File No. 33-65644
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 6
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 COMBINED SERIES 193
(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 : October 29, 1999
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
8,142 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
In the opinion of Counsel, interest income to the Trust and to Unit holders,
with certain exceptions, is exempt under existing law from all Federal income
taxes, but may be subject to state and local taxes. Capital gains, if any,
are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds, Series 222 (the "Trust") is an
insured and fixed portfolio of interest-bearing obligations issued by or on
behalf of municipalities and other governmental authorities, the interest on
which is, in the opinion of recognized bond counsel to the issuing
governmental authorities, exempt from all Federal income taxes under existing
law. At September 16, 1999, each Unit represented a 1/8,142 undivided
interest in the principal and net income of the Trust (see "The Fund" in Part
Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.7% of the Public Offering Price (6.045%
of the amount invested). At September 16, 1999, the Public Offering Price per
Unit was $1,009.87 plus net interest accrued to date of settlement (three
business days after such date) of $8.66 and $21.72 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.17% per annum on September 16, 1999, and 5.11% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.20% per annum on September 16, 1999, and 5.14%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $8,085,000
Number of Units 8,142
Fractional Undivided Interest in the Trust per Unit 1/8,142
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $7,753,720
Aggregate Value of Bonds per Unit $952.31
Sales Charge 6.045% (5.7% of Public Offering Price) $57.56
Public Offering Price per Unit $1,009.87*
Redemption Price and Sponsor's Repurchase Price per Unit
($57.56 less than the Public Offering Price per Unit) $952.31*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $1,963,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $2,945 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $54.02 $54.02
Less: Estimated Annual Expense $2.37 $1.79
Estimated Net Annual Interest Income $51.65 $52.23
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $51.65 $52.23
Divided by 12 and 2, Respectively $4.30 $26.12
Estimated Daily Rate of Net Interest Accrual $.1435 $.1451
Estimated Current Return Based on Public Offering Price 5.11% 5.17%
Estimated Long-Term Return Based on Public Offering Price 5.14% 5.20%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 193, The First Trust of Insured Municipal
Bonds, Series 222
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust of Insured Municipal Bonds, Series 222 as of June 30, 1999, and the
related statements of operations and changes in net assets for each of the
three years in the period then ended. These financial statements are the
responsibility of the Trust's Sponsor. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust of Insured Municipal Bonds, Series 222 at June 30,
1999, and the results of its operations and changes in its net assets for each
of the three years in the period then ended in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $7,860,792)
(Notes 1 and 3) $8,089,272
Accrued interest 112,996
__________
8,202,268
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 29,291
Accrued liabiities 1,047
__________
30,338
__________
Net assets, applicable to 8,267 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $7,860,792
Net unrealized appreciation (Note 2) 228,480
Distributable funds 82,658
__________
$8,171,930
==========
Net asset value per unit $988.50
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
State Board of Education of the State of Alabama,
John C. Calhoun State Community College General 2003 @ 102
Fee, Revenue, Series 1993 (MBIA Insured) (c) 5.60% 5/01/2015 2009 @ 100 S.F. AAA $360,000 364,593
Charleston County, South Carolina, Hospital
Revenue (Bon Secours Health System Project),
Series 1993A (FSA Insured) (c) 5.625 8/15/2025 2003 @ 102 AAA 1,400,000 1,410,318
Town of Cicero, Cook County, Illinois, General
Obligation Tax Increment Refunding, Series 2003 @ 102
1993A (MBIA Insured) (c) 5.70 12/01/2013 2007 @ 100 S.F. AAA 885,000 904,425
Clark County, Nevada, General Obligation (Limited
Tax), Transportation Improvement Revenue, Series
June 1, 1992 A, (AMBAC Insured) (c) (e) (f) 6.00 6/01/2016 2002 @ 100 AAA 5,000 5,116
Rhode Island Convention Center Authority, Revenue, 2003 @ 102
1993 Series A (AMBAC Insured) (c) 5.75 5/15/2027 2021 @ 100 S.F. AAA 1,500,000 1,520,475
The County of Cook, Illinois, General Obligation, 2003 @ 102
Series 1993B (MBIA Insured) (c) 5.375 11/15/2018 2013 @ 100 S.F. AAA 555,000 552,641
Indiana Health Facility, Financing Authority,
Hospital Revenue Refunding, Series 1993
(Columbus Regional Hospital) (Capital Guaranty 2003 @ 102
Insured) (c) 5.50 8/15/2022 2016 @ 100 S.F. AAA 650,000 651,293
Indiana Transportation Finance Authority, Highway
Revenue, Series 1993A (AMBAC Insured) (c) - (d) 6/01/2016 AAA 40,000 14,923
Metropolitan Pier and Exposition Authority
(Illinois), McCormick Place Expansion Project,
Series 1992A
- FGIC Insured - (d) 6/15/2020 AAA(c) 175,000 52,535
- FGIC Insured - (d) 6/15/2021 AAA(c) 100,000 29,203
- Uninsured 6.50 6/15/2022 2003 @ 102 AA- 15,000 15,820
Rhode Island Health and Educational Building
Corporation, Higher Education Facility Revenue
Refunding, Johnson & Wales University Issue, 2003 @ 102
Series 1993A (Connie Lee Insured) (c) 5.75 4/01/2012 2007 @ 100 S.F. AAA 25,000 25,070
City of Salix, Iowa, Pollution Control Refunding
Revenue (Northwestern Public Service Company
Project) (MBIA Insured) (c) 5.90 6/01/2023 2003 @ 102 AAA 500,000 511,950
Washington Public Power Supply System, Nuclear
Project No. 3 Refunding Revenue, Series 1993B
(MBIA Insured) (c) 5.60 7/01/2017 2003 @ 102 AAA 1,500,000 1,518,960
Washoe County, Nevada, Gas and Water Facilities,
Refunding Revenue (Sierra Pacific Power Company
Project), Series 1993B (MBIA Insured) (c) 5.90 6/01/2023 2003 @ 102 AAA 500,000 511,950
______________________
$8,210,000 8,089,272
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
NOTES TO PORTFOLIO
June 30, 1999
(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. Approximately 96% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within five years.
(b) The ratings shown are those effective at June 30, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on the following dates and at the following percentages of
their original principal amount:
<TABLE>
<CAPTION>
Date %
<S> <C> <C>
Indiana Transportation Finance
Authority 4/20/93 24.304
Metropolitan Pier and Exposition
Authority (Illinois), 6/15/2020 1/5/93 16.171
Metropolitan Pier and Exposition
Authority (Illinois), 6/15/2021 1/5/93 15.132
</TABLE>
(e) These Bonds were issued at an original issue discount on June 1, 1992 at
a price of 93.619% of their original principal amount.
(f) This issue of Bonds is secured by, and payable from escrowed U.S.
Government Securities.
(g) The Trust consists of thirteen obligations of issuers located in eight
states. Three bond issues aggregating approximately 21% of the
aggregate principal amount of Bonds in the Trust are obligations of
issuers located in Illinois. Three of the Bonds in the Trust,
representing approximately 18% of the aggregate principal amount of the
Bonds in the Trust, are general obligations 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: Electric, 1; University and School, 2; Utility, 2;
Transportation, 1; Health Care, 2; and Miscellaneous, 2. Approximately
25% and 24% of the aggregate principal amount of the Bonds consist of
health care revenue bonds and utility 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 64%. The
two largest such issues represent approximately 18% each.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $468,933 509,450 534,426
Expenses:
Trustee's fees and related expenses (12,713) (13,810) (13,899)
Insurance expense (Note 3) (268) (679) (747)
Evaluator's fees (2,945) (2,945) (2,945)
Supervisory fees (2,243) (2,424) (2,455)
________________________________
Investment income - net 450,764 489,592 514,380
Net gain (loss) on investments:
Net realized gain (loss) 30,295 25,767 760
Change in net unrealized appreciation
or depreciation (158,669) 193,667 481,979
________________________________
(128,374) 219,434 482,739
________________________________
Net increase (decrease) in net assets
resulting from operations $322,390 709,026 997,119
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $450,764 489,592 514,380
Net realized gain (loss) on investments 30,295 25,767 760
Change in net unrealized appreciation
or depreciation on investments (158,669) 193,667 481,979
__________________________________
322,390 709,026 997,119
Distributions to unit holders:
Investment income - net (448,371) (485,704) (512,442)
Principal from investment transactions - - -
__________________________________
(448,371) (485,704) (512,442)
Unit redemptions (706, 723 and 124 in
1999, 1998 and 1997, respectively):
Principal portion (705,815) (716,570) (117,082)
Net interest accrued (9,435) (11,472) (2,913)
__________________________________
(715,250) (728,042) (119,995)
__________________________________
Total increase (decrease) in net assets (841,231) (504,720) 364,682
Net assets:
At the beginning of the year 9,013,161 9,517,881 9,153,199
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $82,658, $104,385 and
$110,751 at June 30, 1999,
1998 and 1997, respectively) $8,171,930 9,013,161 9,517,881
==================================
Trust units outstanding at the end of
the year 8,267 8,973 9,696
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
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, July 22, 1993. 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 acquired by the Trust (see Note 3), the Trust pays a
fee for Trustee services to The Chase Manhattan Bank which is based on $1.05
and $.55 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 $2,945 annually is payable to the Evaluator and the
Trust pays all related expenses of the Trustee, recurring financial reporting
costs and an annual supervisory fee payable to an affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $228,484
Unrealized depreciation (4)
________
$228,480
========
</TABLE>
<PAGE>
3. Insurance
The issuers of twelve bond issues and a portion of the other bond issue in the
Trust have acquired insurance coverage which provides for the payment, when
due, of all principal and interest on those bonds (see Note (c) to Portfolio);
the Trust has acquired similar insurance coverage on a portion of the other
bond in its 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 which is covered by the insurance acquired by the 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. Annual insurance premiums payable by the Trust in future years,
assuming no change in the portfolio, would be $15.
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 4.9% of the public offering price which is equivalent to
approximately 5.152% of the net amount invested.
Distributions of net interest income -
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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $51.86 52.17 52.20
Semi-annual 52.45 52.87 52.94
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $54.19 54.47 54.62
Expenses (2.10) (2.12) (2.05)
__________________________________
Investment income - net 52.09 52.35 52.57
Distributions to unit holders:
Investment income - net (52.00) (52.30) (52.44)
Principal from investment transactions - - -
Net gain (loss) on investments (16.07) 22.80 49.40
__________________________________
Total increase in net assets (15.98) 22.85 49.53
Net assets:
Beginning of the year 1,004.48 981.63 932.10
__________________________________
End of the year $988.50 1,004.48 981.63
==================================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS, SERIES 222
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
2,275 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
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 California State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, California Trust,
Series 6 (the "Trust") is an insured and fixed portfolio of interest-bearing
obligations issued by or on behalf of municipalities and other governmental
authorities within the State of California, counties, municipalities,
authorities and 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 taxes and from California State
and local income taxes under existing law. At September 16, 1999, each Unit
represented a 1/2,275 undivided interest in the principal and net income of
the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.8% of the Public Offering Price (6.157%
of the amount invested). At September 16, 1999, the Public Offering Price per
Unit was $1,000.40 plus net interest accrued to date of settlement (three
business days after such date) of $8.09 and $21.02 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.16% per annum on September 16, 1999, and 5.09% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.19% per annum on September 16, 1999, and 5.13%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,230,000
Number of Units 2,275
Fractional Undivided Interest in the Trust per Unit 1/2,275
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,143,922
Aggregate Value of Bonds per Unit $942.38
Sales Charge 6.157% (5.8% of Public Offering Price) $58.02
Public Offering Price per Unit $1,000.40*
Redemption Price and Sponsor's Repurchase Price per Unit
($58.02 less than the Public Offering Price per Unit) $942.38*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $595,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $893 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $53.28 $53.28
Less: Estimated Annual Expense $2.31 $1.69
Estimated Net Annual Interest Income $50.97 $51.59
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $50.97 $51.59
Divided by 12 and 2, Respectively $4.25 $25.80
Estimated Daily Rate of Net Interest Accrual $.1416 $.1433
Estimated Current Return Based on Public
Offering Price 5.09% 5.16%
Estimated Long-Term Return Based on Public
Offering Price 5.13% 5.19%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 193, The First Trust of Insured Municipal
Bonds - Multi-State, California Trust, Series 6
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust of Insured Municipal Bonds - Multi-State, California Trust, Series 6 as
of June 30, 1999, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust of Insured Municipal Bonds - Multi-State,
California Trust, Series 6 at June 30, 1999, and the results of its operations
and changes in its net assets for each of the three years in the period then
ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,181,487)
(Note 1) $2,216,053
Accrued interest 33,107
__________
2,249,160
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 7,805
Accrued liabilities 11
__________
7,816
__________
Net assets, applicable to 2,296 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,181,487
Net unrealized appreciation (Note 2) 34,566
Distributable funds 25,291
__________
$2,241,344
==========
Net asset value per unit $976.20
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(e) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Brea Redevelopment Agency (Orange County,
California), 1993 Tax Allocation Refunding 2003 @ 102
(Redevelopment Project AB) (MBIA Insured) (c) 5.75% 8/01/2023 2018 @ 100 S.F. AAA $500,000 508,410
Cerritos Public Financing Authority (Cerritos,
California), 1993 Revenue, Series A (Los Coyotes 2003 @ 102
Redevelopment Project Loan) (AMBAC Insured) (c) 5.75 11/01/2022 2019 @ 100 S.F. AAA 480,000 488,587
Hanford Elementary School District, Kings County,
California, 1993 General Obligation (Election of
1993) (AMBAC Insured) (c) - (d) 1/01/2015 AAA 80,000 34,326
The City of Los Angeles (California), Wastewater 2003 @ 102
System Revenue, Series 1993 - B (MBIA Insured) (c) 5.70 6/01/2023 2021 @ 100 S.F. AAA 460,000 466,398
Certificates of Participation (1993 Refunding
Project), Palmdale School District (County of
Los Angeles, California) (FSA Insured) (c) 5.60 9/01/2020 2003 @ 102 AAA 130,000 132,834
Pleasanton - Suisun City Home Financing Authority
(California), Home Mortgage Revenue, 1984
Series A (MBIA Insured) (c) - (d) 10/01/2016 AAA 35,000 11,877
Poway (California) Redevelopment Agency, Paguay
Redevelopment Project, Subordinated Tax
Allocation Refunding, Series 1993 (FGIC 2003 @ 102
Insured) (c) 5.50 12/15/2023 2015 @ 100 S.F. AAA 80,000 78,209
City of Stockton (California), Certificates of
Participation, Water Enterprise Project, Series 2002 @ 102
1993A (FSA Insured) (c) 5.80 8/01/2022 2010 @ 100 S.F. AAA 485,000 495,412
______________________
$2,250,000 2,216,053
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
NOTES TO PORTFOLIO
June 30, 1999
(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. Approximately 95% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within five years.
(b) The ratings shown are those effective at June 30, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on the following dates and at the following percentages of
their original principal amount:
<TABLE>
<CAPTION>
Date %
<S> <C> <C>
Hanford, Elementary School District 7/1/93 29.250
Pleasanton - Suisun City Home
Financing Authority 10/25/84 2.709
</TABLE>
(e) The Trust consists of eight obligations of issuers located in
California. One of the Bonds in the Trust, representing approximately
4% 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: Tax Assessment, 3;
Sewer, 1; University and School, 1; Water, 1; and Single Family Housing,
1. Approximately 47%, 22%, 20% and 2% of the aggregate principal amount
of the Bonds consist of tax assessment revenue bonds, water revenue
bonds, sewer 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 86%. The largest such issue represents
approximately 22%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $130,241 139,501 143,596
Expenses:
Trustee's fees and related expenses (4,136) (4,071) (4,149)
Evaluator's fees (893) (893) (893)
Supervisory fees (629) (666) (674)
_______________________________
Investment income - net 124,583 133,871 137,880
Net gain (loss) on investments:
Net realized gain (loss) 11,617 2,994 (722)
Change in net unrealized appreciation
or depreciation (31,292) 55,551 119,832
_______________________________
(19,675) 58,545 119,110
_______________________________
Net increase in net assets
resulting from operations $104,908 192,416 256,990
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $124,583 133,871 137,880
Net realized gain (loss) on investments 11,617 2,994 (722)
Change in net unrealized appreciation
or depreciation on investments (31,292) 55,551 119,832
__________________________________
104,908 192,416 256,990
Distributions to unit holders:
Investment income - net (125,029) (133,312) (137,842)
Principal from investment transactions - - -
__________________________________
(125,029) (133,312) (137,842)
Unit redemptions (271, 101 and 27 in
1999, 1998 and 1997, respectively):
Principal portion (266,773) (98,185) (24,716)
Net interest accrued (2,523) (1,579) (251)
__________________________________
(269,296) (99,764) (24,967)
__________________________________
Total increase in net assets (289,417) (40,660) 94,181
Net assets:
At the beginning of the year 2,530,761 2,571,421 2,477,240
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $25,291, $29,243 and
$25,561 at June 30, 1999, 1998 and
1997, respectively) $2,241,344 2,530,761 2,571,421
==================================
Trust units outstanding at the end
of the year 2,296 2,567 2,668
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Securities Evaluation Service,
Inc. (the Evaluator), certain shareholders of which are officers of the
Sponsor. The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds, (3)
appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, July 22, 1993. 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 -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $1.05 and $.55 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 $893 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $34,617
Unrealized depreciation (51)
_______
$34,566
=======
</TABLE>
<PAGE>
3. Insurance
All issues of bonds in the portfolio are insured under insurance obtained by
the issuer of the bonds (see Note (c) to portfolio). Such insurance coverage
continues in force so long as the bonds are outstanding and the insurer
remains in business.
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 4.9% of the public offering price which is equivalent to
approximately 5.152% 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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $51.15 51.13 51.20
Semi-annual 51.56 51.77 51.85
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $53.47 53.34 53.41
Expenses (2.32) (2.15) (2.13)
_______________________________
Investment income - net 51.15 (51.19) 51.28
Distributions to unit holders:
Investment income - net (51.19) (51.17) (51.26)
Principal from investment transactions - - -
Net gain (loss) on investments (9.64) 22.06 44.58
_______________________________
Total increase in net assets (9.68) 22.08 44.60
Net assets:
Beginning of the year 985.88 963.80 919.20
_______________________________
End of the year $976.20 985.88 963.80
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CALIFORNIA TRUST, SERIES 6
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
2,607 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
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 Connecticut State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State Connecticut Trust,
Series 8 (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 Connecticut, counties, municipalities,
authorities and 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 taxes and from Connecticut State
and local income taxes under existing law. At September 16, 1999, each Unit
represented a 1/2,607 undivided interest in the principal and net income of
the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.9% of the Public Offering Price (5.152%
of the amount invested). At September 16, 1999, the Public Offering Price per
Unit was $992.36 plus net interest accrued to date of settlement (three
business days after such date) of $7.42 and $19.88 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.02% per annum on September 16, 1999, and 4.95% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 4.99% per annum on September 16, 1999, and 4.92%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,570,000
Number of Units 2,607
Fractional Undivided Interest in the Trust per Unit 1/2,607
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,460,294
Aggregate Value of Bonds per Unit $943.73
Sales Charge 5.152% (4.9% of Public Offering Price) $48.63
Public Offering Price per Unit $992.36*
Redemption Price and Sponsor's Repurchase Price per Unit
($48.63 less than the Public Offering Price per Unit) $943.73*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $651,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $977 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $51.69 $51.69
Less: Estimated Annual Expense
Excluding Insurance $2.32 $1.66
Annual Premium on Portfolio Insurance $.24 $.24
Estimated Net Annual Interest Income $49.13 $49.79
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $49.13 $49.79
Divided by 12 and 2, Respectively $4.09 $24.90
Estimated Daily Rate of Net Interest Accrual $.1365 $.1383
Estimated Current Return Based on Public
Offering Price 4.95% 5.02%
Estimated Long-Term Return Based on Public
Offering Price 4.92% 4.99%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 193, The First Trust of Insured Municipal
Bonds - Multi-State, Connecticut Trust, Series 8
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust of Insured Municipal Bonds - Multi-State, Connecticut Trust, Series 8 as
of June 30, 1999, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust of Insured Municipal Bonds - Multi-State,
Connecticut Trust, Series 8 at June 30, 1999, and the results of its
operations and changes in its net assets for each of the three years in the
period then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,480,348)
(Notes 1 and 3) $2,506,837
Accrued interest 40,188
Receivable from investment transactions 35,082
__________
2,582,107
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 50,518
Accrued liabilities 11
__________
50,529
__________
Net assets, applicable to 2,607 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,480,348
Net unrealized appreciation (Note 2) 26,489
Distributable funds 24,741
__________
$2,531,578
==========
Net asset value per unit $971.07
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) Rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Town of Bolton, Connecticut, General Obligation,
Issue of 1993 (Unlimited Tax) 5.40% 6/01/2012 2003 @ 102 A1(e) $45,000 45,313
5.40 6/01/2013 2003 @ 102 A1(e) 245,000 247,494
State of Connecticut Health and Educational
Facilities Authority, Revenue, Middlesex
Hospital Issue, Series G (MBIA Insured) (c)(f) 6.25 7/01/2022 2002 @ 102 AAA 500,000 534,810
State of Connecticut Health and Educational
Facilities Authority, Revenue, Lawrence and
Memorial Hospital Issue, Series C (MBIA
Insured) (c) (f) 6.25 7/01/2022 2002 @ 102 AAA 40,000 42,495
Connecticut Housing Finance Authority, Housing 2002 @ 102
Mortgage Finance Program, 1992 Series A 5.85 11/15/2016 2006 @ 100 S.F. Aa2(e) 340,000 346,847
Connecticut Development Authority, Water
Facilities Refunding Revenue (Bridgeport
Hydraulic Company Project - 1993B Series)
(MBIA Insured) (c) 5.50 6/01/2028 2003 @ 102 AAA 500,000 500,215
Commonwealth of Puerto Rico, Public Improvement
Refunding, Series 1993 (General Obligation) 2003 @ 100
(MBIA Insured) (c) 5.00 7/01/2021 2019 @ 100 S.F. AAA 250,000 237,525
Puerto Rico Electric Power Authority, Power
Revenue Refunding, Series N (Capital Guaranty
Insured) (c) - (d) 7/01/2017 2015 @ 87.060 S.F. AAA 165,000 64,408
South Central Connecticut Regional Water
Authority, Water System Revenue, Twelfth Series 2003 @ 102
(FGIC Insured) (c) 5.25 8/01/2012 2009 @ 100 S.F. AAA 485,000 487,730
______________________
$2,570,000 2,506,837
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
NOTES TO PORTFOLIO
June 30, 1999
(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) except for zero coupon bonds
which are redeemable at prices based on the issue price plus the amount
of original issue discount accreted to the redemption date plus, if
applicable, some premium, the amount of which will decline in subsequent
years. "S.F." indicates a sinking fund is established with respect to
an issue of bonds. In addition, certain bonds 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 94% of the aggregate principal amount of
the Bonds in the Trust is subject to call within five years.
