71
Less: Estimated Annual Expense
Excluding Insurance $2.64 $2.15
Annual Premium on Portfolio Insurance $1.32 $1.32
Estimated Net Annual Interest Income $46.75 $47.24
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $46.75 $47.24
Divided by 12 and 2, Respectively $3.90 $23.62
Estimated Daily Rate of Net Interest Accrual $.1299 $.1312
Estimated Current Return Based on Public
Offering Price 8.20% 8.29%
Estimated Long-Term Return Based on Public
Offering Price 6.42% 6.51%
</TABLE>
Trustee's Annual Fee: $1.24 and $.69 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: First day of the month as follows: monthly--each month;
semi-annual--January and July.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust of
Insured Municipal Bonds Multi-State - 5,
Ohio Trust, Series 3
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust of Insured Municipal Bonds - Multi-
State - 5, Ohio Trust, Series 3 as of January 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 January 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, Multi-State - 5, Ohio Trust, Series 3 at January 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
Chicago, Illinois
April 15, 1994
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at value (cost $2,449,974)
(Notes 1 and 3) $2,787,224
Cash 207,624
Accrued interest 101,137
Receivable from investment transactions 15,000
__________
3,110,985
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Principal distributions payable 223,801
Distributions payable and accrued to unit holders 19,706
Unit redemptions payable 11,251
__________
254,758
__________
Net assets, applicable to 4,962 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,449,974
Net unrealized appreciation (Note 2) 337,250
Distributable funds 69,003
__________
$2,856,227
==========
Net asset value per unit $575.62
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS -
MULTI-STATE - 5, OHIO TRUST, SERIES 3
PORTFOLIO - See notes to portfolio.
January 31, 1994
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal
Name of issuer and title of bond (f) rate maturity provisions(a) Rating(b) amount Value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Columbus, Ohio (General Obligation),
Unlimited Tax 5.75% 10/01/2008 AA+ $250,000 275,592
County of Lucas, Ohio, Hospital Facilities Revenue
(St. Vincent Medical Center Project), Series
1984 (e) 10.65 8/15/2014 1995 @ 102 AAA 750,000 821,557
Ohio Housing Finance Agency, Single Family 1994 @ 103
Mortgage Revenue, 1984 Series A 11.375 8/01/2010 1999 @ 100 S.F. A 40,000 41,000
1994 @ 103
11.375 8/01/2014 1994 @ 100 S.F. A 10,000 10,200
Puerto Rico Industrial, Medical and Environmental
Pollution Control Facilities Financing Authority,
Industrial Revenue (Renasa, Inc. - Squibb 1994 @ 100
Corporation Project) 6.50 7/01/2004 1995 @ 100 S.F. Aaa(d) 400,000 403,200
City of Toledo, Ohio, Water System Refunding
Revenue, Series 1984 (c) (e) 10.625 12/01/2003 1994 @ 102 AAA 500,000 542,075
City of Westlake, Ohio, Industrial Development
Revenue, The Oaks Development Company 1994 @ 102
Project (FHA Insured Mortgage), Series B 10.625 7/15/2014 1994 @ 100 S.F. NR 215,000 219,300
City of Westlake, Ohio, Industrial Development
Revenue, Westbay Manor II Development Company 1994 @ 102
Project (FHA Insured Mortgage), Series A 10.625 7/15/2014 1994 @ 100 S.F. NR 465,000 474,300
______________________
$2,630,000 2,787,224
======================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
NOTES TO PORTFOLIO
January 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 at January 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. Approximately 90% of
the aggregate principal amount of the Bonds is subject to call within
five years.
(b) The ratings shown are those effective at January 31, 1994. All ratings
are by Standard & Poor's Corporation unless otherwise indicated ("NR"
indicates No Rating).
(c) Insurance has also been obtained by the bond issuer.
(d) Rating by Moody's Investors Service, Inc.