(b) The ratings shown are those effective at June 30, 1999. All ratings are
by Standard & Poor's Corporation unless otherwise indicated.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on August 24, 1989 at a price of 14.517% of their original
principal amount.
(e) Rating by Moody's Investors Service, Inc.
(f) This issue of Bonds is secured by, and payable from, escrowed Government
securities.
(g) The Trust consists of six obligations of issues located in Connecticut
and two obligations of issuers located in the Commonwealth of Puerto
Rico. Two of the Bonds in the Trust, aggregating approximately 21% of
the aggregate principal amount of the Bonds in the Trust, are general
obligations 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; Single Family
Housing, 1; Water, 2; and Electric, 1. Approximately 21%, 38% and 13%
of the aggregate principal amount of the Bonds consist of health care
revenue bonds, water revenue bonds and single 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 82%. The two largest such issues
represent approximately 19% each.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $139,616 150,204 160,532
Expenses:
Trustee's fees and related expenses (3,640) (3,734) (4,235)
Insurance expense (Note 3) (696) (765) (765)
Evaluator's fees (977) (977) (977)
Supervisory fees (693) (743) (789)
________________________________
Investment income - net 133,610 143,985 153,766
Net gain (loss) on investments:
Net realized gain (loss) 5,484 805 997
Change in net unrealized
appreciation or depreciation (39,758) 67,468 113,725
________________________________
(34,274) 68,273 114,722
________________________________
Net increase in net assets
resulting from operations $99,336 212,258 268,488
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $133,610 143,985 153,766
Net realized gain (loss) on investments 5,484 805 997
Change in net unrealized appreciation
or depreciation on investments (39,758) 67,468 113,725
__________________________________
99,336 212,258 268,488
Distributions to unit holders:
Investment income - net (131,762) (142,642) (154,758)
Principal from investment transactions - - -
__________________________________
(131,762) (142,642) (154,758)
Unit redemptions (163, 200 and 193 in
1999, 1998 and 1997, respectively):
Principal portion (160,758) (194,920) (181,909)
Net interest accrued (3,139) (3,376) (2,380)
__________________________________
(163,897) (198,296) (184,289)
__________________________________
Total increase (decrease) in net assets (196,323) (128,680) (70,559)
Net assets:
At the beginning of the year 2,727,901 2,856,581 2,927,140
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $24,741, $18,821
and $27,077 at June 30, 1999,
1998 and 1997, respectively) $2,531,578 2,727,901 2,856,581
==================================
Trust units outstanding at the end of
the year 2,607 2,770 2,970
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
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, July 22, 1993. 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 Chase Manhattan Bank which is
based on $1.05 and $.55 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 $977 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $33,035
Unrealized depreciation (6,546)
_______
$26,489
=======
</TABLE>
<PAGE>
3. Insurance
The Trust has acquired insurance coverage which provides for the scheduled
payments of principal and interest on two of the bond issues in its portfolio.
The remaining issues are 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 which is covered by the insurance obtained by the 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. Annual insurance premiums payable by the Trust in future
years, assuming no change in the portfolio, would be $630.
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 4.9% of the public offering price which is equivalent to
approximately 5.152% 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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $49.19 49.39 49.99
Semi-annual 49.84 50.16 50.76
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $51.94 51.91 52.14
Expenses (2.23) (2.15) (2.20)
_______________________________
Investment income - net 49.71 49.76 49.94
Distributions to unit holders:
Investment income - net (49.59) (49.79) (50.39)
Principal from investment transactions - - -
Net gain (loss) on investments (13.85) 23.02 36.83
_______________________________
Total increase in net assets (13.73) 22.99 36.38
Net assets:
Beginning of the year 984.80 961.81 925.43
_______________________________
End of the year $971.07 984.80 961.81
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
CONNECTICUT TRUST, SERIES 8
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
1,813 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
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 Florida State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Florida Trust,
Series 6 - Intermediate (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 Florida, counties,
municipalities, authorities and 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 taxes and from
Florida State and local income taxes under existing law. At September 16,
1999, each Unit represented a 1/1,813 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 September 16, 1999, the Public Offering Price per
Unit was $971.01 plus net interest accrued to date of settlement (three
business days after such date) of $7.57 and $18.06 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 4.33% per annum on September 16, 1999, and 4.28% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.86% per annum on September 16, 1999, and 2.81%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $1,700,000
Number of Units 1,813
Fractional Undivided Interest in the Trust per Unit 1/1,813
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,707,627
Aggregate Value of Bonds per Unit $941.88
Sales Charge 3.093% (3.0% of Public Offering Price) $29.13
Public Offering Price per Unit $971.01*
Redemption Price and Sponsor's Repurchase Price per Unit
($29.13 less than the Public Offering Price per Unit) $941.88*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $592,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $888 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to Maximum of $.25
an affiliate of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $43.84 $43.84
Less: Estimated Annual Expense $2.26 $1.83
Estimated Net Annual Interest Income $41.58 $42.01
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $41.58 $42.01
Divided by 12 and 2, Respectively $3.46 $21.01
Estimated Daily Rate of Net Interest Accrual $.1155 $.1167
Estimated Current Return Based on Public
Offering Price 4.28% 4.33%
Estimated Long-Term Return Based on Public
Offering Price 2.81% 2.86%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 193, The First Trust of Insured Municipal
Bonds - Multi-State, Florida Trust, Series 6 - Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust of Insured Municipal Bonds - Multi-State, Florida Trust, Series 6 -
Intermediate as of June 30, 1999, and the related statements of operations and
changes in net assets for each of the three years in the period then ended.
These financial statements are the responsibility of the Trust's Sponsor. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust of Insured Municipal Bonds - Multi-State, Florida
Trust, Series 6 - Intermediate at June 30, 1999, and the results of its
operations and changes in its net assets for each of the three years in the
period then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,703,754)
(Note 1) $1,718,823
Accrued interest 31,365
__________
1,750,188
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 23,123
Accrued liabilities 2
__________
23,125
__________
Net assets, applicable to 1,813 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $1,703,754
Net unrealized appreciation (Note 2) 15,069
Distributable funds 8,240
__________
$1,727,063
==========
Net asset value per unit $952.60
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(d) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Broward County, Florida, Airport System Revenue
Refunding, Series C (AMBAC Insured) (c) 4.40 % 10/01/2000 AAA $345,000 346,667
City of Cape Coral, Florida, General Obligation
Refunding, Series 1993 (AMBAC Insured) (c) 4.625 7/01/2001 AAA 135,000 136,233
The School District of Dade County, Florida,
General Obligation Refunding School, Series
1993 (AMBAC Insured) (c) 5.00 7/15/2003 AAA 395,000 403,058
Fort Pierce Utilities Authority of the City of
Fort Pierce, Florida, Utilities Refunding
Revenue, Series 1993 (AMBAC Insured) (c) 4.50 10/01/2000 AAA 20,000 19,978
Leon County, Florida, School District, Refunding
Revenue (General Obligation) (FSA Insured) (c) 4.60 7/01/2001 AAA 345,000 347,660
City of West Palm Beach, Florida, General
Obligation Refunding, Series 1993 (Unlimited
Tax) (FGIC Insured) (c) 4.60 3/01/2002 2001 @ 101 AAA 205,000 206,820
City of West Palm Beach, Florida, Parking Revenue
Refunding, Series 1993 (AMBAC Insured) (c) 4.75 9/01/2002 2001 @ 101 AAA 255,000 258,407
______________________
$1,700,000 1,718,823
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
NOTES TO PORTFOLIO
June 30, 1999
(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 aggregate
principal amount of the Bonds in the Trust is subject to call, or will
mature, within five years.
(b) The ratings shown are those effective at June 30, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) The Trust consists of seven obligations of issuers located in Florida.
Four of the Bonds in the Trust, aggregating approximately 64% of the
aggregate principal amount of the Bonds in the Trust, are general
obligations 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: Utility, 1; Airport, 1; and
Miscellaneous, 1. Approximately 20% of the aggregate principal amount
of the Bonds in the Trust consists of airport revenue bonds. 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 91%. The
largest such issue represents approximately 23%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $85,195 90,853 99,543
Expenses:
Trustee's fees and related expenses (2,744) (2,861) (3,085)
Evaluator's fees (888) (888) (888)
Supervisory fees (499) (528) (578)
______________________________
Investment income - net 81,064 86,576 94,992
Net gain (loss) on investments:
Net realized gain (loss) 306 (569) (1,681)
Change in net unrealized appreciation
or depreciation (14,616) 19,097 35,651
______________________________
(14,310) 18,528 33,970
______________________________
Net increase in net assets resulting
from operations $66,754 105,104 128,962
==============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $81,064 86,576 94,992
Net realized gain (loss) on investments 306 (569) (1,681)
Change in net unrealized appreciation
or depreciation on investments (14,616) 19,097 35,651
__________________________________
66,754 105,104 128,962
Distributions to unit holders:
Investment income - net (81,324) (85,537) (93,843)
Principal from investment transactions (34,929) - -
__________________________________
(116,253) (85,537) (93,843)
Unit redemptions (181, 116 and 202 in
1999, 1998 and 1997, respectively):
Principal portion (176,978) (112,508) (192,596)
Net interest accrued (1,504) (2,069) (2,803)
__________________________________
(178,482) (114,577) (195,399)
__________________________________
Total increase (decrease) in net assets (227,981) (95,010) (160,280)
Net assets:
At the beginning of the year 1,955,044 2,050,054 2,210,334
__________________________________
At the end of the year (including
distributable funds (deficit)
applicable to Trust units of
$8,240, $17,067 and $(38,150)
at June 30, 1999, 1998 and
1997, respectively) $1,727,063 1,955,044 2,050,054
==================================
Trust units outstanding at the end of
the year 1,813 1,994 2,110
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
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.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, July 22, 1993. 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 -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $1.05 and $.55 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 $888 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $15,091
Unrealized depreciation (22)
_______
$15,069
=======
</TABLE>
<PAGE>
3. Insurance
The issuers of all of the bond issues in the Trust have acquired insurance
coverage which provides for the payment, when due, of all principal and
interest on those bonds (see Note (c) to Portfolio). Such insurance coverage
continues in force so long as the bonds are outstanding and the insurer
remains in business.
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 3.9% of the public offering price which is equivalent to
approximately 4.058% 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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $42.11 42.15 41.89
Semi-annual 42.65 42.80 42.58
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $44.41 44.43 44.20
Expenses (2.15) (2.09) (2.02)
_______________________________
Investment income - net 42.26 42.34 42.18
Distributions to unit holders:
Investment income - net (42.26) (42.30) (42.05)
Principal from investment transactions (19.16) - -
Net gain (loss) on investments (8.70) 8.83 15.43
_______________________________
Total increase (decrease) in
net assets (27.86) 8.87 15.56
Net assets:
Beginning of the year 980.46 971.59 956.03
_______________________________
End of the year $952.60 980.46 971.59
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 6 - INTERMEDIATE
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
1,852 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
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 Georgia State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Georgia 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 Georgia, counties, municipalities, authorities
and 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 taxes and from Georgia State and local income taxes
under existing law. At September 16, 1999, each Unit represented a 1/1,852
undivided interest in the principal and net income of the Trust (see "The
Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 5.1% of the Public Offering Price (5.374%
of the amount invested). At September 16, 1999, the Public Offering Price per
Unit was $995.42 plus net interest accrued to date of settlement (three
business days after such date) of $8.76 and $21.50 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 NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.11% per annum on September 16, 1999, and 5.05% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.05% per annum on September 16, 1999, and 4.99%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $1,825,000
Number of Units 1,852
Fractional Undivided Interest in the Trust per Unit 1/1,852
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,749,490
Aggregate Value of Bonds per Unit $944.65
Sales Charge 5.374% (5.1% of Public Offering Price) $50.77
Public Offering Price per Unit $995.42*
Redemption Price and Sponsor's Repurchase Price per Unit
($50.77 less than the Public Offering Price per Unit) $944.65*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $583,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $875 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $52.90 $52.90
Less: Estimated Annual Expense Excluding Insurance $2.42 $1.81
Annual Premium on Portfolio Insurance $.25 $.25
Estimated Net Annual Interest Income $50.23 $50.84
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $50.23 $50.84
Divided by 12 and 2, Respectively $4.19 $25.42
Estimated Daily Rate of Net Interest Accrual $.1395 $.1412
Estimated Current Return Based on Public
Offering Price 5.05% 5.11%
Estimated Long-Term Return Based on Public
Offering Price 4.99% 5.05%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
Combined Series 193, The First Trust
of Insured Municipal Bonds - Multi-State,
Georgia Trust, Series 2
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust of Insured Municipal Bonds - Multi-State, Georgia Trust, Series 2 as of
June 30, 1999, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust of Insured Municipal Bonds - Multi-State, Georgia
Trust, Series 2 at June 30, 1999, and the results of its operations and
changes in its net assets for each of the three years in the period then ended
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,785,016)
(Notes 1 and 3) $1,838,250
Accrued interest 34,415
__________
1,872,665
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 13,738
Accrued liabilities 13
__________
13,751
__________
Net assets, applicable to 1,887 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $1,785,016
Net unrealized appreciation (Note 2) 53,234
Distributable funds 20,664
__________
$1,858,914
==========
Net asset value per unit $985.12
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Certificates of Participation (Atlanta Pretrial
Detention Center Project), Series 1992, The City
of Atlanta, Georgia (MBIA Insured) (c)(f) 6.25% 12/01/2017 2002 @ 102 AAA $340,000 365,843
Cobb-Marietta Coliseum and Exhibit Hall Authority
(Georgia), Revenue Refunding, Series 1993
(MBIA Insured) (c) 5.50 10/01/2018 2013 @ 100 S.F. AAA 275,000 281,223
Cobb County Kennestone, Hospital Authority
(Georgia), Revenue Certificates (MBIA 2002 @ 100
Insured) (c) (d) 5.00 4/01/2022 2017 @ 100 S.F. AAA 230,000 216,296
The Fulton-DeKalb Hospital Authority (Georgia),
Revenue Refunding Certificates, Series 1993 2003 @ 102
(MBIA Insured) (c) (d) 5.50 1/01/2020 2013 @ 100 S.F. AAA 445,000 448,827
Municipal Electric Authority of Georgia, General 2003 @ 100
Power Revenue, 1992B Series (d) 5.50 1/01/2018 2017 @ 100 S.F. A 500,000 501,561
Puerto Rico Electric Power Authority, Power
Revenue Refunding, Series N (Capital Guaranty
Insured) (c) - (e) 7/01/2017 2015 @ 87.060 S.F. AAA 65,000 24,500
______________________
$1,855,000 1,838,250
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
NOTES TO PORTFOLIO
June 30, 1999
(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. Approximately 82% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within four years.
(b) The ratings shown are those effective at June 30, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds were issued at an original issue discount on the following
dates and at the following percentages of their original principal
amount:
<TABLE>
<CAPTION>
Date %
<S> <C> <C>
Cobb County Kennestone, Hospital
Authority 7/1/92 86.814
The Fulton-DeKalb Hospital Authority 5/1/93 94.483
Municipal Electric Authority of Georgia 11/1/92 89.380
</TABLE>
(e) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on August 24, 1989 at a price of 14.517% of their original
principal amount.
(f) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(g) The Trust consists of five obligations of issuers located in Georgia and
one obligation of an issuer located in the Commonwealth of Puerto Rico.
None of the Bonds in the Trust are a general obligation of a
governmental entity. All issues are revenue bonds payable from the
income of a specific project or authority and are divided by purpose of
issue as follows: Health Care, 2; Electric, 2; and Miscellaneous, 2.
Approximately 36% and 30% of the aggregate principal amount of the Bonds
consist of health care revenue bonds and electric revenue bonds,
respectively. Each of five Bond issues represents 10% or more of the
aggregate principal amount of Bonds in the Trust or a total of
approximately 96%. The largest such issue represents approximately 27%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $104,797 120,749 133,795
Expenses:
Trustee's fees and related expenses (2,937) (2,840) (3,835)
Insurance expense (Note 3) (493) (703) (913)
Evaluator's fees (875) (875) (875)
Supervisory fees (522) (603) (632)
________________________________
Investment income - net 99,970 115,728 127,540
Net gain (loss) on investments:
Net realized gain (loss) 4,810 3,031 (2,656)
Change in net unrealized appreciation
or depreciation (26,103) 62,334 113,019
________________________________
(21,293) 65,365 110,363
________________________________
Net increase in net assets
resulting from operations $78,677 181,093 237,903
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA TRUST, SERIES 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increases in net assets
resulting from operations:
Investment income - net $99,970 115,728 127,540
Net realized gain (loss) on investments 4,810 3,031 (2,656)
Change in net unrealized appreciation
or depreciation on investments (26,103) 62,334 113,019
__________________________________
78,677 181,093 237,903
Distributions to unit holders:
Investment income - net (99,184) (114,482) (126,501)
Principal from investment transactions - - -
__________________________________
(99,184) (114,482) (126,501)
Unit redemptions (200, 324 and 117 in
1999, 1998 and 1997, respectively):
Principal portion (198,975) (317,587) (109,357)
Net interest accrued (2,766) (3,868) (2,183)
__________________________________
(201,741) (321,455) (111,540)
__________________________________
Total increase (decrease) in net assets (222,248) (254,844) (138)
Net assets:
At the beginning of the year 2,081,162 2,336,006 2,336,144
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $20,664, $20,873 and
$24,918 at June 30, 1999, 1998 and
1997, respectively) $1,858,914 2,081,162 2,336,006
==================================
Trust units outstanding at the end
of the year 1,887 2,087 2,411
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA 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, July 22, 1993. 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 obtained by the Trust (see Note 3), the Trust pays a
fee for Trustee services to The Chase Manhattan Bank which is based on $1.05
and $.55 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 $875 annually is payable to the Evaluator and the Trust
pays all related expenses of the Trustee, recurring financial reporting costs
and an annual supervisory fee payable to an affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $53,234
Unrealized depreciation -
_______
$53,234
=======
</TABLE>
<PAGE>
3. Insurance
The issuers of five bond issues in the Trust have acquired insurance coverage
which provides for the payment, when due, of all principal and interest on
those bonds (see Note (c) to the Portfolio); the Trust has acquired similar
insurance coverage on the other bond in its 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 which is covered by the insurance
acquired by the 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. Annual insurance premiums payable
by the Trust in future years, assuming no change in the portfolio, would be
$460.
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 4.9% of the public offering price which is equivalent to
approximately 5.152% 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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $50.50 50.65 50.77
Semi-annual 51.24 51.44 51.56
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $52.61 53.71 53.49
Expenses (2.42) (2.23) (2.50)
_______________________________
Investment income - net 50.19 51.48 50.99
Distributions to unit holders:
Investment income - net (50.60) (51.08) (50.94)
Principal from investment transactions - - -
Net gain (loss) on investments (11.67) 27.90 44.74
_______________________________
Total increase in net assets (12.08) 28.30 44.79
Net assets:
Beginning of the year 997.20 968.90 924.11
_______________________________
End of the year $985.12 997.20 968.90
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
GEORGIA 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 Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
2,195 UNITS
PROSPECTUS
Part One
Dated October 26, 1999
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, although interest on certain Bonds may be a preference item for
purposes of the Alternative Minimum Tax. In addition, the interest income is,
in the opinion of Special Counsel, exempt to the extent indicated from Idaho
State and local income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, Idaho Trust, Series 3 (the "Trust") is a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within the State of Idaho,
counties, municipalities, authorities and 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 taxes and from Idaho
State and local income taxes under existing law, although interest on certain
Bonds may be a preference item for purposes of the Alternative Minimum Tax.
At September 16, 1999, each Unit represented a 1/2,195 undivided interest in
the principal and net income of the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.6% of the Public Offering Price (4.822%
of the amount invested). At September 16, 1999, the Public Offering Price per
Unit was $989.49 plus net interest accrued to date of settlement (three
business days after such date) of $7.75 and $20.05 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 referen
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
_____________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 4.97% per annum on September 16, 1999, and 4.90% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 4.71% per annum on September 16, 1999, and 4.64%
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 and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,145,000
Number of Units 2,195
Fractional Undivided Interest in the Trust per Unit 1/2,195
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,072,009
Aggregate Value of Bonds per Unit $943.97
Sales Charge 4.822% (4.6% of Public Offering Price) $45.52
Public Offering Price per Unit $989.49*
Redemption Price and Sponsor's Repurchase Price per Unit
($45.52 less than the Public Offering Price per Unit) $943.97*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $580,000
</TABLE>
Date Trust Established July 22, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $870 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
SUMMARY OF ESSENTIAL INFORMATION AS OF SEPTEMBER 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $50.83 $50.83
Less: Estimated Annual Expense $2.30 $1.64
Estimated Net Annual Interest Income $48.53 $49.19
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $48.53 $49.19
Divided by 12 and 2, Respectively $4.04 $24.60
Estimated Daily Rate of Net Interest Accrual $.1348 $.1366
Estimated Current Return Based on Public
Offering Price 4.90% 4.97%
Estimated Long-Term Return Based on Public
Offering Price 4.64% 4.71%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 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: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
THIS PAGE LEFT INTENTIONALLY BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust
Combined Series 193, The First Trust
Advantage, Idaho Trust, Series 3
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 193, The First
Trust Advantage, Idaho Trust, Series 3 as of June 30, 1999, and the related
statements of operations and changes in net assets for each of the three years
in the period then ended. These financial statements are the responsibility
of the Trust's Sponsor. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 193, The First Trust Advantage, Idaho Trust, Series 3 at June 30, 1999,
and the results of its operations and changes in its net assets for each of
the three years in the period then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,069,247)
(Note 1) $2,087,684
Accrued interest 29,670
__________
2,117,354
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 10,127
Accrued liabilities 8
__________
10,135
__________
Net assets, applicable to 2,195 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,069,247
Net unrealized appreciation (Note 2) 18,437
Distributable funds 19,535
__________
$2,107,219
==========
Net asset value per unit $960.01
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
PORTFOLIO - See notes to portfolio.
June 30, 1999
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) Rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Ada and Boise Counties, Idaho, The Independent
School District of Boise City, General Obligation 2003 @ 101
Refunding, Series 1993 (AMBAC Insured) 5.40% 7/30/2014 2012 @ 100 S.F. AAA $625,000 630,754
Boise State University, Student Union and Housing
System Refunding and Improvement Revenue, Series
1992 (MBIA Insured) (f) 6.30 4/01/2015 2002 @ 101 AAA 525,000 555,460
City of Idaho Falls, Idaho, General Obligation
Electric Refunding (Deferred Interest), Series
1991 (FGIC Insured) - (d) 4/01/2012 AAA 200,000 103,510
Idaho Health Facilities Authority, Refunding
Revenue (Magic Valley Regional Medical Center 2003 @ 102
Project), Series 1993 (AMBAC Insured) 5.625 12/01/2013 2011 @ 100 S.F. AAA 420,000 427,530
Idaho State University, Student Facilities Fee 2001 @ 101
Revenue, Series 1993 5.40 4/01/2014 2006 @ 100 S.F. A3(c) 90,000 87,673
Student Loan of Idaho Marketing Association, Inc.,
Student Loan Subordinate Revenue, Series 2 (e) 5.70 10/01/2007 2003 @ 102 NR 285,000 282,757
______________________
$2,145,000 2,087,684
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
NOTES TO PORTFOLIO
June 30, 1999
(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. Approximately 91% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within five years.
(b) The ratings shown are those effective at June 30, 1999. All ratings are
by Standard & Poor's Corporation unless otherwise indicated ("NR"
indicates no rating).
(c) Rating by Moody's Investors Service, Inc.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on August 21, 1991 at a price of 23.739% of their original
principal amount.
(e) Interest on these Bonds (approximately 15% of the aggregate principal
amount of the Bonds in the Trust) will be an item of tax preference for
purposes of the Alternative Minimum Tax.
(f) This issue of Bonds is secured by, and payable from, escrowed Government
securities.
(g) The Trust consists of six obligations of issuers located in Idaho. Two
of the Bonds in the Trust, aggregating approximately 38% of the
aggregate principal amount of the Bonds in the Trust, are general
obligations 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: University and School, 2;
Health Care, 1; and Miscellaneous, 1. Approximately 29% and 20% of the
aggregate principal amount of the Bonds consist of university and school
revenue bonds and health care 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 86%. The largest
such issue represents approximately 29%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $115,975 126,940 134,959
Expenses:
Trustee's fees and related expenses (3,039) (3,332) (3,501)
Evaluator's fees (870) (870) (870)
Supervisory fees (585) (651) (675)
________________________________
Investment income - net 111,481 122,087 129,913
Net gain (loss) on investments:
Net realized gain (loss) (2,545) 9 (5,193)
Change in net unrealized
appreciation or depreciation (35,297) 55,220 98,847
________________________________
(37,842) 55,229 93,654
________________________________
Net increase in net assets
resulting from operations $73,639 177,316 223,567
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO TRUST, SERIES 3
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $111,481 122,087 129,913
Net realized gain (loss) on investments (2,545) 9 (5,193)
Change in net unrealized appreciation
or depreciation on investments (35,297) 55,220 98,847
__________________________________
73,639 177,316 223,567
Distributions to unit holders:
Investment income - net (111,290) (121,604) (130,595)
Principal from investment transactions - - (3,255)
__________________________________
(111,290) (121,604) (133,850)
Unit redemptions (144, 264 and 126 in
1999, 1998 and 1997, respectively):
Principal portion (138,965) (254,724) (116,418)
Net interest accrued (1,582) (3,126) (2,263)
__________________________________
(140,547) (257,850) (118,681)
__________________________________
Total increase (decrease) in net assets (178,198) (202,138) (28,964)
Net assets:
At the beginning of the year 2,285,417 2,487,555 2,516,519
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $19,535, $21,570 and
$28,593 at June 30, 1999, 1998 and
1997, respectively) $2,107,219 2,285,417 2,487,555
==================================
Trust units outstanding at the end of
the year 2,195 2,339 2,603
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO 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.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, July 22, 1993. 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 -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $1.05 and $.55 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 $870 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at June 30, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $33,607
Unrealized depreciation (15,170)
_______
$18,437
=======
</TABLE>
<PAGE>
3. 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 4.9% of the public offering price which is equivalent to
approximately 5.152% 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 June 30,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $48.82 48.99 49.72
Semi-annual 49.41 49.80 50.44
</TABLE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended June 30,
1999 1998 1997
<S> <C> <C> <C>
Interest income $51.18 51.34 51.41
Expenses (1.98) (1.96) (1.92)
_______________________________
Investment income - net 49.20 49.38 49.49
Distributions to unit holders:
Investment income - net (49.16) (49.37) (50.11)
Principal from investment transactions - - (1.22)
Net gain (loss) on investments (17.12) 21.43 35.35
_______________________________
Total increase in net assets (17.08) 21.44 33.51
Net assets:
Beginning of the year 977.09 955.65 922.14
_______________________________
End of the year $960.01 977.09 955.65
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 193
THE FIRST TRUST ADVANTAGE
IDAHO 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 Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
The First Trust (registered trademark) Combined Series
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated October 29, 1999 AND PART THREE
IN THE OPINION OF COUNSEL, INTEREST INCOME TO THE TRUSTS AND TO THE UNIT
HOLDERS, WITH CERTAIN EXCEPTIONS, IS EXEMPT UNDER EXISTING LAW FROM ALL
FEDERAL INCOME TAXES. IN ADDITION, THE INTEREST INCOME TO THE TRUSTS IS,
IN THE OPINION OF SPECIAL COUNSEL, EXEMPT TO THE EXTENT INDICATED FROM
STATE AND LOCAL TAXES WHEN HELD BY RESIDENTS OF THE STATE IN WHICH THE
ISSUERS OF THE BONDS IN SUCH TRUSTS ARE LOCATED. CAPITAL GAINS, IF ANY,
ARE SUBJECT TO TAX.
THE FIRST TRUST COMBINED SERIES (the "Fund") consists of underlying
separate unit investment trusts (the "Trusts"). The various trusts are
collectively referred to herein as the "Trusts" while all Trusts that
are not designated as "The First Trust Advantage" are sometimes
collectively referred to herein as the "Insured Trusts" and a Trust with
the name designation of "The First Trust of Insured Municipal Bonds,
Discount Trust" or "The First Trust Advantage: Discount Trust" is
sometimes referred to herein as a "Discount Trust." Each Trust consists
of a portfolio of interest-bearing obligations, issued by or on behalf
of states and territories of the United States, and political
subdivisions and 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 under existing law
although interest on certain Bonds in certain Arkansas, Idaho, Kansas,
Maine, Mississippi and Nebraska Trusts will be a preference item for
purposes of the Alternative Minimum Tax. In addition, the interest
income of each Trust is, in the opinion of Special Counsel, exempt to
the extent indicated from state and local income taxes when held by
residents of the state in which the issuers of the Bonds in such Trust
are located. The securities in a Discount Trust are acquired at prices
which result in a Discount Trust portfolio, as a whole, being purchased
at a deep discount from the aggregate par value of such Securities
although a substantial portion of the Securities in a Discount Trust
portfolio may be acquired at a premium over the par value of such
Securities. All of the Bonds in an Intermediate Trust mature within 8 to
12 years of the Initial Date of Deposit. All of the Bonds in a Short
Intermediate Trust mature within 3 to 6 years of the Initial Date of
Deposit. All of the Bonds in a Long Intermediate Trust mature within 10
to 15 years of the Initial Date of Deposit. The portfolio for each
Trust, 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.
INSURANCE GUARANTEEING THE SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST
ON ALL BONDS IN THE PORTFOLIO OF EACH INSURED TRUST HAS BEEN OBTAINED
FROM FINANCIAL GUARANTY INSURANCE COMPANY AND/OR Ambac Assurance
CORPORATION (FORMERLY KNOWN AS AMBAC INDEMNITY CORPORATION) BY THE
INSURED TRUSTS OR WAS DIRECTLY OBTAINED BY THE BOND ISSUER, THE
UNDERWRITERS, THE SPONSOR OR OTHERS PRIOR TO THE INITIAL DATE OF DEPOSIT
FROM FINANCIAL GUARANTY INSURANCE COMPANY, Ambac Assurance CORPORATION,
OR OTHER INSURERS (THE "PREINSURED BONDS"). INSURANCE OBTAINED BY AN
INSURED TRUST APPLIES ONLY WHILE BONDS ARE RETAINED IN SUCH TRUST, WHILE
INSURANCE ON PREINSURED BONDS IS EFFECTIVE SO LONG AS SUCH BONDS ARE
OUTSTANDING. PURSUANT TO AN IRREVOCABLE COMMITMENT OF FINANCIAL GUARANTY
INSURANCE COMPANY, AND/OR Ambac Assurance CORPORATION IN THE EVENT OF A
SALE OF A BOND INSURED UNDER AN INSURANCE POLICY OBTAINED BY AN INSURED
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. THE INSURANCE, IN EITHER CASE,
RELATES ONLY TO THE BONDS IN THE INSURED TRUSTS AND NOT TO THE UNITS
OFFERED HEREBY. AS A RESULT OF SUCH INSURANCE, THE UNITS OF EACH INSURED
TRUST HAVE RECEIVED A RATING OF "AAA" BY STANDARD & POOR'S RATINGS
GROUP, A DIVISION OF MCGRAW-HILL, INC. ("STANDARD & POOR'S"). SEE "WHY
AND HOW ARE THE INSURED TRUSTS INSURED?" ON PAGE 10. NO REPRESENTATION
IS MADE AS TO ANY INSURER'S ABILITY TO MEET ITS COMMITMENTS.
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
All Parts of the Prospectus Should be Retained for Future Reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
For convenience the Prospectus is divided into sections which give
general information about the Fund and specific information such as the
public offering price, distributions and tax status for each Trust.
The Objectives of the Fund are conservation of capital through
investment in portfolios of tax-exempt bonds and income exempt from
Federal and applicable state and local income taxes although interest on
certain Bonds in certain Arkansas, Idaho, Kansas, Maine, Mississippi and
Nebraska Trusts will be a preference item for purposes of the Federal
Alternative Minimum Tax. ACCORDINGLY, CERTAIN ARKANSAS, IDAHO, KANSAS,
MAINE, MISSISSIPPI AND NEBRASKA TRUSTS MAY BE APPROPRIATE ONLY FOR
INVESTORS WHO ARE NOT SUBJECT TO THE ALTERNATIVE MINIMUM TAX. CERTAIN
BONDS IN THE OKLAHOMA TRUSTS ARE SUBJECT TO OKLAHOMA STATE INCOME TAXES.
The payment of interest and the preservation of principal are, of
course, dependent upon the continuing ability of the issuers, obligors
and/or insurers to meet their respective obligations.
Distributions to Unit holders may be reinvested as described herein. See
"Rights of Unit Holders-How Can Distributions to Unit Holders be
Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain a
market for the Units at prices based upon the aggregate bid price of the
Bonds in the portfolio of each Trust. In the absence of such a market, a
Unit holder will nonetheless be able to dispose of the Units through
redemption at prices based upon the bid prices of the underlying Bonds.
See "Rights of Unit Holders-How May Units be Redeemed?" With respect to
each Insured Trust, neither the bid nor offering prices of the
underlying Bonds or of the Units, absent situations in which Bonds are
in default in payment of principal or interest or in significant risk of
such default, include value attributable to the portfolio insurance
obtained by such Trust. See "Why and How are the Insured Trusts Insured?"
Page 2
THE FIRST TRUST COMBINED SERIES
What is The First Trust Combined Series?
The First Trust Combined Series (the "Fund") is one of a series of
investment companies created by the Sponsor under the name of The First
Trust Combined Series, all of which are generally similar but each of
which is separate and is designated by a different series number. This
Series consists of underlying separate unit investment trusts (such
Trusts being collectively referred to herein as the "Fund"). Each Series
was created under the laws of the State of New York pursuant to a Trust
Agreement (the "Indenture"), dated the Initial Date of Deposit, with
Nike Securities L.P., as Sponsor, The Chase Manhattan Bank, as Trustee,
Securities Evaluation Service, Inc., as Evaluator and First Trust
Advisors L.P., as Portfolio Supervisor. Only Units of a National Trust
may be offered for sale to residents of the State of Illinois. Only
Units of an Indiana Trust and/or a National Trust may be offered for
sale to residents of the State of Indiana. Only Units of a Virginia
Trust and/or a National Trust may be offered for sale to residents of
the State of Virginia. Only Units of a Washington Trust and/or a
National Trust may be offered for sale to residents of Washington. On
the Initial Date of Deposit, the Sponsor deposited with the Trustee
interest-bearing obligations, including delivery statements relating to
contracts for the purchase of certain such obligations and irrevocable
letters of credit issued by a financial institution in the amounts
required for such purchases (the "Bonds"). The Trustee thereafter
credited the account of the Sponsor for Units of each Trust representing
the entire ownership of the Fund which Units are being offered hereby.
The objectives of the Fund are Federal tax-exempt income and state and
local tax-exempt income and conservation of capital through investment
in portfolios of interest-bearing obligations issued by or on behalf of
the state for which such Trust is named (collectively, the "State
Trusts"), and counties, municipalities, authorities and political
subdivisions thereof, the Commonwealth of Puerto Rico and other
territories or municipalities of the United States, or authorities or
political subdivisions thereof, the interest on which obligations is, in
the opinion of recognized bond counsel to the issuing governmental
authorities, exempt from all Federal income tax and, where applicable,
state and local taxes under existing law although interest on certain
Bonds in certain Arkansas, Idaho, Kansas, Maine, Mississippi and
Nebraska Trusts will be a preference item for purposes of the
Alternative Minimum Tax and certain Bonds in the Oklahoma Trusts are
subject to Oklahoma State Income Taxes. The current market value of
certain of the obligations in a Discount Trust were significantly below
face value when the obligations were acquired by such Trust. The prices
at which the obligations are acquired result in a Discount Trust's
portfolio, as a whole, being purchased at a deep discount from the
aggregate par value of such Securities although a substantial portion of
the Securities in a Discount Trust portfolio may be acquired at a
premium over the par value of such Securities. Insurance guaranteeing
the scheduled payment of all principal and interest on Bonds in the
Trusts with the name designation of "The First Trust of Insured
Municipal Bonds," "The First Trust of Insured Municipal Bonds-
Intermediate" or "The First Trust of Insured Municipal Bonds-Multi-
State" (the "Insured Trusts") has been obtained by such Trusts from
Financial Guaranty Insurance Company ("Financial Guaranty") and/or Ambac
Assurance Corporation ("Ambac Assurance") or was obtained directly by
the Bond issuer, the underwriters, the Sponsor or others prior to the
Initial Date of Deposit from Financial Guaranty, Ambac Assurance, or
other insurers (the "Preinsured Bonds"). NO PORTFOLIO INSURANCE POLICY
HAS BEEN OBTAINED BY THE TRUSTS WITH THE NAME DESIGNATION OF "THE FIRST
TRUST ADVANTAGE" (THE "ADVANTAGE TRUSTS"). The portfolio insurance
obtained by the Insured Trusts is effective only while the Bonds thus
insured are held in such Trusts, while insurance on Preinsured Bonds is
effective so long as such Bonds are outstanding. See "Why and How are
the Insured Trusts Insured?" 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 of the Units of an Insured Trust nor
any evaluation of such Units for purposes of repurchases or redemptions
reflects any element of value for the insurance obtained by such Trust
unless Bonds are in default in payment of principal or interest or in
significant risk of such default. See "Public Offering-How is the Public
Offering Price Determined?" On the other hand, the value of insurance
Page 3
obtained by the Bond issuer, the Sponsor or others is reflected and
included in the market value of such Bonds.
Insurance obtained by an Insured Trust or by the Bond issuer, the
Sponsor or others 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 noncancelable policy
for the scheduled payment of interest and principal on the Bonds is
issued by the insurer. A single premium is paid by the Bond issuer, the
underwriters, the Sponsor or others for Preinsured Bonds and a monthly
premium is paid by each Insured Trust for the insurance obtained by such
Trust except for Bonds in such Trust which are insured by the Bond
issuer, the underwriters, the Sponsor or others in which case no
premiums for insurance are paid by such Trust. Upon the sale of a Bond
insured under the insurance policy obtained by an Insured Trust, the
Trustee has the right to obtain permanent insurance from Financial
Guaranty and/or Ambac Assurance with respect to such Bond upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust of the
Fund is eligible to be sold on an insured basis. Standard & Poor's and
Moody's Investors Service, Inc. have rated the claims-paying ability of
Financial Guaranty and Ambac Assurance "AAA" and "Aaa," respectively.
See "Why and How are the Insured Trusts Insured?"
In selecting Bonds, the following facts, among others, were considered:
(i) the Standard & Poor's rating or Fitch Investors Service, Inc.'s
rating of the Bonds was in no case less than "BBB" in the case of an
Insured Trust (or an Arkansas, Kansas or Maine Advantage Trust) and "A-"
in the case of other Advantage Trusts, or the Moody's Investors Service,
Inc. rating of the Bonds was in no case less than "Baa" in the case of
an Insured Trust (or an Arkansas, Kansas or Maine Advantage Trust) and
"A" in the case of other Advantage Trusts, including provisional or
conditional ratings, respectively, or, if not rated, the Bonds had, in
the opinion of the Sponsor, credit characteristics sufficiently similar
to the credit characteristics of interest-bearing tax-exempt obligations
that were so rated as to be acceptable for acquisition by the Fund (see
"Description of Bond Ratings"); (ii) the prices of the Bonds relative to
other bonds of comparable quality and maturity; (iii) with respect to
the Insured Trusts, the availability and cost of insurance of the
principal and interest on the Bonds and (iv) the diversification of
Bonds as to purpose of issue and location of issuer. Subsequent to the
Initial Date of Deposit, a Bond may cease to be rated or its rating may
be reduced below the minimum required as of the Initial Date of Deposit.
Neither event requires elimination of such Bond from the portfolio, but
may be considered in the Sponsor's determination as to whether or not to
direct the Trustee to dispose of the Bond. See "Rights of Unit Holders-
How May Bonds be Removed from the Fund?" The Portfolio appearing in Part
One contains Bond ratings, when available, for the Bonds listed at the
date shown.
Certain of the Bonds in the Trusts may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
Trust were lower than the current market interest rates for newly issued
bonds of comparable rating and type. The market discount of previously
issued bonds will increase when interest rates for newly issued
comparable bonds increase and decrease when such interest rates fall,
other things being equal. A discount bond held to maturity will have a
larger portion of its total return in the form of taxable income and
capital gain and less in the form of tax-exempt interest income than a
comparable bond newly issued at current market rates. See "What is the
Federal Tax Status of Unit Holders?" appearing in Part Three for each
Trust.
Certain of the Bonds in the Trusts may be original issue discount bonds.