(e) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(f) The Trust consists of six obligations of issuers located in Ohio and one
obligation of an issuer located in Puerto Rico. One of the Bonds in the
Trust, representing approximately 10% of the aggregate principal amount
of the Bonds in the Trust, is a general obligation of a governmental
entity. The remaining issues are revenue bonds payable from the income
of a specific project or authority and are divided by purpose of issue
as follows: Industrial, 3; Health Care 1; Water, 1; and Single Family
Housing, 1. Approximately 41%, 29% and 2% of the aggregate principal
amount of the Bonds consist of industrial development revenue bonds,
health care revenue bonds and single family residential mortgage revenue
bonds, respectively. Each of four Bond issues represents 10% or more of
the aggregate principal amount of the Bonds in the Trust or a total of
approximately 80%. The largest such issue represents approximately 29%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $387,309 425,293 437,425
Expenses:
Trustee's fees and related expenses (8,646) (8,752) (8,089)
Insurance expense (Note 3) (9,817) (10,775) (11,121)
Evaluator's fees (3,720) (3,735) (3,795)
________________________________
Investment income - net 365,126 402,031 414,420
Net gain (loss) on investments:
Net realized gain (loss) 36,875 1,900 (350)
Change in unrealized appreciation or
depreciation (162,661) (114,152) 9,359
________________________________
(125,786) (112,252) 9,009
________________________________
Net increase in net assets resulting
from operations $239,340 289,779 423,429
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $365,126 402,031 414,420
Net realized gain (loss) on investments 36,875 1,900 (350)
Change in unrealized appreciation or
depreciation on investments (162,661) (114,152) 9,359
___________________________________
239,340 289,779 423,429
Distributions to unit holders:
Investment income - net (394,607) (402,064) (414,761)
Principal from investment transactions (1,651,174) (138,096) (66,108)
___________________________________
(2,045,781) (540,160) (480,869)
Unit redemptions (27, 2 and 4 in 1994,
1993 and 1992, respectively):
Principal portion (17,013) (1,922) (3,899)
Net interest accrued (326) (67) (111)
___________________________________
(17,339) (1,989) (4,010)
___________________________________
Total increase (decrease) in net assets (1,823,780) (252,370) (61,450)
Net assets:
At the beginning of the year 4,680,007 4,932,377 4,993,827
___________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $69,003, $105,047
and $110,165 at January 31, 1994,
1993 and 1992, respectively) $2,856,227 4,680,007 4,932,377
===================================
Trust units outstanding at the end of
the year 4,962 4,987 4,989
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
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, December 18, 1984. 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 and $.69 per $1,000 principal amount of bonds for those portions of
the Trust under the monthly 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 appreciation at January 31, 1994 follows:
<TABLE>
<S> <C>
Unrealized appreciation $337,800
Unrealized depreciation (550)
________
$337,250
========
</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 and one issue
is also insured by insurance obtained by the issuer of the bonds (see Note (c)
to portfolio). While insurance coverage acquired by an issuer of bonds
continues in force so long as the bonds are outstanding and the insurer
remains in business, 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. Pursuant to an irrevocable commitment of Financial
Guaranty Insurance Company, in the event of a sale of a bond from the
portfolio, 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. Annual insurance premiums payable by the
Trust in future years, assuming no change in the portfolio, would be $6,525.
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.
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 to unit holders -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Type of Year ended January 31,
distribution
plan 1994 1993 1992
<S> <C> <C> <C>
Monthly $78.73 80.28 82.79
Semi-annual 79.60 80.93 83.43
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended January 31,
1994 1993 1992
<S> <C> <C> <C>
Interest income $77.65 85.27 87.66
Expenses (4.45) (4.66) (4.61)
___________________________
Investment income - net 73.20 80.61 83.05
Distributions to unit holders:
Investment income - net (79.48) (80.62) (83.13)
Principal from investment transactions (331.44) (27.69) (13.25)
Net gain (loss) on investments (25.10) (22.51) 1.81
___________________________
Total increase (decrease) in net assets (362.82) (50.21) (11.52)
Net assets:
Beginning of the year 938.44 988.65 1,000.17
___________________________
End of the year $575.62 938.44 988.65
===========================
</TABLE>
<PAGE>
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - 5, OHIO TRUST, SERIES 3
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 3rd Avenue
New York, New York 10017
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 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.
Page 32
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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
Massachusetts Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated May 23, 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;
(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
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
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.
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 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,
Page 2
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 (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.
Page 3
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 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.
Massachusetts Tax Status of Unit Holders
At the time of the closing for each Massachusetts Trust, Special
Counsel to the Fund for Massachusetts tax matters rendered an
opinion under then existing Massachusetts income tax law applicable
to taxpayers whose income is subject to Massachusetts income taxation
and based on rulings of the Commissioner of Revenue substantially
to the effect that:
For Massachusetts income tax purposes, each Massachusetts Trust
will be treated as a corporate trust under Section 8 of Chapter
62 of the Massachusetts General Laws and not as a grantor trust
under Section 10(e) of Chapter 62 of the Massachusetts General
Laws.
Each Massachusetts Trust will not be held to be engaging in business
in Massachusetts within the meaning of said Section 8 and will,
therefore, not be subject to Massachusetts income tax.
Massachusetts Unit holders who are subject to Massachusetts income
taxation under Chapter 62 of Massachusetts General Laws will not
be required to include their respective shares of the earnings
of or distributions from a Massachusetts Trust in their Massachusetts
gross income to the extent that such earnings or distributions
represent tax-exempt interest for Federal income tax purposes
received by such Massachusetts Trust on obligations issued by
Massachusetts, its counties, municipalities, authorities, political
subdivisions or instrumentalities, or issued by United States
territories or possessions ("Obligations").
Any proceeds of insurance obtained by the Trustee of the Fund
or by the issuer of an Obligation held by a Massachusetts Trust
which are paid to Massachusetts Unit holders and which represent
maturing interest on defaulted obligations held by the Trustee
will be excludable from Massachusetts gross income of
Page 4
a Massachusetts Unit holder if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted Obligation.
A Massachusetts Trust's capital gains and/or capital losses realized
upon disposition of Obligations held by it will be includable
pro rata in the Federal gross income of Massachusetts Unit holders
who are subject to Massachusetts income taxation under Chapter
62 of the Massachusetts General Laws, and such gains and/or losses
will be included as capital gains and/or losses in the Massachusetts
Unit holders' Massachusetts gross income, except where capital
gain is specifically exempted from income taxation under acts
authorizing issuance of said Obligations.
Gains or losses realized upon sale or redemption of Units by Massachusetts
Unit holders who are subject to Massachusetts income taxation
under Chapter 62 of the Massachusetts General Laws will be includable
in their Massachusetts gross income.
In determining such gain or loss Massachusetts Unit holders will,
to the same extent required for Federal tax purposes, have to
adjust their tax bases for their Units for accrued interest received,
if any, on Bonds delivered to the Trustee after the Unit holders
pay for their Units and for amortization of premiums, if any,
on obligations held by a Massachusetts Trust.
The Units of a Massachusetts Trust are not subject to any property
tax levied by Massachusetts or any political subdivision thereof,
nor to any income tax levied by any such political subdivision.
They are includable in the gross estate of a deceased Massachusetts
Unit holder who is a resident of Massachusetts for purposes of
the Massachusetts Estate Tax.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Certain Considerations
Each Trust will invest substantially all of its net assets in
obligations issued by or on behalf of the Commonwealth of Massachusetts,
political subdivisions thereof, or agencies or instrumentalities
of the Commonwealth or its political subdivisions (the "Bonds").
Each Trust is therefore susceptible to general or particular political,
economic, or regulatory factors that may affect issuers of such
Massachusetts investments. The following information constitutes
only a brief summary of some of the many complex factors that
may have an effect. The information may not be applicable to "conduit"
obligations on which the public issuer itself has no financial
responsibility. This information is derived from official statements
of the Commonwealth and certain of its agencies or instrumentalities
in connection with the issuance of securities, and from other
publicly available documents, and is believed to be accurate.
No independent verification has been made of any of the following
information.
The Massachusetts Economy. At the present time, the Massachusetts
economy is experiencing a slow down. While Massachusetts had benefitted
from an annual job growth rate of approximately 2% since the early
1980's, by 1989, employment had started to decline. Nonagricultural
employment declined 0.7% in fiscal 1989, 4.0% in fiscal 1990,
5.5% in fiscal 1991, 1.5% in fiscal 1992, and 0.8% in fiscal 1993.
A comparison of total, nonagricultural employment in July 1991
with that in December 1992 indicates a decline of 1.6%.
From 1980 to 1989, Massachusetts' unemployment rate was significantly
lower than the national average. By 1990, however, unemployment
reached 6.0%, exceeding the national average for the first time
since 1977. Massachusetts' unemployment rate averaged 9.0% in
fiscal 1991 and 8.5% in fiscal 1992. The Massachusetts unemployment
rate was 8.2% as of January 1993, and 6.3% as of July 1993.
In recent years, per capita personal income growth in Massachusetts
has slowed, after several years during which it was among the
highest in the nation. Between the first quarter of fiscal 1991
and the first quarter of fiscal 1992, aggregate personal income
in Massachusetts increased 2.6% as compared to 4.1% for the nation
as a whole. Between the second quarter of 1991 and the second
quarter of 1992, aggregate personal income in Massachusetts increased
3.9% as compared to 4.7% for the nation as a whole.
The Commonwealth, while the third most densely populated state
according to the 1990 census, has experienced only a modest increase
in population from 1980 to 1990 at a rate equal to approximately
one-half
Page 5
the rate of increase in the United States population as a whole.
Preliminary information compiled by the Commonwealth suggests
that out-migration has increased in recent years.
Massachusetts possesses a diversified economic base which includes
traditional manufacturing, high technology and service industries,
served by an extensive transportation system and related facilities.