Under current law, the original issue discount, which is the difference
between the stated redemption price at maturity and the issue price of
the Bonds, is deemed to accrue on a daily basis and the accrued portion
is treated as tax-exempt interest income for Federal income tax
purposes. On sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable as capital
gain unless the gain is attributable to market discount in which case
the accretion of market discount is taxable as ordinary income. See
"What is the Federal Tax Status of Unit Holders?" appearing in Part
Three for each Trust. The current value of an original discount bond
reflects the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the Bonds
approach maturity.
Certain of the original issue discount bonds may be Zero Coupon Bonds
(including bonds known as multiplier bonds, money multiplier bonds,
Page 4
capital appreciation bonds, capital accumulator bonds, compound interest
bonds and money discount maturity payment bonds). Zero Coupon Bonds do
not provide for the payment of any current interest and generally
provide for payment at maturity at face value unless sooner sold or
redeemed. Zero Coupon bond features include (1) not paying interest on a
semi-annual basis and (2) providing for the reinvestment of the bond's
semi-annual earnings at the bond's stated yield to maturity. While Zero
Coupon Bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection.
Certain of the Bonds in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased and deposited in the
Trusts were higher than the current market interest rates for newly
issued bonds of comparable rating and type. The current returns of bonds
trading at a market premium are initially higher than the current
returns of comparable bonds of a similar type issued at currently
prevailing interest rates because premium bonds tend to decrease in
market value as they approach maturity when the face amount becomes
payable. Because part of the purchase price is thus returned not at
maturity but through current income payments, early redemption of a
premium bond at par or early prepayments of principal will result in a
reduction in yield. Redemptions are more likely to occur at times when
the Bonds have an offering side valuation which represents a premium
over par, or for original issue discount Bonds, a premium over the
accreted value. To the extent that the Bonds were deposited in the Fund
at a price higher than the price at which they are redeemed, this will
represent a loss of capital when compared to the original Public
Offering Price of the Units. Because premium bonds generally pay a
higher rate of interest than bonds priced at or below par, the effect of
the redemption of premium bonds would be to reduce Estimated Net Annual
Unit Income by a greater percentage than the par amount of such bonds
bears to the total par amount of Bonds in the Trust. Although the actual
impact of any such redemptions that may occur will depend upon the
specific Bonds that are redeemed, it can be anticipated that the
Estimated Net Annual Unit Income will be significantly reduced after the
dates on which such Bonds are eligible for redemption. The Trust may be
required to sell Zero Coupon Bonds prior to maturity (at their current
market price which is likely to be less than their par value) in order
to pay expenses of the Trust or in case the Trust is terminated. See
"Rights of Unit Holders-How May Bonds be Removed from the Fund?" and
"Other Information-How May the Indenture be Amended or Terminated?"
Certain of the Bonds in the Trusts may be general obligations of a
governmental entity that are backed by the taxing power of such entity.
All other Bonds in the Trusts are revenue bonds payable from the income
of a specific project or authority and are not supported by the issuer's
power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. There are, of course, variations in
the security of the different Bonds in the Fund, both within a
particular classification and between classifications, depending on
numerous factors.
Certain of the Bonds in the Trusts may be healthcare revenue bonds.
Healthcare revenue bonds are obligations of issuers whose revenues are
primarily derived from services provided by hospitals or other
healthcare facilities, including nursing homes. A healthcare issuer's
ability to make debt service payments on these obligations is dependent
on various factors, including occupancy levels of the facility, demand,
government regulations, wages of employees, overhead expenses,
competition from other similar providers, malpractice insurance costs
and the degree of governmental competition from other similar providers,
malpractice insurance costs and the degree of governmental financial
assistance, including Medicare and Medicaid and other similar third-
party payer programs.
Certain of the Bonds in the Trusts may be housing revenue bonds. Housing
revenue bonds are obligations of issuers whose revenues are primarily
derived from mortgage loans on single family residences or housing
projects for low to moderate income families. Housing revenue bonds are
generally payable at any time and therefore their average life will
ordinarily be less than their stated maturities. The ability of such
issuers to make debt service payments on these obligations is dependent
on various factors, including occupancy levels, rental income, mortgage
default rates, taxes, operating expenses, governmental regulations and
the appropriation of subsidies.
Page 5
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services.
Water and sewerage bonds are generally payable from user fees. Problems
faced by such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user fees, the
difficulty of financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering
new supplies of fresh water, the effect of conservation programs and the
impact of "no-growth" zoning ordinances.
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy.
Utilities are generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which may be
charged and the appropriate rate of return. The problems faced by such
issuers include the difficulty in obtaining approval for timely and
adequate rate increases from the governing public utility commission,
the difficulty in financing large construction programs, increased
federal, state and municipal government regulations, the limitations on
operations and increased costs and delays attributable to environmental
considerations, increased competition, recent reductions in estimates of
future demand for electricity in certain areas of the country, the
difficulty of the capital market in absorbing utility debt, the
difficulty in obtaining fuel at reasonable prices and the effect of
energy conservation.
Certain of the Bonds in the Trusts may be lease obligations issued
primarily by governmental authorities that have no taxing power or other
means of directly raising revenues. Rather, the governmental authorities
are financing vehicles created solely for the construction of buildings
(i.e., schools, administrative offices, convention centers and prisons)
or the purchase of equipment (i.e., police cars and computer systems)
that will be used by a state or local government (the "lessee"). These
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt service
on the obligations. Lease obligations are subject, in almost all cases,
to annual appropriation risk, i.e., the lessee government is not legally
obligated to budget and appropriate for the rental payments beyond the
current fiscal year, or construction and abatement risk-rental
obligations cease in the event that delays in building, damage,
destruction or condemnation of the project prevents its use by the
lessee.
Certain of the Bonds in the Trusts may be industrial revenue bonds
("IRBs"), tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. Debt service
payments on IRBs are dependent on various factors, including the
creditworthiness of the corporate operator of the project and, if
applicable, corporate guarantor, revenues generated from the project
and, if applicable, corporate guarantor, revenues generated from the
project and regulatory and environmental restrictions.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. The ability of issuers to make debt
service payments on airport obligations is dependent on the capability
of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other
factors, many airlines may have difficulty meeting their obligations
under these use agreements. Similarly, payment on Bonds related to other
facilities is dependent on revenues from the projects, such as user fees
from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of a
facility, lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Certain of the Bonds in the Trusts may be obligations of issuers which
govern the operation of schools, colleges and universities and whose
revenues are derived mainly from ad valorem taxes. 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.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the operation of resource
recovery facilities. Resource recovery facilities are designed to
Page 6
process solid waste, generate steam and convert steam to electricity.
Resource recovery bonds may be subject to extraordinary optional
redemption at par upon the occurrence of certain circumstances,
including but not limited to: destruction or condemnation of a project;
contracts relating to a project becoming void, unenforceable or
impossible to perform; changes in the economic availability of raw
materials, operating supplies or facilities necessary for the operation
of a project or technological or other unavoidable changes adversely
affecting the operation of a project; administrative or judicial actions
which render contracts relating to the projects void, unenforceable or
impossible to perform; or impose unreasonable burdens or excessive
liabilities.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore, the
economy is largely dependent for its development upon U.S. policies and
programs that are being reviewed and may be eliminated.
Economic activity in Puerto Rico increased again during 1998. The growth
in Puerto Rico's gross domestic product (GDP) was 3%, with an additional
2.7% growth expected in 1999. The main driving force behind this growth
was manufacturing, Puerto Rico's largest and most quickly developing
economic sector, accounting for more than 55% of the territory's GDP
during 1998. Manufacturing exports have increased more than 35% during
the past five years to $23.4 billion in 1998, due in part to increasing
emphasis on rebuilding Puerto Rico's infrastructure, including the
upcoming renovation of the Port of San Juan.
Puerto Rico's unemployment, although at relatively low historical
levels, remains above the average for the United States. Average total
employment increased from 1.01 million in 1993 to 1.14 million in 1998,
with 11.4% growth during this five-year period. Non-farm employment (not
seasonally adjusted) for January 1999 reached 1,158,138, its highest
recorded level. The average unemployment rate decreased from 17.0% in
1993 to 13.3% in 1998 and dropped further to 12.7% in March 1999. The
U.S. average in 1998 was 4.5%.
The territory has experienced $1.9 billion in general fund revenue
growth during the past five years, totaling a $1.9 billion increase
between fiscal 1994 and fiscal 1998. During fiscal 1998, more than 67%
of Puerto Rico's $5.9 billion in general fund receipts were due to the
income tax, with excise taxes accounting for another 22%. Long-term debt
for the territory reached $14.7 billion at the end of fiscal 1998 (ended
June 30, 1998). Outstanding general obligation debt accounted for $4.8
billion of this amount, while revenue bonds represented $5.2 billion.
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.
Interest on certain of the Bonds in certain Arkansas, Idaho, Kansas,
Maine, Mississippi and Nebraska Trusts will be an item of tax preference
for purposes of the Alternative Minimum Tax ("AMT"). The investment by
non-AMT individual taxpayers in AMT municipal bonds generally results in
a higher yield to such bondholders than non-AMT municipal bonds. Since a
portion of the interest from certain Arkansas, Idaho, Kansas, Maine,
Mississippi and Nebraska Trusts is an AMT preference item, certain
Arkansas, Idaho, Kansas, Maine, Mississippi and Nebraska Trusts may be
more appropriate for investors who are not subject to AMT.
Investors should be aware that many of the Bonds in the Trusts are
subject to continuing requirements such as the actual use of Bond
proceeds or manner of operation of the project financed from Bond
proceeds that may affect the exemption of interest on such Bonds from
Federal income taxation. Although at the time of issuance of each of the
Bonds in the Trusts an opinion of bond counsel was rendered as to the
exemption of interest on such obligations from Federal income taxation,
there can be no assurance that the respective issuers or other obligors
Page 7
on such obligations will fulfill the various continuing requirements
established upon issuance of the Bonds. A failure to comply with such
requirements may cause a determination that interest on such obligations
is subject to Federal income taxation, perhaps even retroactively from
the date of issuance of such Bonds, thereby reducing the value of the
Bonds and subjecting Unit holders to unanticipated tax liabilities.
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with
their terms and because the proceeds from such events will be
distributed to Unit holders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
Certain of the Bonds contained in the Trusts may be subject to being
called or redeemed in whole or in part prior to their stated maturities
pursuant to optional redemption provisions, sinking fund provisions,
special or extraordinary redemption provisions or otherwise. A bond
subject to optional call is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A bond subject
to sinking fund redemption is one which is subject to partial call from
time to time at par or, in the case of a zero coupon bond, at the
accreted value from a fund accumulated for the scheduled retirement of a
portion of an issue prior to maturity. Special or extraordinary
redemption provisions may provide for redemption at par (or for original
issue discount bonds at issue price plus the amount of original issue
discount accreted to redemption date plus, if applicable, some premium)
of all or a portion of an issue upon the occurrence of certain
circumstances. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called Bonds are used to pay
for Unit redemptions) result in the distribution of principal and may
result in a reduction in the amount of subsequent interest
distributions; it may also affect the long-term return and the current
return on Units of each Trust. Redemption pursuant to call provisions is
more likely to occur, and redemption pursuant to sinking fund provisions
may occur, when the Bonds have an offering side valuation which
represents a premium over par or for original issue discount bonds a
premium over the accreted value. Unit holders may recognize capital gain
or loss upon any redemption or call.
Like other investment companies, financial and business organizations
and individuals around the world, the Fund could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Fund do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Fund's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Fund. The Sponsor is
unable to predict what impact, if any, the Year 2000 Problem will have
on issuers of the Bonds contained in the Fund.
To the best knowledge of the Sponsor, there is no litigation pending as
of the date hereof in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trusts. At any time
after the date hereof, litigation may be initiated on a variety of
grounds with respect to Bonds in a Trust. 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 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.
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 (if applicable) 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 amount will result in
Page 8
a change in the Estimated Current Return. For each Trust, the Public
Offering Price will vary in accordance with fluctuations in the prices
of the underlying Bonds and the 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 Trust will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration and
determines and factors in the relative weightings of the market values,
yields (which take into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the Bonds in
the Trust and (2) takes into account a compounding factor, the expenses
and sales charge associated with each Unit of a Trust. Since the market
values and estimated retirements of the Bonds and the expenses of the
Trust will change, there is no assurance that the Estimated Long-Term
Return indicated in Part One for each Trust will be realized in the
future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only Net Annual Interest
Income and Public Offering Price. Neither rate reflects the true return
to Unit holders, which is lower, because neither includes the effect of
certain delays in distributions to Unit holders.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on the Trust and
returns over specified periods on other similar Trusts sponsored by Nike
Securities L.P. with returns on taxable investments such as corporate or
U.S. Government bonds, bank CDs and money market accounts or money
market funds, each of which has investment characteristics that may
differ from those of the Trust.
How are Purchased Interest and Accrued Interest Treated?
Purchased Interest. For The First Trust Combined Series 198-208, each
Trust contains an amount of Purchased Interest. Purchased Interest is a
portion of the unpaid interest that has accrued on the Bonds from the
later of the last payment date on the Bonds or the date of issuance
thereof through the First Settlement Date and is included in the
calculation of the Public Offering Price. Purchased Interest will be
distributed to Unit holders as Units are redeemed or Securities are
sold, mature or are called. See "Summary of Essential Information"
appearing in Part One for each Trust for the amount of Purchased
Interest per Unit for each Trust. Purchased Interest is an element of
the determination of the price Unit holders will receive in connection
with the sale or redemption of Units prior to the termination of the
Trust.
Accrued Interest. Accrued interest is the accumulation of unpaid
interest on a bond from the last day on which interest thereon was paid.
Interest on Bonds generally is paid semi-annually, although each Trust
accrues such interest daily. Because of this, a Trust always has an
amount of interest earned but not yet collected by the Trustee. For this
reason, with respect to sales settling subsequent to the First
Settlement Date, the Public Offering Price of Units will have added to
it the proportionate share of accrued interest to the date of
settlement. Unit holders will receive on the next distribution date of
the Trust the amount, if any, of accrued interest paid on their Units.
For The First Trust Combined Series 1-197, except through an advancement
of its own funds, the Trustee has no cash for distribution to Unit
holders until it receives interest payments on the Bonds in a Trust. The
Trustee will recover its advancements without interest or other costs to
such Trust from interest received on the Bonds in the Trust. 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.
For The First Trust Combined Series 198-208, in an effort to reduce the
amount of Purchased Interest which would otherwise have to be paid by
Unit holders, the Trustee may advance a portion of the accrued interest
to the Sponsor as the Unit holder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest from
the First Settlement Date to the date of settlement (other than the
Purchased Interest already included therein), less any distributions
Page 9
from the Interest Account subsequent to the First Settlement Date. See
"Rights of Unit Holders-How are Interest and Principal Distributed?"
For The First Trust Combined Series 209 and subsequent Series, in an
effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of
Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date and the same will be
distributed to the Sponsor as the Unit holder of record as of the First
Settlement Date. Consequently, the amount of accrued interest to be
added to the Public Offering Price of Units will include only accrued
interest from the First Settlement Date to the date of settlement, less
any distributions from the Interest Account subsequent to the First
Settlement Date. See "Rights of Unit Holders-How are Interest and
Principal Distributed?"
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by a Trust and distributed to Unit holders.
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 Purchased Interest
(if any) and accrued interest from the purchaser of his Units. Since the
Trustee has the use of the funds (including Purchased Interest, if any)
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 Insured Trusts Insured?
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS. THE
BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED BY
INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as to the
scheduled payment of interest and principal by policies obtained by each
Insured Trust from Financial Guaranty Insurance Company ("Financial
Guaranty" or "FGIC"), a New York stock insurance company, or Ambac
Assurance Corporation ("Ambac Assurance" or "Ambac"), a Wisconsin-
domiciled stock insurance company, or obtained by the Bond issuer, the
underwriters, the Sponsor or others prior to the Initial Date of Deposit
directly from Financial Guaranty, Ambac Assurance or other insurers (the
"Preinsured Bonds"). The insurance policy obtained by each Insured Trust
is noncancellable and will continue in force for such Trust so long as
such Trust is in existence and the Bonds described in the policy
continue to be held by such Trust (see "Portfolio" for each Insured
Trust). The terms governing outstanding and existing policies remain
effective regardless of whether the insurer changes its name or sells
its assets. Nonpayment of premiums on the policy obtained by each
Insured Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or Ambac Assurance to take action against
the Trustee to recover premium payments due it. Premium rates for each
issue of Bonds protected by the policy obtained by each Insured Trust
are fixed for the life of such Trust. The premium for any Preinsured
Bonds has been paid in advance by the Bond issuer, the underwriters, the
Sponsor or others and any such policy or policies are noncancellable and
will continue in force so long as the Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. If the
provider of an original issuance insurance policy is unable to meet its
obligations under such policy, or if the rating assigned to the claims-
paying ability of such insurer deteriorates, Financial Guaranty and/or
Ambac Assurance has no obligation to insure any issue adversely affected
by either of the above described events. A monthly premium is paid by
each Insured Trust for the insurance obtained by such Trust, which is
payable from the interest income received by such Trust. In the case of
Preinsured Bonds, no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of the
aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay to
Citibank, N.A., or its successor, as its agent (the "Fiscal Agent"),
that portion of the principal of and interest on the Bonds covered by
the policy which shall become due for payment but shall be unpaid by
reason of nonpayment by the issuer of the Bonds. The term "due for
payment" means, when referring to the principal of a Bond, its stated
maturity date or the date on which it shall have been called for
mandatory sinking fund redemption and does not refer to any earlier date
on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on a Bond, the stated
date for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation, "due
for payment" also means, when referring to the principal of such Bond,
the date on which such Bond has been called for mandatory redemption as
a result of such determination of taxability, and when referring to
interest on such Bond, the accrued interest at the rate provided in such
documentation to the date on which such Bond has been called for such
mandatory redemption, together with any applicable redemption premium.
The term "due for payment" will not include, when referring to either
Page 10
the principal of a Bond or the interest on a Bond, any acceleration of
payment unless such acceleration is at the sole option of Financial
Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent on the
date such principal or interest becomes due for payment or on the
business day next following the day on which Financial Guaranty shall
have received notice of nonpayment, whichever is later. The Fiscal Agent
will disburse to the Trustee the face amount of principal and interest
which is then due for payment but is unpaid by reason of nonpayment by
the issuer but only upon receipt by the Fiscal Agent of (i) evidence of
the Trustee's right to receive payment of the principal or interest due
for payment and (ii) evidence, including any appropriate instruments of
assignment, that all of the rights to payment of such principal or
interest due for payment shall thereupon vest in Financial Guaranty.
Upon such disbursement, Financial Guaranty shall become the owner of the
Bond, appurtenant coupon or right to payment of principal or interest on
such Bond and shall be fully subrogated to all of the Trustee's rights
thereunder, including the right to payment thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained by an
Insured Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds regardless of the
identity of the holder thereof) (the "Permanent Insurance") upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee
will exercise the right to obtain Permanent Insurance only if upon such
exercise the Insured Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium attributable to the Permanent
Insurance) from such sale in excess of the sale proceeds if such Bonds
were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance is determined based upon the
insurability of each Bond as of the Initial Date of Deposit and will not
be increased or decreased for any change in the creditworthiness of such
Bond.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a wholly-
owned subsidiary of General Electric Capital Corporation ("GECC").
Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is a monoline
financial guarantee insurer domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As
of March 31, 1999, the total capital and surplus of Financial Guaranty
was approximately $1,274,619,558. Copies of Financial Guaranty's
financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared on the
basis of generally accepted accounting principles, may be obtained by
writing to Financial Guaranty at 115 Broadway, New York, New York 10006,
Attention: Communications Department (telephone number (212) 312-3000)
or to the New York State Insurance Department at 25 Beaver Street, New
York, New York 10004-2319, Attention: Financial Condition
Property/Casualty Bureau (telephone number (212) 480-5187).
In addition, Financial Guaranty is currently licensed to write insurance
in all fifty states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained
herein with respect to such corporation is unaudited but appears in
reports or other materials filed with state insurance regulatory
authorities and is subject to audit and review by such authorities. No
representation is made herein as to the accuracy or adequacy of such
information or as to the absence of material adverse changes in such
information subsequent to the date thereof.
Ambac Assurance Corporation ("Ambac Assurance"). Effective July 14,
1997, AMBAC Indemnity Corporation changed its name to Ambac Assurance
Corporation. The Insurance Policy of Ambac Assurance obtained by an
Insured Trust is noncancellable and will continue in force for so long
as the Bonds described in the Insurance Policy are held by an Insured
Trust. A monthly premium is paid by an Insured Trust for the Insurance
Policy obtained by it. The Trustee will pay, when due, successively, the
Page 11
full amount of each installment of the insurance premium. Pursuant to a
binding agreement with Ambac Assurance, in the event of a sale of a Bond
covered by the Ambac Assurance Insurance Policy, the Trustee has the
right to obtain permanent insurance for such Bond upon payment of a
single predetermined premium from the proceeds of the sale of such Bond.
Under the terms of the Insurance Policy, Ambac Assurance agrees to pay
to the Trustee that portion of the principal of and interest on the
Bonds insured by Ambac Assurance which shall become due for payment but
shall be unpaid by reason of nonpayment by the issuer of the Bonds. The
term "due for payment" means, when referring to the principal of a Bond
so insured, its stated maturity date or the date on which it shall have
been called for mandatory sinking fund redemption and does not refer to
any earlier date on which payment is due by reason of call for
redemption (other than by mandatory sinking fund redemption),
acceleration or other advancement of maturity and means, when referring
to interest on a Bond, the stated date for payment of interest.