The Massachusetts service sector, at approximately 33% of the
state work force in June of 1993, is the largest sector in the
Massachusetts economy. Government employment is below the national
average, representing less than 14% of the Massachusetts work
force. In recent years, the construction, manufacturing and trade
sectors have experienced the greatest decreases in employment
in Massachusetts, with more modest declines taking place in the
government; finance, insurance and real estate; and service sectors.
From 1990 to December of 1992, manufacturing employment in Massachusetts
declined by approximately 12.5%. At the same time, there has occurred
a reversal of the dramatic growth which occurred during the 1980's
in the finance, insurance and real estate sector and in the construction
sector of the Massachusetts economy.
Over the next decade, Massachusetts has a very full public construction
agenda which is expected not only to improve mobility, but to
provide a substantial number of construction and related employment
opportunities, including the six billion dollar Central Artery
Tunnel project involving the construction of a third tunnel under
Boston Harbor linking the MassPike and downtown Boston with Logan
International Airport, and the depression into tunnels of the
Central Artery that traverses the City of Boston. Federal funds
are expected to cover approximately 90% of the cost of this project.
The Central Artery/Tunnel project is expected to employ approximately
5,000 on-site workers and 10,000 auxiliary workers during the
peak years of construction in the mid-1990's.
State Finances. In fiscal years 1987 through 1991, Commonwealth
spending exceeded revenues. Spending in five major expenditure
categories-Medicaid, debt service, public assistance, group health
insurance and transit subsidies-grew at rates well in excess of
the rate of inflation for the comparable period. During the same
period, the Commonwealth's tax revenues repeatedly failed to meet
official forecasts. That revenue shortfall combined with steadily
escalating costs contributed to serious budgetary and financial
difficulties which have affected the credit standing and borrowing
abilities of Massachusetts and certain of its public bodies and
municipalities, and which may have contributed to higher interest
rates on debt obligations issued by them.
More conservative revenue forecasting for fiscal 1992 together
with significant efforts to restrain spending during fiscal 1991
and reductions in budgeted program expenditures for fiscal 1992
and fiscal 1993 have moderated these difficulties. Significant
spending commitments for public education are contained in recent
education reform legislation enacted in June of 1993. In July
and August of 1993, the Executive Office for Administration and
Finance announced a series of actions affecting state workers
(including a hiring freeze, layoffs and the elimination of positions)
intended to keep expected fiscal 1994 expenditures with current
appropriations. Notwithstanding these actions, a continuation,
or worsening, of the present slowdown and its effect on the financial
condition of the Commonwealth and its public authorities and municipalities
could result in a decline in the market values of, or default
on existing obligations including the Bonds deposited in the Massachusetts
Trusts.
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 in a Massachusetts
Trust 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
the State and various agencies and political subdivisions located
in the State. 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 a Massachusetts
Trust to pay interest on or principal of the Bonds.
Page 6
Massachusetts Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: 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 7
Minnesota Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated May 23, 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;
(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
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
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.
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 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,
Page 2
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 (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.
Page 3
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 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.
Minnesota Tax Status of Unit Holders
At the time of the closing for each Minnesota Trust, Special Counsel
to the Fund for Minnesota tax matters rendered an opinion under
then existing Minnesota income tax law applicable to taxpayers
whose income is subject to Minnesota income taxation substantially
to the effect that:
Each Minnesota Trust will have no income other than (i) interest
income on bonds issued by the State of Minnesota and its political
and governmental subdivisions, municipalities and governmental
agencies and instrumentalities and on bonds issued by possessions
of the United States which would be exempt from Federal and Minnesota
income taxation when paid directly to an individual, trust or
estate (and the term "Bonds" as used herein refers only to such
bonds), (ii) gain on the disposition of such Bonds, and (iii)
proceeds paid under certain insurance policies issued to the Trustee
or to the issuers of the Bonds which represent maturing interest
or principal payments on defaulted Bonds held by the Trustee.
Based on the foregoing, and in reliance upon the opinion of Chapman
and Cutler with respect to the Federal tax treatment of a Minnesota
Trust and its Unit holders, it is the opinion of Special Counsel
that Minnesota tax law applies to a Minnesota Trust and its Unit
holders in the following manner:
"Taxable income" for Minnesota income tax purposes is the same
as "taxable income" for Federal income tax purposes with certain
modifications that (with one exception) do not apply to the present
circumstances. The exception is that corporations must add to
Federal taxable income the amount of any interest received on
the obligations of states and their agencies and instrumentalities,
political and governmental subdivisions, and municipalities. The
terms "trust" and "corporation" have the same meanings for Minnesota
Page 4
income tax purposes, as relevant to the Minnesota tax status of
a Minnesota Trust, as for federal income tax purposes.
In view of the relationship between Federal and Minnesota law
described in the preceding paragraph and the opinion of Chapman
and Cutler with respect to the Federal tax treatment of a Minnesota
Trust and its Unit holders, (1) each Minnesota Trust will be treated
as a trust rather than a corporation for Minnesota income tax
purposes and will not be deemed the recipient of any Minnesota
taxable income; (2) each Unit holder of a Minnesota Trust will
be treated as the owner of a pro rata portion of such Minnesota
Trust for Minnesota income tax purposes, and the income of such
Minnesota Trust will therefore be treated as the income of the
Unit holders under Minnesota law; (3) interest on the Bonds will
be exempt from Minnesota income taxation of Unit holders who are
individuals, trusts and estates when received by a Minnesota Trust
and attributed to such Unit holders and when distributed to such
Unit holders (except as hereinafter provided with respect to "industrial
development bonds" and "private activity bonds" held by "substantial
users"); (4) interest on the Bonds will be includable in the Minnesota
taxable income (subject to allocation and apportionment) of Unit
holders that are corporations; (5) each Unit holder will realize
taxable gain or loss when a Minnesota Trust disposes of a Bond
(whether by sale, exchange, redemption or payment at maturity)
or when the Unit holder redeems or sells Units at a price that
differs from original cost as adjusted for amortization of bond
discount or premium and other basis adjustments (including any
basis reduction that may be required to reflect a Unit holder's
share of interest, if any, accruing on Bonds during the interval
between the Unit holder's settlement date and the date such Bonds
are delivered to a Minnesota Trust, if later); (6) tax cost reduction
requirements relating to amortization of bond premium may, under
some circumstances, result in Unit holders realizing taxable gain
when their Units are sold or redeemed for an amount equal to or
less than their original cost; (7) any proceeds paid under the
insurance policy issued to the Trustee with respect to the Bonds
which represent maturing interest on defaulted obligations held
by the Trustee will be excludible from Minnesota gross income
if, and to the same extent as, such interest would have been so
excludible if paid by the issuer of the defaulted obligations;
(8) any proceeds paid under individual insurance policies obtained
by issuers of Bonds which represent maturing interest on defaulted
obligations held by the Trustee will be excludible from Minnesota
gross income if, and to the same extent as, such interest would
have been so excludible if paid in the normal course by the issuer
of the defaulted obligations; (9) net capital gains of Unit holders
attributable to the Bonds will be fully includable in the Minnesota
taxable income of Unit holders (subject to allocation and apportionment
in the case of corporate Unit holders); and (10) interest on bonds
includable in the computation of "alternative minimum taxable
income" for Federal income tax purposes will also be includable
in the computation of "alternative minimum taxable income" for
Minnesota income tax purposes.
Interest income attributable to Bonds that are "industrial development
bonds" or "private activity bonds," as those terms are defined
in the Internal Revenue Code, will be taxable under Minnesota
law to a Unit holder who is a "substantial user" of the facilities
financed by the proceeds of such Bonds (or a "related person"
to such a "substantial user") to the same extent as if such Bonds
were held directly by such Unit holder.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Certain Considerations
In the early 1980s, the State of Minnesota experienced financial
difficulties due to a downturn in the State's economy resulting
from the national recession. As a consequence, the State's revenues
were significantly lower than anticipated in the July 1, 1979
to June 30, 1981 biennium and the July 1, 1981 to June 30, 1983
biennium.
In response to revenue shortfalls, the legislature broadened and
increased the State sales tax, increased income taxes (by increasing
rates and eliminating deductions), reduced appropriations and
deferred the payment of State aid, including appropriations for
and aids to local governmental units. The State's fiscal problems
affected other governmental units within the State, such as local
governments, school
Page 5
districts and state agencies, which, in varying degrees, also
faced cash flow difficulties. In certain cases, revenues of local
governmental units and agencies were reduced by the recession.
Because of the State's fiscal problems, Standard & Poor's Corporation
reduced its rating on the State's outstanding general obligation
bonds from AAA to AA+ in August 1981 and to AA in March 1982.
Moody's Investors Service, Inc. lowered its rating on the State's
outstanding general obligation bonds from Aaa to Aa in April 1982.
The State's economy recovered in the July 1, 1983 to June 30,
1985 biennium, and substantial reductions in the individual income
tax were enacted in 1984 and 1985. Standard & Poor's raised its
rating on the State's outstanding general obligation bonds to
AA+ in January 1985. In 1986, 1987 and 1991 legislation was required
to eliminate projected budget deficits by raising additional revenue,
reducing expenditures, including aid to political subdivisions
and higher education, and making other budgetary adjustments.