Ambac Assurance will make payment to the Trustee not later than thirty
days after notice from the Trustee is received by Ambac Assurance that a
nonpayment of principal or of interest on a Bond has occurred, but not
earlier than the date on which the Bonds are due for payment. Ambac
Assurance will disburse to the Trustee the face amount of principal and
interest which is then due for payment but is unpaid by reason of
nonpayment by the issuer in exchange for delivery of Bonds, not less in
face amount than the amount of the payment in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where
Bonds are issuable only in a form whereby principal is payable to
registered holders or their assigns, Ambac Assurance shall pay principal
only upon presentation and surrender of the unpaid Bonds uncancelled and
free of any adverse claim, together with an instrument of assignment in
satisfactory form, so as to permit ownership of such Bonds to be
registered in the name of Ambac Assurance or its nominee. In cases where
Bonds are issuable only in a form whereby interest is payable to
registered holders or their assigns, Ambac Assurance shall pay interest
only upon presentation of proof that the claimant is the person entitled
to the payment of interest on the Bonds and delivery of an instrument of
assignment, in satisfactory form, transferring to Ambac Assurance all
right under such Bonds to receive the interest in respect of which the
insurance payment was made.
Ambac Assurance is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in fifty states, the District of
Columbia and the Commonwealth of Puerto Rico, with admitted assets of
approximately $3,462,875,000 (unaudited) and statutory capital of
approximately $1,970,343,000 (unaudited) as of March 31, 1999. Statutory
capital consists of Ambac Assurance's policyholders' surplus and
statutory contingency reserve. Ambac Assurance is a wholly owned
subsidiary of Ambac Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's have both assigned a
triple-A claims-paying ability rating to Ambac Assurance.
On December 18, 1997, all of the outstanding shares of Construction Loan
Insurance Corporation (which previously owned all of the outstanding
shares of Connie Lee Insurance Company) were merged into Connie Lee
Holdings, Inc. ("Connie Lee"). Connie Lee is a wholly-owned subsidiary
of Ambac Assurance Corporation, a Wisconsin-domiciled insurance company.
Copies of Ambac Assurance's financial statements prepared in accordance
with statutory accounting standards are available from Ambac Assurance.
The address of Ambac Assurance's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York, New
York 10004 and (212) 668-0340.
The information relating to Ambac Assurance contained above has been
furnished by Ambac Assurance. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any
adverse changes in such information, subsequent to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or Ambac
Assurance has applied its own standards which are not necessarily the
same as the criteria used in regard to the selection of bonds by the
Sponsor. This decision is made prior to the Initial Date of Deposit, as
bonds not covered by such insurance are not deposited in an Insured
Trust, unless such bonds are Preinsured Bonds. The insurance obtained by
an Insured Trust covers Bonds deposited in such Trust and physically
delivered to the Trustee in the case of bearer bonds or registered in
the name of the Trustee or its nominee or delivered along with an
assignment in the case of registered bonds or registered in the name of
the Trustee or its nominee in the case of Bonds held in book-entry form.
Page 12
Contracts to purchase Bonds are not covered by the insurance obtained by
an Insured Trust although Bonds underlying such contracts are covered by
insurance upon physical delivery to the Trustee.
Insurance obtained by each Insured Trust or by the Bond issuer, the
underwriters, the Sponsor or others does not guarantee the market value
of the Bonds or the value of the Units of such Trust. The insurance
obtained by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by the
Trustee, the insurance terminates as to such Bond on the date of sale.
In the event of a sale of a Bond insured by an Insured Trust, the
Trustee has the right to obtain Permanent Insurance upon the payment of
an insurance premium from the proceeds of the sale of such Bond. Except
as indicated below, insurance obtained by an Insured Trust has no effect
on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value to such insurance obtained by an
Insured Trust (including the right to obtain Permanent Insurance) for
the purpose of computing the price or redemption value of Units only if
the Bonds covered by such insurance are in default in payment of
principal or interest or, in the Sponsor's opinion, in significant risk
of such default. The value of the insurance will be equal to the
difference between (i) the market value of a Bond which is in default in
payment of principal or interest or in significant risk of such default
assuming the exercise of the right to obtain Permanent Insurance (less
the insurance premium attributable to the purchase of Permanent
Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering-How is the Public Offering
Price Determined?" herein for a more complete description of the
Evaluator's method of valuing defaulted Bonds and Bonds which have a
significant risk of default. Insurance on a Preinsured Bond is effective
as long as such Bond is outstanding. Therefore, any such insurance may
be considered to represent an element of market value in regard to the
Bonds thus insured, but the exact effect, if any, of this insurance on
such market value cannot be predicted.
A contract of insurance obtained by an Insured Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and/or Ambac Assurance and the Fund. Otherwise
neither Financial Guaranty nor its parent, FGIC Corporation, or any
affiliate thereof, nor Ambac Assurance nor its parent, Ambac, Inc., 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 in which the investors or the affiliates of FGIC
Corporation and/or Ambac Inc. have or will be participants or for which
a policy of insurance guaranteeing the scheduled payment of interest and
principal has been obtained from Financial Guaranty and/or Ambac
Assurance. Neither the Fund nor the Units of a Trust nor the portfolio
of such Trust is insured directly or indirectly by FGIC Corporation
and/or Ambac Inc.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation" or "MBIA") is the principal operating subsidiary of MBIA,
Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA Corporation. MBIA
Corporation is domiciled in the State of New York and licensed to do
business in and subject to regulation under the laws of all fifty
states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guam. MBIA has two European branches,
one in the Republic of France and the other in the Kingdom of Spain. New
York has laws prescribing minimum capital requirements, limiting classes
and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of
dividends by the insurer, changes in control and transactions among
affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for
certain periods of time.
As of December 31, 1998, MBIA had admitted assets of $6.5 billion
(audited), total liabilities of $4.2 billion (audited), and total
capital and surplus of $2.3 billion (audited) determined in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities. As of March 31, 1999, MBIA had admitted assets
of $6.7 billion (unaudited), total liabilities of $4.4 billion
(unaudited), and total capital and surplus of $2.3 billion (unaudited),
determined in accordance with statutory accounting practices prescribed
or permitted by insurance regulatory authorities. Copies of MBIA's
Page 13
financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504. The telephone number of MBIA is (914)
273-4545.
Effective February 17, 1998 MBIA acquired all of the outstanding stock
of Capital Markets Assurance Corporation ("CMAC"), a New York domiciled
financial guarantee insurance company, through a merger with its parent,
CapMAC Holdings, Inc. Pursuant to a reinsurance agreement, CMAC has
ceded all of its net insured risks (including any amounts due but unpaid
from third party reinsurers), as well as its unearned premiums and
contingency reserves, to MBIA. MBIA is not obligated to pay the debts of
or claims against CMAC.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of Bond Investors Guaranty
Insurance Company (BIG), now known as MBIA Insurance Corp. of Illinois.
Through a reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves, to MBIA
and MBIA has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG 1," both designated to be of the highest
quality. Standard & Poor's rates all new issues insured by MBIA "AAA."
Capital Guaranty Insurance Company. On December 20, 1995, Capital
Guaranty Corporation ("CGC") merged with a subsidiary of Financial
Security Assurance Holdings Ltd. and Capital Guaranty Insurance Company,
CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly-
owned subsidiary of Financial Security Assurance Inc. On September 30,
1997, Financial Security Assurance Inc. assumed all of the liabilities
of FSA Maryland and sold the FSA Maryland "shell company" to American
Capital Access, a wholly-owned subsidiary of American Capital Access
Holdings, Incorporated.
Financial Security Assurance. Financial Security Assurance Inc.
("Financial Security") is a monoline insurance company incorporated in
1984 under the laws of the State of New York. Financial Security is
licensed to engage in the financial guaranty insurance business in all
50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of
securities offered in domestic and foreign markets. In general,
financial guaranty insurance consists of the issuance of a guaranty of
scheduled payments of an issuer's securities, thereby enhancing the
credit rating of those securities, in consideration for payment of a
premium to the insurer. Financial Security and its subsidiaries
principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or
other assets having an ascertainable cash flow or market value.
Collateralized securities include public utility first mortgage bonds
and sale/leaseback obligation bonds. Municipal securities consist
largely of general obligation bonds, special revenue bonds and other
special obligations of state and local governments. Financial Security
insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed
company. Major shareholders of Holdings include Fund American
Enterprises Holdings, Inc., MediaOne Capital Corporation, XL Capital
Ltd. and The Tokio Marine and Fire Insurance Co. Ltd. No shareholder of
Financial Security is obligated to pay any debt of Financial Security or
its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional
contribution to the capital of Financial Security or its subsidiaries.
As of March 31, 1999, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively, of
Financial Security and its consolidated subsidiaries were, in accordance
with statutory accounting principles, approximately $1,077,088,000
(unaudited) and $607,467,000 (unaudited), and the total shareholders'
equity and the unearned premium reserve, respectively, of Financial
Security and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately $1,138,741,000
(unaudited), and $512,383,000 (unaudited). Copies of Financial
Security's financial statements may be obtained by writing to Financial
Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's telephone number is
(212) 826-0100.
Page 14
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security
or any of its operating insurance company subsidiaries are reinsured
among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject
to applicable statutory risk limitations. In addition, Financial
Security reinsures a portion of its liabilities under certain of its
financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis.
Such reinsurance is utilized as a risk management device and to comply
with certain statutory and rating agency requirements; it does not alter
or limit the obligations of Financial Security under any financial
guaranty insurance policy.
The claims-paying ability of Financial Security is rated "Aaa" by
Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Rating
Services, Nippon Investors Service Inc. and Standard & Poor's
(Australia) Pty. Ltd. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by such
rating agencies.
Connie Lee Insurance Company. On December 18, 1997, all of the
outstanding shares of Construction Loan Insurance Corporation (which
previously owned all of the outstanding shares of Connie Lee Insurance
Company) were merged into Connie Lee Holdings, Inc. ("Connie Lee").
Connie Lee is a wholly-owned subsidiary of Ambac Assurance Corporation,
a Wisconsin-domiciled insurance company.
As of December 31, 1998, the total policyholders' surplus of Connie Lee
was $120,484,617 (unaudited) and total admitted assets were $234,425,505
(unaudited), as reported to the Commissioner of Insurance of the State
of Wisconsin in Connie Lee's financial statements prepared in accordance
with statutory accounting principles applicable to insurance companies.
Copies of these financial statements are available from Connie Lee upon
request.
Standard & Poor's has rated the claims-paying ability of Connie Lee "AAA".
Connie Lee makes no representation regarding the Bonds or the
advisability of investing in the Bonds. The above rating is not a
recommendation to buy, sell or hold the Connie Lee insured Bonds and
such rating is subject to the revision or withdrawal at any time by the
rating agency. Any downward revision or withdrawal of the rating may
have an adverse effect on the market price of the Connie Lee insured
Bonds.
The address of Connie Lee's administrative offices and its telephone
number are 1299 Pennsylvania Avenue, N.W., Washington, D.C. 20004 and
(800) 221-1854.
Because the Bonds in each Insured Trust are insured as to the scheduled
payment of principal and interest and on the basis of the financial
condition of the insurance companies referred to above, Standard &
Poor's has assigned to units of each Insured Trust its "AAA" investment
rating. This is the highest rating assigned to securities by Standard &
Poor's. See "Description of Bond Ratings." The obtaining of this rating
by each Insured Trust should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the
market value of each Insured Trust or the Units of such Trust. Standard
& Poor's has indicated that this rating is not a recommendation to buy,
hold or sell Units nor does it take into account the extent to which
expenses of each Trust or sales by each Trust of Bonds for less than the
purchase price paid by such Trust will reduce payment to Unit holders of
the interest and principal required to be paid on such Bonds. Such
rating will be in effect for a period of thirteen months from the
Initial Date of Deposit of an Insured Trust and will, unless renewed,
terminate at the end of such period. There is no guarantee that the
"AAA" investment rating with respect to the Units of an Insured Trust
will be maintained.
An objective of portfolio insurance obtained by such Insured Trust is to
obtain a higher yield on the Bonds in the portfolio of such Trust than
would be available if all the Bonds in such portfolio had the Standard &
Poor's "AAA" and/or Moody's Investors Service, Inc. "Aaa" rating(s) and
at the same time to have the protection of insurance of scheduled
payment of interest and principal on the Bonds. There is, of course, no
certainty that this result will be achieved. Bonds in a Trust for which
insurance has been obtained by the Bond issuer, the underwriters, the
Sponsor or others (all of which were rated "AAA" by Standard & Poor's
and/or "Aaa" by Moody's Investors Service, Inc.) may or may not have a
higher yield than uninsured bonds rated "AAA" by Standard & Poor's or
"Aaa" by Moody's Investors Service, Inc. In selecting Bonds for the
portfolio of each Insured Trust, the Sponsor has applied the criteria
herein before described.
Page 15
What is the Federal Tax Status of Unit Holders?
See Part Three for each Trust.
FOR INFORMATION WITH RESPECT TO EXEMPTION FROM STATE OR OTHER LOCAL
TAXES, SEE PART THREE FOR EACH TRUST.
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to the Trusts, for which the Sponsor will be reimbursed in
amounts as set forth under "Special Trust Information" in each Part One
of this Prospectus, the Sponsor will not receive any fee in connection
with its activities relating to the Trusts. Legal and regulatory filing
fees and expenses associated with annually updating the Trusts'
registration statements are also now chargeable to each Trust.
Historically, the Sponsor paid these fees and expenses. For Series 49 and
all subsequent Series, First Trust Advisors L.P., an affiliate of the
Sponsor, will receive an annual supervisory fee, which is not to exceed
the amount set forth in Part One for each Trust, for providing portfolio
supervisory services for the Trust. Such fee is based on the number of
Units outstanding in each Trust on January 1 of each year except for
Trusts which were established subsequent to the last January 1, in which
case the fee will be based on the number of Units outstanding in such
Trusts as of the respective Initial Dates of Deposit.
For each valuation of the Bonds in a Trust, the Evaluator will receive a
fee as indicated in Part One of this Prospectus. The Trustee pays
certain expenses of each Trust for which it is reimbursed by such Trust.
The Trustee will receive for its ordinary recurring services to a Trust
an annual fee computed as indicated in Part One of this Prospectus. For
a discussion of the services performed by the Trustee pursuant to its
obligations under the Indenture, reference is made to the material set
forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable monthly on or before each
Distribution Date from the Interest Account of each Trust to the extent
funds are available and then from the Principal Account of such Trust.
Since the Trustee has the use of the funds being held in the Principal
and Interest Accounts for future distributions, payment of expenses and
redemptions and since such Accounts are non-interest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Fund is expected to result from the
use of these funds. However, the Trustee may bear from its own resources
certain expenses relating to a Trust.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services and
supervisory services, such individual fees may exceed the actual costs
of providing such services for a Trust, but at no time will the total
amount received for such Services rendered to all unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year exceed
the actual cost to the Sponsor or its affiliate of supplying such
services in such year.
The annualized cost of the portfolio insurance obtained by the Fund for
each Insured Trust is indicated in Part One for each Trust in a Series
of the Fund. The portfolio insurance continues so long as such Trust
retains the Bonds thus insured. Premiums are payable monthly in advance
by the Trustee on behalf of such Trust. As Bonds in the portfolio are
redeemed by their respective issuers or are sold by the Trustee, the
amount of premium will be reduced in respect of those Bonds no longer
owned by and held in the Trust which were insured by insurance obtained
by such Trust. Preinsured Bonds for which insurance has been obtained
from Financial Guaranty and/or Ambac Assurance or, beginning with Series
25 and all subsequent Series, other insurers, are not insured by such
Trust. The premium payable for Permanent Insurance will be paid solely
from the proceeds of the sale of such Bond in the event the Trustee
exercises the right to obtain Permanent Insurance on a Bond. The
premiums for such Permanent Insurance with respect to each Bond will
decline over the life of the Bond. An Advantage Trust is not insured;
accordingly, there are no premiums for insurance payable by such Trust.
The following additional charges are or may be incurred by a Trust: all
expenses (including legal and annual 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;
Page 16
fees of the Trustee for any extraordinary services performed under the
Indenture; indemnification of the Trustee for any loss, liability or
expense incurred by it without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its
acceptance or administration of the Trust; indemnification of the
Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; all taxes and other government charges imposed upon the Bonds
or any part of the Trust (no such taxes or charges are being levied or
made or, to the knowledge of the Sponsor, are contemplated); and
expenditures incurred in contacting Unit holders upon termination of the
Trust. The above expenses and the Trustee's annual fee, when paid or
owing to the Trustee, are secured by a lien on the Trust. In addition,
the Trustee is empowered to sell Bonds of a Trust in order to make funds
available to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required, the
Indenture requires the accounts of each Trust to be audited on an annual
basis at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a secondary market for
Units, the Sponsor shall bear the cost of such annual audits to the
extent such cost exceeds $.50 per Unit. Unit holders of a Trust covered
by an audit may obtain a copy of the audited financial statements from
the Trustee upon request.
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 the amount of
Purchased Interest of a Trust (if any) and interest accrued to the date
of settlement. All expenses incurred in maintaining a market, other than
the fees of the Evaluator, the costs of the Trustee in transferring
and recording the ownership of Units, and costs incurred in annually
updating the Trusts' registration statements, 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. As in the First Trust
Combined Series, 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 plus the amount of Purchased Interest of a Trust
(if any) and the appropriate sales charge determined in accordance with
the schedule set forth below, based upon the number of years remaining
to the maturity of each Bond in the portfolio of the Trust, adjusting
the total to reflect the amount of any cash held in or advanced to the
principal account of the Trust and dividing the result by the number of
Units of such trust then outstanding. The minimum sales charge on Units
will be 3% of the Public Offering Price (equivalent to 3.093% of the net
amount invested). For purposes of computation, Bonds will be deemed to
mature on their expressed maturity dates unless: (a) the Bonds have been
called for redemption or funds or securities have been placed in escrow
to redeem them on an earlier call date, in which case such call date
will be deemed to be the date upon which they mature; or (b) such Bonds
are subject to a "mandatory tender," in which case such mandatory tender
will be deemed to be the date upon which they mature. The offering price
of Bonds in the Trust may be expected to be greater than the bid price
of such Bonds by approximately 1-2% of the aggregate principal amount of
such Bonds.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each of the various
Bonds in the Trusts based upon the maturities of such bonds, in
accordance with the following schedule:
Page 17
<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 or more consecutive
series of a particular State, National, Discount, Intermediate, Long
Intermediate or Short Intermediate Trust for purposes of calculating the
discount for volume purchases listed above. Additionally, with respect
to the employees, officers and directors (including their immediate
family members, defined as spouses, children, grandchildren, parents,
grandparents, mothers-in-law, fathers-in-law, sons-in-law and daughters-
in-law, and trustees, custodians or fiduciaries for the benefit of such
person) of the Sponsor and broker/dealers and their subsidiaries and
vendors providing services to the Sponsor, may purchase Units of the
Trusts during the secondary market at the Public Offering Price less the
concession the Sponsor typically allows broker/dealers.
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer. The reduced sales charge structure will apply on all
purchases of Units in a Trust by the same person on any one day from the
Sponsor or any one broker/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 the Sponsor
or such broker/dealer of Units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser will be deemed, for the purpose of calculating
the applicable sales charge, to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account.
From time to time the Sponsor may implement programs under which
broker/dealers and other selling agents 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 broker/dealers and other selling agents
may be eligible to win other nominal awards for certain sales efforts,
or under which the Sponsor will reallow to any such broker/dealer or
other selling agent 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 broker/dealers and
other selling agents 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
Page 18
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 Bonds in each Trust is determined by the
evaluator (the "Evaluator"), on the basis of bid prices (1) on the basis
of current market prices for the Bonds obtained from dealers or brokers
who customarily deal in bonds comparable to those held by the Trust; (2)
if such prices are not available for any of the Bonds, on the basis of
current market prices for comparable bonds; (3) by determining the value
of the Bonds by appraisal; or (4) by any combination of the above.
Unless Bonds are in default in payment of principal or interest or, in
the Sponsor's opinion, in significant risk of such default, the
Evaluator will not attribute any value to the insurance obtained by an
Insured Trust. On the other hand, the value of insurance obtained by the
issuer of Bonds in a Trust is reflected and included in the market value
of such Bonds.
The Evaluator will consider in its evaluation of Bonds which are in
default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default (the "Defaulted Bonds") and
which are covered by insurance obtained by an Insured Trust, the value
of the insurance guaranteeing interest and principal payments. The value
of the insurance will be equal to the difference between (i) the market
value of Defaulted Bonds assuming the exercise of the right to obtain
Permanent Insurance (less the insurance premium attributable to the
purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the
Evaluator will consider the ability of Financial Guaranty and/or Ambac
Assurance to meet its commitments under an Insured Trust's insurance
policy, including the commitments to issue Permanent Insurance. It is
the position of the Sponsor that this is a fair method of valuing the
Bonds and the insurance obtained by an Insured Trust and reflects a
proper valuation method in accordance with the provisions of the
Investment Company Act of 1940.
The Evaluator will be requested to make a determination of the aggregate
price of the Bonds in each Trust, on a bid price basis, as of the close
of trading on the New York Stock Exchange on each day on which it is
open, effective for all sales, purchases or redemptions made subsequent
to the last preceding determination.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. A person will
become owner of the Units on the date of settlement provided payment has
been received. Cash, if any, made available to the Sponsor prior to the
date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934.
Delivery of Certificates representing Units so ordered will be made
three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units Be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market (see "Public Offering-Will
There be a Secondary Market?") may be offered by this Prospectus at the
secondary market public offering price determined in the manner
described above.
It is the intention of the Sponsor to qualify Units of the Fund for sale
in a number of states. Sales 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. Notwithstanding the foregoing, broker/dealers
or other selling agents who purchase, in the aggregate, $250,000 of the
Trusts on any day will receive a volume concession or agency commission
of $40.00 per Unit. However, resales of Units of a Trust by such
broker/dealers and other selling agents to the public will be made at
the Public Offering Price described in this Prospectus. The Sponsor
Page 19
reserves the right to change the amount of the concession or agency
commission from time to time. Certain commercial banks are making Units
of the Fund 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 amounts indicated above.
Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have not indicated that these
particular agency transactions are not permitted under such Act. In
Texas and in certain other states, any banks making Units available must
be registered as broker/dealers under state law.
What are the Sponsor's Profits?
The Sponsor and participating dealers will receive a maximum gross sales
commission equal to 5.8% of the Public Offering Price of the Units of
each State Trust (equivalent to 6.157% of the net amount invested), 5.8%
of the Public Offering Price of the Units of a National or Discount
Trust (equivalent to 6.157% of the net amount invested), 4.7% of the
Public Offering Price of the Units of an Intermediate or Long
Intermediate Trust (equivalent to 4.932% of the net amount invested),
and 3.7% of the Public Offering Price of the Units of a Short
Intermediate Trust (equivalent to 3.842% of the net amount invested)
less any reduced sales charge for quantity purchases as described under
"Public Offering-How is the Public Offering Price Determined?"
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased (based on the bid prices of the Bonds
in each Trust) and the price at which Units are resold (which price is
also based on the bid prices of the Bonds in each Trust and includes a
maximum sales charge of 5.8% for a State Trust, 5.8% for a National or
Discount Trust, 4.7% for an Intermediate or Long Intermediate Trust and
3.7% for a Short Intermediate Trust) or redeemed. The secondary market
public offering price of Units may be greater or less than the cost of
such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How are Certificates Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units is evidenced by registered certificates executed by
the Trustee and the Sponsor. Delivery of certificates representing Units
ordered for purchase is normally made three business days following such
order or shortly thereafter. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or
accompanied by a 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 Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification. Certificates
for Units will bear an appropriate notation on their face indicating
which plan of distribution has been selected in respect thereof. When a
change is made, the existing certificate must be surrendered to the
Trustee and a new certificate issued to reflect the then currently
effective plan of distribution. There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued to
replace destroyed, stolen or lost certificates, the Unit holder may be
required to furnish indemnity satisfactory to the Trustee and pay such
expenses as the Trustee may incur. Mutilated certificates must be
surrendered to the Trustee for replacement.
Page 20
How are Interest and Principal Distributed?
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with the
Distribution Dates being the last day of the month in which the related
Record Date occurs. It is anticipated that an amount equal to
approximately one-half of the amount of net annual interest income per
Unit will be distributed on or shortly after each Distribution Date to
Unit holders of record on the preceding Record Date. Record Dates for
monthly distributions of interest are the fifteenth day of each month.
The Distribution Dates for distributions of interest under the monthly
plan is the last day of each month in which the related Record Date
occurs. See "Special Trust Information" appearing in each Part I of this
Prospectus.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the Trustee will furnish each Unit holder a card to be returned to
the Trustee not more than thirty nor less than ten days before the end
of such month. Unit holders desiring to change the plan of distribution
in which they are participating may so indicate on the card and return
same, together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate are
not returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve months.
The pro rata share of cash in the Principal Account of each Trust will
be computed as of the fifteenth day of each month, and distributions to
the Unit holders of such Trust as of such Record Date will be made on
the dates specified in Part One. Proceeds from the disposition of any of
the Bonds of such Trust (less any premiums due with respect to Bonds for
which the Trustee has exercised the right to obtain Permanent Insurance)
received after such Record Date and prior to the following Distribution
Date will be held in the Principal Account of such Trust and not
distributed until the next Distribution Date. The Trustee is not
required to make a distribution from the Principal Account of a Trust
unless the amount available for distribution shall equal at least $1.00
per Unit.
The Trustee will credit to the Interest Account of each Trust all
interest received by such Trust, including that part of the proceeds
(including insurance proceeds if any, paid to an Insured Trust) of any
disposition of Bonds which represents accrued interest. Other receipts
will be credited to the Principal Account of such Trust. The
distribution to the Unit holders of a Trust as of each Record Date will
be made on the following Distribution Date or shortly thereafter and
shall consist of an amount substantially equal to such portion of the
holder's pro rata share of the estimated annual income of such Trust
after deducting estimated expenses. Except through an advancement of its
own Funds, the Trustee has no cash for distribution to Unit holders
until it receives interest payments on the Bonds in a Trust. The Trustee
shall be reimbursed, without interest, for any such advances from funds
in the Interest Account of such Trust on the ensuing Record Date.
Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution Date
after the purchase, under the applicable plan of distribution. The
Trustee is not required to pay interest on funds held in the Principal
or Interest Account of a Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of each Trust and, to the extent funds are not
sufficient therein, from the Principal Account of each Trust, amounts
necessary to pay the expenses of such Trust. The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the
Trustee may withdraw from the Interest Account and the Principal Account
of a Trust such amounts as may be necessary to cover redemption of Units
of such Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an existing account. For
example, at a Unit holder's direction, the Trustee would distribute
Page 21
automatically on the applicable distribution date interest income or
principal on the participant's Units to, among other investment
vehicles, a Unit holder's checking, bank savings, money market,
insurance, reinvestment or any other account. All such distributions, of
course, are subject to the minimum investment and sales charges, if any,
of the particular investment vehicle to which distributions are
directed. The Trustee will notify the participant of each distribution
pursuant to the Universal Distribution Option. The Trustee will
distribute directly to the Unit holder any distributions which are not
accepted by the specified investment vehicle. A participant may at any
time, by so notifying the Trustee in writing, elect to terminate his
participation in the Universal Distribution Option and receive directly
future distributions on his Units.
Distribution Reinvestment Option. The Sponsor has entered into an
arrangement with Oppenheimer Management Corporation, which permits any
Unit holder of a Trust to elect to have each distribution of interest
income or principal on his Units automatically reinvested in shares of
either the Oppenheimer Intermediate Tax-Exempt Bond Fund (the
"Intermediate Series") or the Oppenheimer Insured Tax-Exempt Bond Fund
(the "Insured Series"). Oppenheimer Management Corporation is the
investment adviser of each Series which are open-end, diversified
management investment companies. The investment objective of the
Intermediate Series is to provide a high level of current interest
income exempt from Federal income tax through the purchase of investment
grade securities. The investment objective of the Insured Series is to
provide as high a level of current interest income exempt from Federal
income tax as is consistent with the assurance of the scheduled receipt
of interest and principal through insurance and the preservation of
capital (the income of either Series may constitute an item of
preference for determining the Federal alternative minimum tax). The
objectives and policies of each Series are presented in more detail in
the prospectus for each Series.
Each person who purchases Units of a Trust may contact the Trustee to
request a prospectus describing each Series and a form by which such
person may elect to become a participant in a Distribution Reinvestment
Option with respect to a Series. Each distribution of interest income or
principal on the participant's Units will automatically be applied by
the Trustee to purchase shares (or fractions thereof) of a Series
without a sales charge and with no minimum investment requirements.
The shareholder service agent for each Series will mail to each
participant in the Distribution Reinvestment Option confirmations of all
transactions undertaken for such participant in connection with the
receipt of distributions from The First Trust Combined Series and the
purchase of shares (or fractions thereof) of a Series.
A participant may at any time, by so notifying the Trustee in writing,
elect to terminate his participation in the Distribution Reinvestment
Option and receive future distributions on his Units in cash. There will
be no charge or other penalty for such termination. The Sponsor and
Oppenheimer Management Corporation each have the right to terminate the
Distribution Reinvestment Option, in whole or in part.
It should be remembered that even if distributions are reinvested
through the Universal Distribution Option or the Distribution
Reinvestment Option they are still treated as distributions for income
tax purposes.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after
the last business day of each calendar year, the Trustee will furnish to
each person who at any time during the calendar year was a Unit holder
of a Trust of record, a statement as to (1) the Interest Account:
interest received by such Trust (including amounts representing interest
received upon any disposition of Bonds of such Trust), the amount of
such interest representing insurance proceeds (if applicable),
Page 22
deductions for payment of applicable taxes and for fees and expenses of
the Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount
and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (2) the
Principal Account: the dates of disposition of any Bonds of such Trust
and the net proceeds received therefrom (excluding any portion
representing interest and the premium attributable to the exercise of
the right, if applicable, to obtain Permanent Insurance), deduction for
payment of applicable taxes and for fees and expenses of the Trust,
redemptions of Units, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) the Bonds held and the
number of Units of such Trust outstanding on the last business day of
such calendar year; (4) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (5) the
amounts actually distributed during such calendar year from the Interest
Account and from the Principal Account of such Trust, separately stated,
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Date for such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information in
respect of each plan of distribution so that Unit holders may be
informed regarding the results of the 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
Trustee at its unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed
as explained above (or by providing satisfactory indemnity, as in
connection with lost, stolen or destroyed certificates), and payment of
applicable governmental charges, if any. No redemption fee will be
charged. On the third day following such tender, the Unit holder will be
entitled to receive in cash an amount for each Unit equal to the
Redemption Price per Unit next computed after receipt by the Trustee of
such tender of Units. The "date of tender" is deemed to be the date on
which Units are received by the Trustee (if such day is a day on which
the New York Stock Exchange is open for trading), except that as regards
Units received after the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time or as of any earlier closing time on a
day on which the New York Stock Exchange is scheduled in advance to
close at such earlier time), the date of tender is the next day on which
such Exchange is open for trading and such Units will be deemed to have
been tendered to the Trustee on such day for redemption at the
redemption price computed on that day. Units so redeemed shall be
cancelled.
Purchased Interest (if any) and other accrued interest to the settlement
date paid on redemption shall be withdrawn from the Interest Account of
a 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 will be determined on the basis of the bid
price of the Bonds in a Trust and the amount of Purchased Interest of
the Trust (if any), 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
Trustee on the basis of (1) the cash on hand in the Trust or moneys in
the process of being collected, (2) the value of the Bonds in such Trust
based on the bid prices of the Bonds, except for those cases in which
the value of the insurance, if applicable, has been added, and (3)
Purchased Interest (if any) and any other interest accrued thereon, less
(a) amounts representing taxes or other governmental charges payable out
of such Trust, (b) the accrued expenses of such Trust, and (c) cash held
for distribution to Unit holders of record as of a date prior to the
evaluation then being made. The Evaluator may determine the value of the
Bonds in a Trust (1) on the basis of current bid prices of the Bonds
obtained from dealers or brokers who customarily deal in bonds
comparable to those held by such Trust, (2) on the basis of bid prices
for bonds comparable to any Bonds for which bid prices are not
available, (3) by determining the value of the Bonds by appraisal, or
(4) by any combination of the above. In determining the Redemption Price
per Unit for an Insured Trust, no value will be attributed to the
portfolio insurance covering the Bonds in such Trust unless such Bonds
are in default in payment of principal or interest or in significant
risk of such default. On the other hand, Bonds insured under a policy
obtained by the Bond issuer, the underwriters, the Sponsor or others are
entitled to the benefits of such insurance at all times and such
benefits are reflected and included in the market value of such Bonds.
See "Why and How are the Insured Trusts Insured?" For a description of
Page 23
the situations in which the evaluator may value the insurance obtained
by an Insured Trust, see "Public Offering-How is the Public Offering
Price Determined?"
The difference between the bid and offering prices of such Bonds may be
expected to average 1-2% of the principal amount. In the case of
actively traded bonds, the difference may be as little as 1/2 of 1% and,
in the case of inactively traded bonds, such difference usually will not
exceed 3%. Therefore, the price at which Units may be redeemed could be
less than the price paid by the Unit holder and may be less than the par
value of the Securities represented by the Units so redeemed.
The Trustee is empowered to sell underlying Bonds in a Trust in order to
make funds available for redemption. To the extent that Bonds are sold,
the size and diversity of such Trust will be reduced. Such sales may be
required at a time when Bonds would not otherwise be sold and might
result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or an emergency exists, as a result of which
disposal or evaluation of the Bonds is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission may by
order permit. Under certain extreme circumstances, the Sponsor may apply
to the Securities and Exchange Commission for an order permitting a full
or partial suspension of the right of Unit holders to redeem their Units.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, which for certain
Trusts includes Purchased Interest, it may purchase such Units by
notifying the Trustee before 1:00 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 as any other Units. Any profit or loss
resulting from the resale or redemption of such Units will belong to the
Sponsor.
How May Bonds be Removed from the Fund?
The Trustee is empowered to sell such of the Bonds in each Trust on a
list furnished by the Sponsor as the Trustee in its sole discretion may
deem necessary to meet redemption requests or pay expenses to the extent
funds are unavailable. As described in the following paragraph and in
certain other unusual circumstances for which it is determined by the
Depositor to be in the best interests of the Unit holders or if there is
no alternative, the Trustee is empowered to sell Bonds in a Trust which
are in default in payment of principal or interest or in significant
risk of such default and for which value has been attributed to the
insurance, if any, obtained by the Trust. See "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, if any, or otherwise, within thirty days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails
to instruct the Trustee to sell or to hold such Bond within thirty days
after notification by the Trustee to the Sponsor of such default, the
Trustee may, in its discretion, sell the defaulted Bond and not be
liable for any depreciation or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made by an
issuer of any of the Bonds to issue new obligations in exchange and
substitution for any Bonds pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept such an offer
or to take any other action with respect thereto as the Sponsor may deem
proper if the issuer is in default with respect to such Bonds or in the
written opinion of the Sponsor the issuer will probably default in
respect to such Bonds in the foreseeable future. Any obligations so
received in exchange or substitution will be held by the Trustee subject
to the terms and conditions in the Indenture to the same extent as Bonds
Page 24
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under "What
is the First Trust Combined Series?" for Failed Bonds, the acquisition
by a Trust of any securities other than the Bonds initially deposited is
prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, the FT Series (formerly known as 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 $25 billion in First Trust unit investment trusts have
been deposited. The Sponsor's employees include a team of professionals
with many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1998, the total
partners' capital of Nike Securities L.P. was $18,506,548 (audited).
This paragraph relates only to the Sponsor and not to the Trust or to
any series thereof or to any other Underwriter. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Bonds. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the Fund which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
Page 25
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trusts as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East Roosevelt
Road, Suite 200, Wheaton, Illinois 60187. The Evaluator may resign or
may be removed by the Sponsor 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 thirty days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee), provided that
the Indenture is not amended to increase the number of Units of any
Trust issuable thereunder or to permit the deposit or acquisition of
securities either in addition to or in substitution for any of the Bonds
of any Trust initially deposited in a Trust, except for the substitution
of certain refunding securities for Bonds or New Bonds for Failed Bonds.
In the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
Each Trust may be liquidated at any time by consent of 100% of the Unit
holders of such Trust or by the Trustee when the value of such Trust, as
shown by any evaluation, is less than 20% of the aggregate principal
amount of the Bonds initially deposited in the Trust or by the Trustee
in the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by the
Underwriters, including the Sponsor. If a Trust is liquidated because of
the redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of such Trust the entire
sales charge paid by such purchaser. The Indenture will terminate upon
the redemption, sale or other disposition of the last Bond held
thereunder, but in no event shall it continue beyond the Mandatory
Termination Date as indicated in Part One for each Trust. In the event
of termination, written notice thereof will be sent by the Trustee to
all Unit holders of such Trust. Within a reasonable period after
termination, the Trustee will sell any Bonds remaining in the Trust,
and, after paying all expenses and charges incurred by such Trust, will
distribute to each Unit holder of such Trust (including the Sponsor if
it then holds any Units), upon surrender for cancellation of his
Certificate for Units, his pro rata share of the balances remaining in
the Interest and Principal Accounts of such Trust, all as provided in
the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Booth & Baron, 122 East 42nd Street, Suite 1507, New York, New York
10168, acts as special counsel for the Fund for New York tax matters for
Series 1, 2 and 3 of the Fund. Winston & Strawn (previously named Cole &
Page 26
Deitz), 175 Water Street, New York, New York 10038 acts as counsel for
the Trustee and as special counsel for the Fund for New York Tax matters
for Series 4-125 of the Fund. Carter, Ledyard & Milburn, 2 Wall Street,
New York, New York 10005, acts as counsel for the Trustee and as special
counsel for the Fund for New York tax matters for Series 126 and
subsequent Series of the Fund. For information with respect to state and
local tax matters, including the State Trust special counsel for such
matters, see Part Three for each Trust.
Experts
The statements of net assets, including the portfolios, of each Trust
contained in Part One of the Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere therein and in the
Registration Statement, and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and
auditing.
Page 27
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
l. 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;
ll. Nature of and provisions of the obligation;
lll. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.**
AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
_____________
*As published by the rating companies.
**Bonds insured by Financial Guaranty Insurance Company, Ambac Assurance
Corporation, Municipal Bond Investors Assurance Corporation, Connie Lee
Insurance Company, Financial Security Assurance and Capital Guaranty
Insurance Company are automatically rated "AAA" by Standard & Poor's.
Page 28
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat large than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
Baa-Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at
the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Con.(---)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis
of condition.
Fitch Investors Service, Inc. A brief description of the applicable
Fitch Investors Service, Inc. rating symbols and their meanings follow:
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments.
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
Page 29
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to
show relative standing within these major rating categories.
Page 30
CONTENTS:
The First Trust Combined Series:
What is The First Trust Combined Series? 3
What are Estimated Long-Term Return and
Estimated Current Return? 8
How are Purchased Interest and Accrued
Interest Treated? 9
Why and How are the Insured Trusts Insured? 10
What is the Federal Tax Status of Unit Holders? 16
What are the Expenses and Charges? 16
Public Offering:
How is the Public Offering Price Determined? 17
How are Units Distributed? 19
What are the Sponsor's Profits? 20
Rights of Unit Holders:
How are Certificates Issued and Transferred? 20
How are Interest and Principal Distributed? 21
How can Distributions to Unit Holders be
Reinvested? 21
What Reports will Unit Holders Receive? 22
How May Units be Redeemed? 23
How May Units be Purchased by the Sponsor? 24
How May Bonds be Removed from the Fund? 24
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 25
Who is the Trustee? 25
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 26
Other Information:
How May the Indenture be Amended or
Terminated? 26
Legal Opinions 26
Experts 27
Description of Bond Ratings 28
__________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST(REGISTERED TRADEMARK)
THE FIRST TRUST
COMBINED SERIES
Prospectus
Part Two
October 29, 1999
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE
AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 31
NATIONAL TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated March 31, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
Page 3
she receives any tax-exempt interest. A taxpayer whose modified adjusted
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Certain Considerations
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the National Trusts are
subject. Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within the
control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the National Trusts to pay interest on or
principal of the Bonds.
Page 5
NATIONAL TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 6
CALIFORNIA 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 28, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
she receives any tax-exempt interest. A taxpayer whose modified adjusted
gross income (after inclusion of tax-exempt interest) does not exceed
Page 3
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
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
Page 4
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
California Tax Status of Unit Holders
At the time of the closing for each California Trust, Special Counsel to
the Fund for California tax matters rendered an opinion under then
existing California income and property tax law applicable to taxpayers
whose income is subject to California income taxation substantially to
the effect that:
Each California Trust is not an association taxable as a corporation and
the income of a California Trust will be treated as the income of the
Unit holders under the income tax laws of California.
Interest on the underlying securities (which may include bonds or other
obligations issued by the governments of Puerto Rico, the Virgin
Islands, Guam or the Northern Mariana Islands) which is exempt from tax
under California personal income tax and property tax laws when received
by a California Trust will, under such laws, retain its status as tax-
exempt interest when distributed to Unit holders. However, interest on
the underlying securities attributed to a Unit holder which is a
corporation subject to the California franchise tax laws may be
includable in its gross income for purposes of determining its
California franchise tax.
Under California income tax law, each Unit holder in a California Trust
will have a taxable event when a California Trust disposes of a security
(whether by sale, exchange, redemption or payment at maturity) or when
the Unit holder redeems or sells Units. Because of the requirement that
tax cost basis be reduced to reflect amortization of bond premium, under
some circumstances a Unit holder may realize taxable gain when Units are
sold or redeemed for an amount equal to, or less than, their original
cost. The total tax cost of each Unit to a Unit holder is allocated
among each of the bond issues held in a California Trust (in accordance
with the proportion of a California Trust comprised by each bond issue)
in order to determine his per unit tax cost for each bond issue; and the
tax cost reduction requirements relating to amortization of bond premium
will apply separately to the per unit cost of each bond issue; and the
tax cost reduction requirements relating to amortization of bond premium
will apply separately to the per unit cost of each bond issue. Unit
holders' bases in their Units, and the bases for their fractional
interest in each California Trust asset, may have to be adjusted for
their pro rata share of accrued interest received, if any, on securities
delivered after the Unit holders' respective settlement dates.
Under the California personal property tax laws, bonds (including the
bonds in a California Trust as well as "regular-way" and "when-issued"
contracts for the purchase of bonds) or any interest therein is exempt
from such tax.