A budget forecast released by the Minnesota Department of Finance
on February 27, 1992 projected a $569 million budget shortfall,
primarily attributable to reduced income tax receipts, for the
biennium ending June 30, 1993. Planning estimates for the 1994-95
biennium projected a budget shortfall of $1.75 billion (less a
$400 million reserve). The State responded by enacting legislation
that made substantial accounting changes, reduced the budget reserve
(cash flow account) by $160 million to $240 million, reduced appropriations
for state agencies and higher education, and imposed a sales tax
on purchases by local governmental units and adopted other tax
and spending changes. The 1993 legislature enacted further tax
and spending changes. An end-of-legislative-session budget forecast
released by the Department of Finance on June 15, 1993 for the
biennium ending June 30, 1995 projects a General Fund surplus
of $16 million at the end of the biennium, after applying a projected
$297 million surplus from June 30, 1993 and after reserving $360
million for the cash flow account. Total budgeted expenditures
and transfers for the biennium are $16.5 billion.
State grants and aids represent a large percentage of the total
revenues of cities, towns, counties and school districts in Minnesota.
Even with respect to bonds that are revenue obligations and not
general obligations of the issuer, there can be no assurance that
the fiscal problems referred to above will not adversely affect
the market value or marketability of the bonds or the ability
of the respective obligors to pay interest on and principal of
the bonds.
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 in a Minnesota
Trust 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
the State and various agencies and political subdivisions located
in the State. 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 a Minnesota
Trust to pay interest on or principal of the bonds.
Page 6
Minnesota Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: 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 7
Ohio Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated May 23, 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;
(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
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
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.
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 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,
Page 2
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 (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
Page 3
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 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.
Ohio Tax Status of Unit Holders
Each Ohio Insured Trust is comprised of interest-bearing obligations
issued by or on behalf of the State of Ohio, political subdivisions
thereof, or agencies or instrumentalities thereof ("Ohio Obligations"),
or by the governments of Puerto Rico, the Virgin Islands or Guam
(collectively, "Territorial Obligations"). At the time of the
closing for each Ohio Trust, Special Counsel to the Fund for Ohio
tax matters rendered an opinion under then existing Ohio income
tax law applicable to taxpayers whose income is subject to Ohio
income taxation substantially to the effect that:
Each Ohio Insured Trust is not taxable as a corporation or otherwise
for purposes of the Ohio personal income tax, Ohio school district
income taxes, the Ohio corporation franchise tax, or the Ohio
dealers in intangibles tax.
Income of an Ohio Insured Trust will be treated as the income
of the Unit holders for purposes of the Ohio personal income tax,
Ohio school district income taxes, Ohio municipal income taxes
and the Ohio corporation franchise tax in proportion to the respective
interest therein of each Unit holder.
Interest on Ohio Obligations and Territorial Obligations held
by an Ohio Insured Trust is exempt from the Ohio personal income
tax, Ohio municipal income taxes and Ohio school district income
taxes and is excluded from the net income base of the Ohio corporation
franchise tax when distributed or deemed distributed to Unit holders.
Proceeds paid under insurance policies, if any, to the Trustee
of an Ohio Insured Trust, representing maturing interest on defaulted
obligations held by an Ohio Insured Trust will be exempt from
the Ohio personal income tax, Ohio school district income taxes,
Ohio municipal income taxes and the net income base of the Ohio
corporation franchise tax if, and to the same extent as, such
interest would be exempt from such taxes if paid directly by the
issuer of such obligations.
Page 4
Gains and losses realized on the sale, exchange or other disposition
by an Ohio Insured Trust of Ohio Obligations are excluded in determining
adjusted gross and taxable income for purposes of the Ohio personal
income tax, Ohio municipal income taxes and Ohio school district
income taxes and are excluded from the net income base of the
Ohio corporation franchise tax when distributed or deemed distributed
to Unit holders.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Certain Considerations
As described above, an Ohio Insured Trust will invest substantially
all of its net assets in securities issued by or on behalf of
(or in certificates of participation in lease-purchase obligations
of) the State of Ohio, political subdivisions of the State, or
agencies or instrumentalities of the State or its political subdivisions
(Ohio Obligations). An Ohio Insured Trust is therefore susceptible
to general or particular political, economic or regulatory factors
that may affect issuers of Ohio Obligations. The following information
constitutes only a brief summary of some of the many complex factors
that may have an effect. The information does not apply to "conduit"
obligations on which the public issuer itself has no financial
responsibility. This information is derived from official statements
of certain Ohio issuers published in connection with their issuance
of securities and from other publicly available documents, and
is believed to be accurate. No independent verification has been
made of any of the following information.