Any proceeds paid under an insurance policy issued to the Trustee of a
Trust with respect to the bonds in a California Trust as well as
"regular-way" and "when-issued" contracts for the purchase of bonds
which represent maturing interest on defaulted obligations held by the
Trustee will be exempt from California personal income tax if, and to
the same extent as, such interest would have been so exempt if paid by
the issuer of the defaulted obligations.
Under Section 17280(b)(2) of the California Revenue and Taxation Code,
interest on indebtedness incurred or continued to purchase or carry
Units of a California Trust is not deductible for the purposes of the
California personal income tax. While there presently is no California
authority interpreting this provision, Section 17280(b)(2) directs the
California Franchise Tax Board to prescribe regulations determining the
proper allocation and apportionment of interest costs for this purpose.
The Franchise Tax Board has not yet proposed or prescribed such
regulations. In interpreting the generally similar Federal provision,
the Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (although the Service has not contended that a deduction for
interest on indebtedness incurred to purchase or improve a personal
Page 5
residence or to purchase goods or services for personal consumption will
be disallowed). In the absence of conflicting regulations or other
California authority, the California Franchise Tax Board generally has
interpreted California statutory tax provisions in accord with Internal
Revenue Service interpretations of similar Federal provisions.
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
Economic Factors. Each California Trust is susceptible to political,
economic or regulatory factors affecting issuers of California municipal
obligations (the "California Municipal Obligations"). These include the
possible adverse effects of certain California constitutional
amendments, legislative measures, voter initiatives and other matters
that are described below. The following information provides only a
brief summary of the complex factors affecting the financial situation
in California (the "State") and is derived from sources that are
generally available to investors and are believed to be accurate. No
independent verification has been made of the accuracy or completeness
of any of the following information. It is based in part on information
obtained from various State and local agencies in California or
contained in Official Statements for various California Municipal
Obligations.
There can be no assurance that future statewide or regional economic
difficulties, and the resulting impact on State or local governmental
finances generally, will not adversely affect the market value of
California Municipal Obligations held in the portfolio of a Trust or the
ability of particular obligors to make timely payments of debt service
on (or relating to) those obligations.
Since the recession in California in the early 1990's, California has
made a significant recovery. Deep cuts in the nation's defense budget
were the main reason that California's downturn was so severe. By 1996,
nearly 60% of California's more than 385,000 aerospace jobs had been
eliminated. In addition, California suffered more than two-thirds of all
of the nation's job losses resulting from military base closures.
As 1998 unfolded, the impact of Asia's recession on California began to
emerge. High-technology manufacturing employment-aerospace and
electronics-peaked in March 1998, and by November 1998, had lost almost
15,000 jobs, or nearly 3% of the industries' workforce. Total nonfarm
employment started 1998 with annual growth above 3%, but more recently,
the year-to-year pace has slowed to around 2.7%.
Overall, however, California's economy continued to expand in 1998.
Nonfarm employment growth averaged 3.2% and personal income was up more
than 6%. The jobless rate was below 6% most of the year. Nonresidential
construction activity remained strong, with building permit value up
almost 18%. Homebuilding continued on a moderate recovery path, with
permits for new houses reaching 126,000 units, a 13% increase over 1997.
The construction industry led California's employment growth in 1998.
From October 1997 to October 1998, construction jobs increased by more
than 9%.
Although weak export demand is likely to persist through at least 1999,
there are other elements in the California economy that will help
partially offset the Asia-related problems. Demand for computer services
and software remains extremely strong, buoyed by the demand to fix Year
2000 problems, the continued explosive growth of the Internet, and by
financial sector needs related to the new euro currency. The strength in
construction activity will continue to boost prospects for related
manufacturing industries. Although California economic growth will slow
from the pace of 1997 and 1998, gains in employment and income should
continue to outpace the nation.
California's population grew by 574,000 people in 1997 to a total of
32.96 million. This reflects a 1.8% increase of population for the year,
compared to 1.0% growth posted in calendar year 1996. California's
population is concentrated in metropolitan areas specifically located in
the Los Angeles and San Diego counties.
California enjoys a large and diverse labor force. For calendar year
1997, the total civilian labor force was 15,971,000 with 14,965,000
individuals employed and 1,006,000, or 6.3%, unemployed. In comparison,
the unemployment rate for the United States during the same time was 4.9%.
During 1997, several tax reform and business measures were enacted.
California's Workers' Compensation system which previously had some of
the highest premiums and lowest benefits in the nation, was reformed
with a 40% premium reduction, saving employers more than $4 billion per
year. The Bank and Corporation tax was cut by 5% to 8.84%, thus lowering
the cost of doing business in California by $300 million per year. The
Page 6
tax rate on Subchapter "S" corporations was reduced from 2.5% to 1.5%,
and the requirements for qualification for Subchapter "S" status were
conformed to recent federal law changes. Personal income taxes were
reduced by $1.1 billion in 1997 and when the tax package is fully
implemented in 1999-2000, the personal income tax cut will total $800
million.
Constitutional Limitations on Taxes and Appropriations
Limitation on Taxes. Certain California municipal obligations may be
obligations of issuers which rely in whole or in part, directly or
indirectly, on ad valorem property taxes as a source of revenue. The
taxing powers of California local governments and districts are limited
by Article XIIIA of the California Constitution, enacted by the voters
in 1978 and commonly known as "Proposition 13." Briefly, Article XIIIA
limits to 1% of full cash value the rate of ad valorem property taxes on
real property and generally restricts the reassessment of property to
the rate of inflation, not to exceed 2% per year or decline in value,
except upon new construction or change of ownership (subject to a number
of exemptions). Taxing entities may, however, raise ad valorem taxes
above the 1% limit to pay debt service on voter-approved bonded
indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or
as of March 1, 1975, if acquired earlier), subject to certain
adjustments. This system has resulted in widely varying amounts of tax
on similarly situated properties. Several lawsuits have been filed
challenging the acquisition-based assessment system of Proposition 13
and on June 18, 1992, the U.S. Supreme Court announced a decision
upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through
ad valorem property taxes above the 1% limit; it also requires voters of
any governmental unit to give two-thirds approval to levy any "special
tax." Court decisions, however, allowed non-voter approved levy of
"general taxes" which were not dedicated to a specific use. In response
to these decisions, the voters of the State in 1986 adopted an
initiative statute which imposed significant new limits on the ability
of local entities to raise or levy general taxes, except by receiving
majority local voter approval. Significant elements of this initiative,
"Proposition 62," have been overturned in recent court cases. An
initiative proposed to re-enact the provisions of Proposition 62 as a
constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
Appropriations Limits. California and its local governments are subject
to an annual "appropriations limit" imposed by Article XIIIB of the
California Constitution, enacted by the voters in 1979 and significantly
amended by Propositions 98 and 111 in 1988 and 1990, respectively.
Article XIIIB prohibits the State or any covered local government from
spending "appropriations subject to limitation" in excess of the
appropriations limit imposed. "Appropriations subject to limitation" are
authorizations to spend "proceeds of taxes," which consist of tax
revenues, and certain other funds, including proceeds from regulatory
licenses, user charges or other fees, to the extent that such proceeds
exceed the cost of providing the product or service, but "proceeds of
taxes" exclude most State subventions to local governments. No limit is
imposed on appropriations of funds which are not "proceeds of taxes,"
such as reasonable user charges or fees, and certain other non-tax
funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior
to January 1, 1979 or subsequently authorized by the voters; (2)
appropriations arising from certain emergencies declared by the
Governor; (3) appropriations for certain capital outlay projects; (4)
appropriations by the State of post-1989 increases in gasoline taxes and
vehicle weight fees; and (5) appropriations made in certain cases of
emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population, and any transfers of service
responsibilities between government units. The definitions for such
adjustments were liberalized in 1990 by Proposition 111 to follow more
closely growth in California's economy.
"Excess" revenues are measured over a two-year cycle. With respect to
local governments, excess revenues must be returned by a revision of tax
rates or fee schedules within the two subsequent fiscal years. The
appropriations limit for a local government may be overridden by
referendum under certain conditions for up to four years at a time. With
respect to the State, 50% of any excess revenues is to be distributed to
K-12 school districts and community college districts (collectively, "K-
14 districts") and the other 50% is to be refunded to taxpayers. With
Page 7
more liberal annual adjustment factors since 1988, and depressed
revenues since 1990 because of the recession, few governments, including
the State, are currently operating near their spending limits, but this
condition may change over time. Local governments may by voter approval
exceed their spending limits for up to four years.
Because of the complex nature of Articles XIIIA and XIIIB of the
California Constitution, the ambiguities and possible inconsistencies in
their terms, and the impossibility of predicting future appropriations
or changes in population and cost of living, and the probability of
continuing legal challenges, it is not currently possible to determine
fully the impact of Article XIIIA or Article XIIIB on California
Municipal Obligations or the ability of California or local governments
to pay debt service on such California Municipal Obligations. It is not
presently possible to predict the outcome of any pending litigation with
respect to the ultimate scope, impact or constitutionality of either
Article XIIIA or Article XIIIB, or the impact of any such determinations
upon State agencies or local governments, or upon their ability to pay
debt service on their obligations. Future initiatives or legislative
changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
Obligations of the State of California. Under the California
Constitution, debt service on outstanding general obligation bonds is
the second charge to the General Fund after support of the public school
system and public institutions of higher education. The State had $19.3
billion aggregate principal amount of general obligation bonds
outstanding, and $14.3 billion authorized and unissued, as of December
31, 1998. Outstanding lease revenue bonds totaled $6.7 billion as of
December 31, 1998 and are estimated to total $6.6 billion as of June 30,
1999.
From July 1, 1997 to July 1, 1998, the State issued approximately $2.6
billion in non-self liquidating general obligation bonds and $1.0
billion in revenue bonds. Refunding bonds, which are used to refinance
existing long-term debt, accounted for $1.0 billion of the general
obligation bonds and $514 million of the revenue bonds.
General Fund general obligation debt service expenditures for fiscal
year 1997-98 were $1.865 billion and are estimated at $1.926 billion for
fiscal year 1998-99.
Recent Financial Results. California maintains a Special Fund for
Economic Uncertainties (the "Economic Uncertainties Fund"), derived from
General Fund revenues, as a reserve to meet cash needs of the General
Fund. As of December 31, 1998, the General Fund had outstanding internal
loans from Special Funds of $1.1 billion (in addition, there are $1.7
billion of external loans represented by the 1998-99 Revenue
Anticipation Notes, which mature on June 30, 1999). The revised
projected 1997-98 fiscal year balance in the General Fund Reserve for
Economic Uncertainties was $2,594.6 million. The Special Fund for
Economic Uncertainties was $74.6 million as of June 30, 1998.
The Budget. California's solid economic performance during 1998 led to
healthy revenue growth. General Fund collections grew by 11.7% in fiscal
year 1997-98 to reach $55.0 billion, an increase of $5.8 billion from
the prior year. For fiscal year 1998-99, the Governor's Budget assumes
total General Fund revenues of $56.3 billion, a 2.4% net increase from
1997-98. This revised estimate reflects the impact of the tax relief
legislation which reduces current year collections $851 million from the
baseline estimate, with a more moderate revenue loss in the budget year.
After accounting for non-economic factors, underlying General Fund
revenue growth for 1998-99 is estimated at 4.0%.
Overall, General Fund revenues and transfers represent nearly 80% of
total revenues. The remaining 20% are special funds dedicated to
specific programs. The three largest revenue sources (personal income,
sales, and bank and corporation) account for about 75% of total revenues
with personal income comprising 50% of the total. The personal income
tax in fiscal year 1998 was $27,859 million, an increase of $4,681
million from fiscal year 1997.
Expenditures for the 1997-98 fiscal year were $53.1 billion, an 8%
increase. As of June 30, 1998, the General Fund balance was $2.8
billion. The estimate for June 30, 1999 is $1.1 billion. The General
Fund ended the 1997-98 fiscal year with a cash surplus of $935 million,
the first time the State has recorded a surplus without short-term
borrowing in the last nine years.
Proposed 1998-99 Budget. The Governor's proposed budget for fiscal year
1998-99 is designed to further economic growth, educational reform,
public safety, and maintain government and environmental quality. K-12
education remains the State's top funding priority. The Budget includes
$350 million to lengthen the school year to 180 days. The Budget fully
funds the fourth and final year of the Governor's "Compact with Higher
Page 8
Education" and calls for the development of a new compact with UC and
CSU. The Budget provides $50 million in General Fund and $200 million in
a proposed bond to capitalize the Infrastructure and Development Bank,
which will help businesses locate and expand in California. The Budget
also proposes a $7 billion investment plan to maintain and build the
State's school system, water supply, prisons, natural resources and
other important infrastructure.
Bond Rating. The State's general obligation bonds have received ratings
of "A1" by Moody's Investors Service, "A+" by Standard & Poor's Ratings
Group and "AA+" by Fitch IBCA, Inc. There can be no assurance that such
ratings will be maintained in the future. It should be noted that the
creditworthiness of obligations issued by local California issuers may
be unrelated to the creditworthiness of obligations issued by the State
of California, and that there is no obligation on the part of the State
to make payment on such local obligations in the event of default.
Cash Management Policies. Cash temporarily idle during each fiscal year
is invested in the Pooled Money Investment Account (PMIA). The
investment of PMIA is restricted by law to the following categories:
U.S. Government securities, securities of federally sponsored agencies,
domestic corporate bonds, bank notes, interest-bearing time deposits in
California banks and savings and loan associations, prime commercial
paper, repurchase and reverse repurchase agreements, security loans,
bankers' acceptances, negotiable certificates of deposit and loans to
various bond funds. The average daily investment balance for the year
ended June 30, 1998, amounted to $29.3 billion, with an average
effective yield of 5.7%. For the year ended June 30, 1997, the average
daily investment was $28.3 billion and the average effective yield was
5.6%. Total earnings of the PMIA for fiscal year 1997-98 amounted to
$1.7 billion.
Legal Proceedings. The State is involved in certain legal proceedings
(described in the State's recent financial statements) that, if decided
against the State, may require the State to make significant future
expenditures or may substantially impair revenues. In January of 1997,
California experienced major flooding in six different areas with
current estimates of property damage to be approximately $1.6 to $2
billion. One lawsuit has been filed by 500 homeowners and more lawsuits
are expected. Exposure from all of the anticipated cases arising from
these floods could total approximately $2 billion.
The primary government is a defendant in Ceridian Corporation v.
Franchise Tax Board, a suit which challenges the validity of two
sections of the California tax laws. The first relates to deduction from
corporate taxes for dividends received for insurance companies to the
extent the insurance companies have California activities. The second
relates to corporate deduction of dividends to the extent the earnings
of the dividend paying corporation have already been included in the
measure of their California tax. If both sections of the California Tax
law are invalidated, and all dividends become deductible, then the
General fund can become liable for approximately $200-$250 million
annually.
Obligations of Other Issuers
Other Issuers of California Municipal Obligations. There are a number of
state agencies, instrumentalities and political subdivisions of the
State that issue Municipal Obligations, some of which may be conduit
revenue obligations payable from payments from private borrowers. These
entities are subject to various economic risks and uncertainties, and
the credit quality of the securities issued by them may vary
considerably from the credit quality of the obligations backed by the
full faith and credit of the State.
State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13.
Subsequently, the California Legislature enacted measures to provide for
the redistribution of the State's General Fund surplus to local
agencies, the reallocation of certain State revenues to local agencies
and the assumption of certain governmental functions by the State to
assist municipal issuers to raise revenues.
To the extent the State should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other fiscal considerations, the absolute level, or the rate of growth,
of State assistance to local governments may be further reduced. Any
such reductions in State aid could compound the serious fiscal
constraints already experienced by many local governments, particularly
counties. At least one rural county (Butte) publicly announced that it
might enter bankruptcy proceedings in August 1990, although such plans
were put off after the Governor approved legislation to provide
additional funds for the county. Other counties have also indicated that
their budgetary condition is extremely grave. The Richmond Unified
School District (Contra Costa County) entered bankruptcy proceedings in
May 1991 but the proceedings were dismissed. Los Angeles County, the
Page 9
largest in the State, has reported severe fiscal problems, leading to a
nominal $1.2 billion deficit in its $11 billion budget for the 1995-96
fiscal year. To balance the budget, the county imposed severe cuts in
services, particularly for health care. The Legislature is considering
actions to help alleviate the County's fiscal problems, but none were
completed before August 15, 1995. As a result of its bankruptcy
proceedings (discussed further below) Orange County also implemented
stringent cuts in services and laid off workers.
Assessment Bonds. California Municipal Obligations which are assessment
bonds may be adversely affected by a general decline in real estate
values or a slowdown in real estate sales activity. In many cases, such
bonds are secured by land which is undeveloped at the time of issuance
but anticipated to be developed within a few years after issuance. In
the event of such reduction or slowdown, such development may not occur
or may be delayed, thereby increasing the risk of a default on the
bonds. Because the special assessments or taxes securing these bonds are
not the personal liability of the owners of the property assessed, the
lien on the property is the only security for the bonds. Moreover, in
most cases the issuer of these bonds is not required to make payments on
the bonds in the event of delinquency in the payment of assessments or
taxes, except from amounts, if any, in a reserve fund established for
the bonds.
California Long-Term Lease Obligations. Certain California long-term
lease obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being
leased is unavailable for beneficial use and occupancy by the
municipality during the term of the lease. Abatement is not a default,
and there may be no remedies available to the holders of the
certificates evidencing the lease obligation in the event abatement
occurs. The most common cases of abatement are failure to complete
construction of the facility before the end of the period during which
lease payments have been capitalized and uninsured casualty losses to
the facility (e.g., due to earthquake). In the event abatement occurs
with respect to a lease obligation, lease payments may be interrupted
(if all available insurance proceeds and reserves are exhausted) and the
certificates may not be paid when due.
Several years ago, the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of
the District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a State receiver (including a brief period
under bankruptcy court protection), the District failed to make rental
payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders, in which the State was named
defendant (on the grounds that it controlled the District's finances).
One of the defenses raised in answer to this lawsuit was the invalidity
of the District's lease. The trial court has upheld the validity of the
lease and the case has been settled. Any judgment in a future case
against the position asserted by the Trustee in the Richmond case may
have adverse implications for lease transactions of a similar nature by
other California entities.
Other Considerations. The repayment of industrial development securities
secured by real property may be affected by California laws limiting
foreclosure rights of creditors. Securities backed by health care and
hospital revenues may be affected by changes in State regulations
governing cost reimbursements to health care providers under Medi-Cal
(the State's Medicaid program), including risks related to the policy of
awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such
bonds are secured solely by the increase in assessed valuation of a
redevelopment project area after the start of redevelopment activity. In
the event that assessed values in the redevelopment project decline
(e.g., because of a major natural disaster such as an earthquake), the
tax increment revenue may be insufficient to make principal and interest
payments on these bonds. Both Moody's and S&P suspended ratings on
California tax allocation bonds after the enactment of Articles XIIIA
and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing
entity which increased such tax rate to repay that entity's general
obligation indebtedness. As a result, redevelopment agencies (which,
typically, are the issuers of tax allocation securities) no longer
receive an increase in tax increment when taxes on property in the
project area are increased to repay voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon
the ability of California municipal securities issuers to pay interest
Page 10
and principal on their obligations remains unclear. Furthermore, other
measures affecting the taxing or spending authority of California or its
political subdivisions may be approved or enacted in the future.
Legislation has been or may be introduced which would modify existing
taxes or other revenue-raising measures or which either would further
limit or, alternatively, would increase the abilities of state and local
governments to impose new taxes or increase existing taxes. It is not
presently possible to predict the extent to which any such legislation
will be enacted. Nor is it presently possible to determine the impact of
any such legislation on California Municipal Obligations in which the
Fund may invest, future allocations of state revenues to local
governments or the abilities of state or local governments to pay the
interest on, or repay the principal of, such California Municipal
Obligations.
Substantially all of California is within an active geologic region
subject to major seismic activity. Northern California, in 1989, and
southern California, in 1994, experienced major earthquakes causing
billions of dollars in damages. The federal government provided more
than $13 billion in aid for both earthquakes, and neither event is
expected to have any long-term negative economic impact. Any California
Municipal Obligation in a California Trust could be affected by an
interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be
constrained by the inability of (i) an issuer to have obtained
earthquake insurance coverage at reasonable rates; (ii) an insurer to
perform on its contracts of insurance in the event of widespread losses;
or (iii) the Federal or State government to appropriate sufficient funds
within their respective budget limitations.
On December 7, 1994, Orange County, California (the "County"), together
with its pooled investment fund (the "County Pooled Fund") filed for
protection under Chapter 9 of the federal Bankruptcy Code, after reports
that the County Pooled Fund had suffered significant market losses in
its investments caused a liquidity crisis for the County Pooled Fund and
the County. More than 180 other public entities, most but not all
located in the County, were depositors in the County Pooled Fund. As of
mid-January 1995, the County estimated that the County Pooled Fund had
lost about $1.64 billion, or 23%, of its initial deposits of around $7.5
billion. The Pooled Fund has been almost completely restructured to
reduce its exposure to changes in County interest rates. Many of the
entities which kept moneys in the County Pooled Fund, including the
County, faced cash flow difficulties because of the bankruptcy filing
and may be required to reduce programs or capital projects. The County
and some of these entities have, and others may in the future, default
in payment of their obligations. At that time, Moody's and Standard &
Poor's suspended, reduced to below investment grade levels or placed on
"Credit Watch", various securities of the County and the entities
participating in the Pooled Fund.