The creditworthiness of Ohio Obligations of local issuers is generally
unrelated to that of obligations of the State itself, and the
State has no responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in
connection with investment in particular Ohio Obligations or in
those obligations of particular Ohio issuers. It is possible that
the investment may be in particular Ohio Obligations, or in those
of particular issuers, as to which those factors apply. However,
the information below is intended only as a general summary, and
is not intended as a discussion of any specific factors that may
affect any particular obligation or issuer.
The timely payment of principal of and interest on Ohio Obligations
has been guaranteed by bond insurance purchased by the issuers,
an Ohio Trust or other parties. The timely payment of debt service
on Ohio Obligations that are so insured may not be subject to
the factors referred to in this section of the Prospectus.
Ohio is the seventh most populous state. Its 1990 Census count
of 10,847,000 indicates a 0.5% population increase from 1980.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods
manufacturing largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. As a result,
general economic activity, as in many other industrially-developed
states, tends to be more cyclical than in some other states and
in the nation as a whole. Agriculture is an important segment
of the economy, with over half the State's area devoted to farming
and approximately 20% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported
1990 average monthly State rate was 5.7%, compared to the 5.5%
national figure. However, for both 1991 and 1992 the State rates
(6.4% and 7.2%) were below the national rates (6.7% and 7.4%).
The unemployment rate and its effects vary among particular geographic
areas of the State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local
government finances generally, will not adversely affect the market
value of Ohio Obligations held in the Trust portfolio or the ability
of particular obligors to make timely payments of debt service
on (or lease payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its appropriations
and expenditures, and is precluded by law from ending its July
1 to June 30 fiscal year (FY) or fiscal biennium in a deficit
position. Most State operations are financed through the General
Revenue Fund (GRF), for which personal income and sales-use taxes
are the major sources. Growth and depletion of GRF ending fund
balances show a consistent pattern related to national economic
conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State
has well-established procedures for,
Page 5
and has timely taken, necessary actions to ensure a resource/expenditure
balances during less favorable economic periods. These procedures
include general and selected reductions in appropriations spending.
Key biennium-ending fund balances at June 30, 1989 were $475.1
million in the GRF and $353 million in the Budget Stabilization
Fund (BSF, a cash and budgetary management fund). In FYs 1990-91,
necessary corrective steps were taken to respond to lower receipts
and higher expenditures in certain categories than earlier estimated.
Those steps included, in FY 91, selected reductions in appropriation
spending and the transfer of $64 million from the BSF to the GRF.
The State reported June 30, 1991 ending fund balances of $135.3
million (GRF) and $300 million (BSF).
To allow time to resolve certain Senate and House budget differences
for the latest complete biennium that began July 1, 1991, an interim
appropriations act was enacted effective July 1, 1991; it included
debt service and lease rental GRF appropriations for the entire
1992-93 biennium, while continuing most other appropriations for
a month. The general appropriations act for the entire biennium
was passed on July 11, 1991 and signed by the Governor. Pursuant
to it, $200 million was transferred from the BSF to the GRF in
FY 1992.
Based on the updated FY financial results and economic forecast
in the course of FY 1992, both in light of the continuing uncertain
nationwide economic situation, there was projected and timely
addressed an FY 1992 imbalance in GRF resources and expenditures.
GRF receipts significantly below original forecasts resulted primarily
from lower collections of certain taxes, particularly sales and
use taxes and personal income taxes. Higher expenditure levels
resulted from higher spending in certain areas, particularly human
services, including Medicaid. As an initial action, the Governor
ordered most State agencies to reduce GRF spending in the last
six months of FY 1992 by a total of approximately $184 million.
As authorized by the General Assembly, the $100.4 million BSF
balance, and additional amounts from certain other funds, were
transferred late in the FY to the GRF, and adjustments in the
timing of certain tax payments made. Other administrative revenue
and spending actions resolved the remaining GRF imbalance.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative
and administrative actions. As a first step the Governor ordered,
effective July 1, 1992, $300 million in selected GRF spending
reductions. Executive and legislative action in December 1992
- a combination of tax revisions and additional appropriations
spending reductions - resulted in a balance of GRF resources and
expenditures in the 1992-93 biennium. The State reported an ending
GRF cash balance at June 30, 1993 of approximately $111 million,
and, as a first step to BSF replenishment, OBM has deposited $21
million in the BSF.
No spending reductions were applied to appropriations needed for
debt service or lease rentals on any State obligations.
The GRF appropriations act for the current 1994-95 biennium was
passed and signed by the Governor on July 1, 1993. It includes
all necessary GRF appropriations for biennial State debt service
and lease rental payments.
The State's incurrence or assumption of debt without a vote of
the people is, with limited exceptions, prohibited by current
State Constitutional provisions. The State may incur debt, limited
in amount to $750,000, to cover casual deficits or failures in
revenues or to meet expenses not otherwise provided for. The Constitution
expressly precludes the State from assuming the debts of any local
government or corporation. (An exception is made in both cases
for any debt incurred to repel invasion, suppress insurrection,
or defend the State in war.)
By 13 constitutional amendments, the last adopted in 1993, Ohio
voters have authorized the incurrence of State debt to the payment
of which taxes or excises were pledged. At December 7, 1993, $596.6
million (excluding certain highway bonds payable primarily from
highway use charges) of this debt was outstanding or awaiting
delivery. The only such State debt then still authorized to be
incurred are portions of the highway bonds, and the following;
(a) up to $100 million of obligations for coal research and development
may be outstanding at any time ($43.1 million outstanding); (b)
of $1.2 billion of obligations for local infrastructure improvements,
no more than $120 million may be issued in any calendar year ($645.2
million outstanding or awaiting delivery, $480 million remaining
to be issued); and (c) up to $200 million in general obligation
Page 6
bonds for parks and recreation purposes may be outstanding at
any one time (no more than $50 million to be issued in any one
year, and none have yet been issued).
The Constitution also authorizes the issuance of State obligations
for certain purposes, the owners of which do not have the right
to have excises or taxes levied to pay debt service. Those special
obligations include obligations issued by the Ohio Public Facilities
Commission and the Ohio Building Authority, $4.28 billion of which
were outstanding or awaiting sale or delivery at January 31, 1994.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision
of housing. The General Assembly may for that purpose authorize
the issuance of State obligations secured by a pledge of all or
such portion as it authorizes of State revenues or receipts (but
not by a pledge of the State's full faith and credit).
State and local agencies issue revenue obligations that are payable
from revenues from or relating to certain facilities (but not
from taxes). By judicial interpretation, these obligations are
not "debt" within constitutional provisions. In general, payment
obligations under lease-purchase agreements of Ohio public agencies
(in which certificates of participation may be issued) are limited
in duration to the agency's fiscal period, and are renewable only
upon appropriations being made available for the subsequent fiscal
period.
Local school districts in Ohio receive a major portion (on a state-wide
basis, recently approximately 46%) of their operating moneys from
State subsidies, but are dependent on local property taxes, and
in 98 districts from voter-authorized income taxes, for significant
portions of their budgets. Litigation, similar to that in other
states, is pending questioning the constitutionality of Ohio's
system of school funding. A small number of the State's 612 local
school districts have in any year required special assistance
to avoid year-end deficits. A current program provides for school
district cash need borrowing directly from commercial lenders,
with diversion of State subsidy distributions to repayment if
needed; in FY 1991 under this program, 26 districts borrowed a
total of $41.8 million (including over $27 million for one district),
and in FY 1992 borrowings totalled $68.6 million (including $46.6
million for one district). FY 1993 loans totalled $94.5 million
for 43 districts (including $75 million for one). FY 1994 loan
approvals totalled at January 31, 1994, $9.90 million for 16 districts.
Ohio's 943 incorporated cities and villages rely primarily on
property and municipal income taxes for their operations, and,
with other local governments, receive local government support
and property tax relief moneys distributed by the State. For those
few municipalities that on occasion have faced significant financial
problems, there are statutory procedures for a joint State/local
commission to monitor the municipality's fiscal affairs and for
development of a financial plan to eliminate deficits and cure
any defaults. Since inception in 1979, these procedures have been
applied to 23 cities and villages; for 18 of them the fiscal situation
was resolved and the procedures terminated.
At present the State itself does not levy ad valorem taxes on
real or tangible personal property. Those taxes are levied by
political subdivisions and other local taxing districts. The Constitution
has since 1934 limited the amount of the aggregate levy (including
a levy for unvoted general obligations) of property taxes by all
overlapping subdivisions, without a vote of the electors or a
municipal charter provision, to 1% of true value in money, and
statutes limit the amount of that aggregate levy to 10 mills per
$1 of assessed valuation (commonly referred to as the "ten-mill
limitation"). Voted general obligations of subdivisions are payable
from property taxes that are unlimited as to amount or rate.
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 in an Ohio Trust
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 the State
and various agencies and political subdivisions located in the
State. 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 an Ohio Trust
to pay interest on or principal of the bonds.
Page 7
Ohio Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
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 8
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust of Insured Municipal Bonds -
Multi-State, Series 5, 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
June 1, 1994.
THE FIRST TRUST OF INSURED
MUNICIPAL BONDS - MULTI-STATE,
SERIES 5
(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, the ) June 1, 1994
General Partner of Nike )
Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-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 April 15, 1994 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust of Insured Municipal Bonds-
Multi-State dated May 18, 1994.
ERNST & YOUNG
Chicago, Illinois
May 17, 1994