The State of California has no obligation with respect to any
obligations or securities of the County or any of the other
participating entities, although under existing legal precedents, the
State may be obligated to ensure that school districts have sufficient
funds to operate.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the California Trusts
are subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not within
the control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the California Trusts to pay interest on or
principal of the Bonds.
Page 11
California 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: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 12
CONNECTICUT 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 March 31, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
Page 3
she receives any tax-exempt interest. A taxpayer whose modified adjusted
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Connecticut Tax Status of Unit Holders
The assets of a Connecticut Trust will consist of obligations (the
"Bonds"), some of which have been issued by or on behalf of the State of
Connecticut or its political subdivisions or other public bodies created
under the laws of the State of Connecticut ("Connecticut Bonds") and the
balance of which have been issued by or on behalf of entities classified
for relevant purposes as territories or possessions of the United
States, including one or more of Puerto Rico, Guam, or the Virgin
Islands, the interest on the obligations of which Federal law would
prohibit Connecticut from taxing if received directly by the Unit
holders. Certain Connecticut Bonds in a Connecticut Trust were issued
prior to the enactment of the Connecticut income tax on the Connecticut
taxable income of Individuals, trusts, and estates (the "Connecticut
Income Tax"); therefore, bond counsel to the issuers of such Bonds did
not opine as to the exemption of the interest on such Bonds from such
tax. However, the Sponsor and special counsel to the Connecticut Trust
for Connecticut tax matters believe that such interest will be so
exempt. Interest on Bonds in a Connecticut Trust issued by other
issuers, if any, is, in the opinion of bond counsel to such issuers,
exempt from state taxation.
The Connecticut Income Tax was enacted in August 1991. Generally, under
this tax as enacted, a Unit holder would recognize gain or loss for
purposes of this tax upon the maturity, redemption, sale, or other
disposition by a Connecticut Trust of an obligation held by it, or upon
the redemption, sale, or other disposition of a Unit of a Connecticut
Trust held by the Unit holder, to the same extent that gain or loss is
recognized by the Unit holder thereupon for Federal income tax purposes.
However, on June 19, 1992, Connecticut legislation was adopted that
provides that gains and losses from the sale or exchange of Connecticut
Bonds held as capital assets will not be taken into account for purposes
of the Connecticut Income Tax for taxable years starting on or after
January 1, 1992. Regulations effective for taxable years starting on or
after January 1, 1994, clarify that this provision also applies to gain
or loss recognized by a Unit holder upon the maturity or redemption of a
Connecticut Bond held by a Connecticut Trust. However, it is not clear
whether this provision would apply, to the extent attributable to
Connecticut Bonds held by a Connecticut Trust, to gain or loss
recognized by a Unit holder upon the redemption, sale, or other
disposition of a Unit of a Connecticut Trust held by the Unit holder.
Unit holders are urged to consult their own tax advisors in this regard.
At the time of the closing for each Connecticut Trust, Special Counsel
to the Fund for Connecticut tax matters, which relied explicitly on the
opinion of Chapman and Cutler regarding Federal income tax matters,
rendered an opinion under then existing Connecticut income tax law
applicable to taxpayers whose income is subject to Connecticut income
taxation substantially to the effect that:
1. Each Connecticut Trust is not liable for any tax on or measured by
net income imposed by the State of Connecticut.
2. Interest income from a Bond issued by or on behalf of the State of
Connecticut, any political subdivision thereof, or public
instrumentality, state or local authority, district, or similar public
entity created under the laws of the State of Connecticut (a
"Connecticut Bond"), or from a Bond issued by United States territories
or possessions the interest on which Federal law would prohibit
Connecticut from taxing if received directly by a Unit holder from the
issuer thereof, is not taxable under the Connecticut tax on the
Connecticut taxable income of individuals, trusts, and estates (the
"Connecticut Income Tax") when such interest is received by a
Connecticut Trust or distributed by it to such a Unit holder.
3. Insurance proceeds received by a Connecticut Trust representing
maturing interest on defaulted Bonds held by a Connecticut Trust are not
taxable under the Connecticut Income Tax if, and to the same extent as,
Page 5
such interest would not be taxable thereunder if paid directly to a
Connecticut Trust by the issuer of such Bonds.
4. Gains and losses recognized by a Unit holder for Federal income tax
purposes upon the maturity, redemption, sale, or other disposition by a
Connecticut Trust of a Bond held by a Connecticut Trust or upon the
redemption, sale, or other disposition of a Unit of a Connecticut Trust
held by a Unit holder are taken into account as gains or losses,
respectively, for purposes of the Connecticut Income Tax, except that,
in the case of a Unit holder holding a Unit of a Connecticut Trust as a
capital asset, such gains and losses recognized upon the maturity,
redemption, sale or exchange of a Connecticut Bond held by a Connecticut
Trust are excluded from gains and losses taken into account for purposes
of such tax, and no opinion is expressed as to the treatment for
purposes of such tax of gains and losses recognized, to the extent
attributable to Connecticut Bonds, upon the redemption, sale, or other
disposition by a Unit holder of a Unit of a Connecticut Trust held by him.
5. The portion of any interest income or capital gain of a Connecticut
Trust that is allocable to a Unit holder that is subject to the
Connecticut corporation business tax is includable in the gross income
of such Unit holder for purposes of such tax.
6. An interest in a Unit of a Connecticut Trust that is owned by or
attributable to a Connecticut resident at the time of his death is
includable in his gross estate for purposes of the Connecticut
succession tax and the Connecticut 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
Economic Outlook. Connecticut's economy has been slow to emerge from a
recession that began in early 1989 and ended in late 1992. While its
recovery lags behind most of the New England region, Connecticut has
regained over 80% of the jobs lost during the recession, unemployment
rates are down, retail sales are picking up, and the state has posted
the strongest income gains in the nation. Business indicators suggest
that the economy is growing at a respectable pace, although growth rates
may slow through 2004 in response to rising interest rates and wage
pressures resulting from tight labor markets.
During the recession, Connecticut lost 158,200 jobs or about 9.5% of the
state's total workforce, with the largest losses in the manufacturing
sector. Investors should be aware that manufacturing was historically
the most important economic activity in Connecticut. Yet in terms of
number of persons employed, this sector lost about 20% of its job base
between 1989 and 1992, and losses in this sector still persist. In
addition, job losses which started during the recession continued in the
finance, insurance and real estate sector until only the last quarter of
1998.
After four years of slow recovery, the state's economy is beginning to
gain momentum, and forecasters expect a return to the late 1980s levels
of employment within the next few years. Since 1992, Connecticut has
recreated over 114,000 jobs. During the early part of the recovery,
Connecticut job gains were running well below the national average.
During the past three years, however, the state's job growth has been
consistent with national trends. Small business is fueling much of the
state's job growth; businesses with fewer than 100 employees have
contributed over 60% of Connecticut's net job gain over the last 20
years, as compared with 50% nationally. During 1998, Connecticut's total
employment increased by about 19,000 jobs or 1.2%. For 1999, however,
NEEP (the New England Economic Project) projections indicate that
Connecticut will gain only about 2,000 jobs.
The composition of employment in the state has changed significantly
over the past decade as high paying manufacturing jobs were replaced by
lower paying service sector jobs. Most of the decline in the
manufacturing sector results from reductions in federal defense
spending, including a 65% decrease between 1985 and 1995. Between 1989
and 1997, manufacturing slipped from 18.6% of the state's total
employment to 14.1%, while the finance, insurance and real estate sector
dipped from 11.6% to 9.5%. By contrast, declines in these industries
have been offset by growth in the service sector, which increased from
27.2% of the state's total employment in 1988 to 34.4% in 1997. The
strongest job gains within the service sector have been in security
services, recreational services, hotel and lodging, social services and
general building contracting.
Page 6
Unemployment in Connecticut finally dipped below the national average
during 1998. The state's unemployment rate dropped significantly from
5.1% in 1997 to only 3.7% in 1998 (the December 1998 rate was as low as
2.8%). Nationally, the average unemployment rate has decreased steadily,
from 4.9% in 1997 to 4.5% in 1998. Although they have shown some
improvement, unemployment rates in Connecticut's major cities still
remain considerably higher than the statewide average. Moreover, high
rates of urban unemployment contribute to growing income inequality
within the state, so much so that Connecticut families in the top 20%
have incomes nearly 15 times higher than those in the bottom 20%. In
fact, Connecticut continues to be one of the country's worst states in
terms of income inequality. Strong economic growth in conjunction with
state policies sensitive to these issues could help to reverse these
trends.
Despite the recent positive overall economic growth in Connecticut, some
disturbing trends persist. Inflation-adjusted median household income in
the state is still 25% lower than it was in 1989, due largely to the
fact that the jobs gained during the recovery pay approximately 30% less
than the jobs that were lost during the recession. The current positive
growth in wages and earnings has been insufficient to compensate for the
lower wage bases of the newly-created jobs, particularly with reference
to the transfer of jobs from manufacturing to the service sector. Even
with solid wage growth, it will take time before the service sector wage
base reaches the present wage and salary level of the manufacturing
sector.
Other factors contributing to the negative growth trend in real median
family income are the aging of the Connecticut labor force and its slow
population growth. The state's population continues to increase in age
faster than the national trend. In 1997, the national median age was
34.9, while Connecticut's was 36.6. As the labor force ages, less income
is derived from salary and wages and more comes from transfer payments
(such as social security and government pensions). In addition,
Connecticut's overall population growth has been stagnant during the
past five years, with annual rates in the -0.1% to 0.1% range.
Furthermore, a substantial portion of the state's negative domestic
migration rate (accounting for a population loss of 6,500 in 1998) is
represented by young families and residents under 45.
Connecticut's per capita income for 1997 was $35,954, a substantial
increase of 6.3% from the previous year, making it the highest among the
fifty states. This figure is 42.1% higher than the 1997 nationwide per
capita income of $25,298 and 18.1% higher than the New England regional
average. To put these numbers in perspective, however, it should be
noted that prices for goods and services in Connecticut are 22% higher
than the national average.
Although all parts of society are not benefiting equally, Connecticut is
in the midst of a solid, sustained economic recovery. Net real income is
expected to grow in 1999 and 2000, though at a slower rate than during
the prior two years. At the same time, housing starts should follow a
slow upward trend, and the retail sales rate is expected to accelerate
to the end of 2000. Nevertheless, the population loss from outmigration
as well as the failure to attract new workers from nearby regions are
depleting the volume and quality of the State's workforce.
Revenues and Expenditures. Fiscal Year 1998 saw the deterioration of
Connecticut's financial condition slow to the point where an operating
surplus was realized for the first time after nine consecutive years of
operating deficits-highlighting the state's continual reliance on debt-
financing. Traditionally, Connecticut borrows money to cover its annual
operating expenses, but for the first time since the recession, the
state's resources were at a level sufficient to cover all operating
outlays. The total government operating surplus equaled $7 million or
0.06% of total revenues.
The State Comptroller reported in the Comprehensive Annual Financial
Report (for the fiscal year ending June 30, 1998) that Connecticut's
General Fund closed FY 1998 with a surplus of $389 million, its largest
surplus in more than a decade, while the Transportation Fund generated a
$25 million deficit. The surplus is primarily the result of
exceptionally strong revenue growth. During FY 1998, Connecticut's
General Fund revenues increased 6.2% over the previous year to $7.6
billion, lead mainly by 14% growth in state income tax receipts. The
state derives over 70% of its revenues from taxes, the most important of
which have been the income and sales and use taxes, representing 42.2%
and 36.4%, respectively, of FY 1998 General Fund revenues.
Connecticut's total expenditures in Fiscal Year 1998 grew by 4%-about
twice the rate of inflation-to reach $12.3 billion. This figure exceeds
the state's constitutional cap on expenditures by $194.1 million. Fixed
costs (entitlement programs, grant commitments, court mandates and debt
service) continue to consume the largest share of state spending, while
Page 7
Medicaid expenditures, which represent about 20% of General Fund
spending, showed modest growth. During FY 1998, the largest increases in
overall state expenditures were for health and hospital services, up
6.7% or $60 million; general government, up 9.5% or $68 million; and
debt service, up 13.8% or $160 million to total $1.32 billion during
that year alone.
Projected tax revenues for Fiscal Year 1999 include changes in the
state's corporate tax rate, which was lowered by 1993 legislation after
the rate had reached the highest level in the nation. The rate cut is
being phased in between January 1996 and January 2000 to decrease the
corporate tax from 10.75% to 7.5%. Total General Fund revenues for FY
1999 are estimated at $9.99 billion, $7.96 billion of which are tax
receipts. According to the State Comptroller's January 1999 revised
estimates, the income tax will exceed the budgetary estimate by $210
million, and the corporate and sales taxes will generate an unexpected
$54 million and $21 million, respectively, for FY 1999.
Nevertheless, General Fund spending for FY 1999 is also expected to
exceed budgeted levels. The state budgeted $9.97 billion for
appropriations, but in January 1999 this amount was increased by $112
million to $10.03 billion. This level of spending, however, only exceeds
the statutory spending cap by $29.5 million, compared to last year's
excess appropriations totaling $194.1 million. The largest portion of
the overspending represents the $80 million appropriation for
construction of a new sports stadium in Hartford (Special Session PA 98-
1). This new expense is largely offset by decreased spending within the
Department of Social Services due to lower than anticipated expenditures
for Medicaid, Child Care Services and a medical coverage plan for
uninsured children.
Revised projected General Fund revenues will be sufficient to cover the
additional spending and to generate a surplus. It is estimated that
General Fund receipts will produce a year-end General Fund surplus of
$193 million, down from FY 1998's $389 million balance. The State
Comptroller's Office anticipates another General Fund surplus in FY 2000
totaling $68.4 million, but the following two fiscal years are projected
to generate a General Fund deficit of $102 million and $138 million.
GAAP Budgeting. Very strong revenue growth, despite a jump in state
spending, improved Connecticut's overall financial position in FY 1998.
The state's operating balance dropped from a $191 million deficit in FY
1996 to a $95 million deficit in FY 1997 and then to a $7 million
surplus in FY 1998. According to Generally Accepted Accounting
Principles (GAAP), however, the General Fund balance sheet displayed a
cumulative deficit of $694.3 million during FY 1998. Over the past six
years, the cumulative General Fund balance sheet deficit has increased
by about 33%. The rate of growth in the deficit is slowing, but it is
currently 50% higher than in 1993. Deficits will continue to result from
the operation of state programs, but some progress is being made in
reducing those deficits.
In 1993, the Connecticut General Assembly enacted Public Act 93-402,
which authorized the use of Generally Accepted Accounting Principles
(GAAP) for the preparation and maintenance of the state's annual
financial statements and the preparation of the state's biennial budget.
Originally, conversion to GAAP from the modified cash basis of
accounting was scheduled for Fiscal Year 1996. That implementation has
been postponed twice and is now currently planned for FY 2000 or 2001.
Debt Management. Connecticut ranks first in the nation in state tax-
supported debt burden per capita. Debt per capita reached $2,820 during
FY 1998, compared to $1,204 in FY 1990. Despite the state's high
resident income, Connecticut's debt-to-income ratio is 19.7%, more than
three times the national average of 5.9%. Moreover, nearly 11% of all
state spending is applied to the state's debt service.
Outstanding debt and the related debt service requirements have more
than doubled during the past decade. Outstanding bonded debt, which
consists of unpaid bond issues, increased from $9.229 billion in FY 1997
to $9.299 billion in FY 1998. In addition to bonded debt, the state has
unpaid pension debt, workers' compensation claims, employee compensation
accumulations and capital leases. When these long-term obligations are
added to the state's bonded debt, Connecticut's total debt for FY 1998
rises to $16.651 billion.
Connecticut issued approximately $951 million of new general obligation
bonds in FY 1998, a 5.7% increase over the prior year's issuance. In
addition, another $828 million of bonds are authorized but unissued. The
state's total debt service, as a percentage of government operations,
increased to 11% in FY 1998, as compared to 7.2% in FY 1994. No new debt
burden was created in FY 1998 for General Obligation Economic Recovery
Notes. During FY 1998, $79 million in outstanding Economic Recovery
Notes were retired, leaving a balance for final payment during FY 1999
of $78 million.
Page 8
General obligation bonds issued by Connecticut municipalities are
payable primarily from ad valorem taxes on property subject to taxation
by the municipality. Certain Connecticut municipalities have experienced
severe fiscal difficulties and have reported operating and accumulated
deficits in recent years. The most notable of these is the City of
Bridgeport, which filed a bankruptcy petition on June 7, 1991. The state
opposed the petition. The United States Bankruptcy Court for the
District of Connecticut has held that Bridgeport has authority to file
such a petition but that its petition should be dismissed on the grounds
that Bridgeport was not insolvent when the petition was filed. Regional
economic difficulties, reductions in revenues, and increased expenses
could lead to further fiscal problems for the state and its political
subdivisions, authorities and agencies. Difficulty in payment of debt
service on borrowings could result in declines, possibly severe, in the
value of their outstanding obligations and increases in their future
borrowing costs.
There can be no assurance that general economic difficulties or the
financial circumstances of the state or its towns and cities will not
adversely affect the market value of the Bonds in the Connecticut Trusts
or the ability of the obligors to pay debt service on such Bonds.
Ratings. The State of Connecticut's general obligation bonds are rated
AA by Standard & Poor's Ratings Services. On March 9, 1997, Moody's
Investors Service, Inc. refined the state's rating from Aa to Aa3. On
March 17, 1995, Fitch IBCA, Inc. (formerly known as Fitch Investors
Service, L.P.) reduced its rating of the state's general obligation
bonds from AA+ to AA.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the Connecticut Trusts
are subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not within
the control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the Connecticut Trusts to pay interest on or
principal of the Bonds.
Page 9
CONNECTICUT 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: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 10
FLORIDA 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 28, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
Page 3
she receives any tax-exempt interest. A taxpayer whose modified adjusted
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Florida Tax Status of Unit Holders
The Internal Revenue Service Restructuring and Reform Act of 1998
provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions) is subject to a maximum marginal stated tax rate of 20% (10%
in the case of certain taxpayers in the lowest tax bracket). Capital
gain or loss is long-term if the holding period for the asset is more
than one year, and is short-term if the holding period for the asset is
one year or less. The date on which a Unit is acquired (i.e., the "trade
date") is excluded for purposes for determining the holding period of
the Unit. Capital gains realized from assets held for one year or less
are taxed at the same rates as ordinary income.
The Bonds were accompanied by opinions of Bond Counsel to the respective
issuers thereof to the effect that the Bonds were exempt from the
Florida intangibles tax. Neither the Sponsor nor its counsel have
independently reviewed such opinions or examined the Bonds to be
deposited in and held by a Florida Trust and have assumed the
correctness as of the date of deposit of the opinions of Bond Counsel.
"Non-Corporate Unit holder" means a Unit holder of the Florida Trust who
is an individual not subject to the Florida state income tax on
corporations under Chapter 220, Florida Statutes and "Corporate Unit
holder" means a Unit holder of the Florida Trust that is a corporation,
bank or savings association or other entity subject to Florida state
income tax on corporations or franchise tax imposed on banks or savings
associations under Chapter 220, Florida Statutes.
At the time of the closing for each Florida Trust, Chapman and Cutler,
Special Counsel to the Fund for Florida tax matters, rendered an opinion
under then existing Florida income tax law applicable to taxpayers whose
income is subject to Florida income taxation substantially to the effect
that:
For Florida state income tax purposes, the Florida Trust will not be
subject to the Florida income tax imposed by Chapter 220, Florida
Statutes.
Because Florida does not impose an income tax on individuals, Non-
Corporate Unit holders residing in Florida will not be subject to any
Florida income taxation on income realized by the Florida Trust. Any
amounts paid to the Florida Trust or to Non-Corporate Unit holders under
an insurance policy issued to the Florida Trust or the Sponsor which
represent maturing interest on defaulted obligations held by the Trustee
will not be subject to the Florida income tax imposed by Chapter 220,
Florida Statutes.
Corporate Unit holders with commercial domiciles in Florida will be
subject to Florida income or franchise taxation on income realized by
the Florida Trust and on payments of interest pursuant to any insurance
policy to the extent such income constitutes "non-business income" as
defined by Chapter 220 or is otherwise allocable to Florida under
Chapter 220. Other Corporate Unit holders will be subject to Florida
income or franchise taxation on income realized by the Florida Trust (or
on payments of interest pursuant to any insurance policy) only to the
extent that the income realized does not constitute "non-business
income" as defined by Chapter 220 and if such income is otherwise
allocable to Florida under Chapter 220.
Units will be subject to Florida estate tax only if held by Florida
residents. However, the Florida estate tax is limited to the amount of
the credit for state death taxes provided for in Section 2011 of the
Internal Revenue Code.
Neither the Bonds nor the Units will be subject to the Florida ad
valorem property tax, the Florida intangible personal property tax or
the Florida sales or use tax.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Florida law. Ownership of the Units may
result in collateral Florida tax consequences to certain taxpayers.
Page 5
Prospective investors should consult their tax advisors as to the
applicability of any such collateral consequences.
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
Economic Outlook. In 1980, Florida was the seventh most populous state
in the U.S. The state has grown dramatically since then and as of April
1, 1997, ranks fourth with an estimated population of 14.7 million.
Florida's attraction, as both a growth and retirement state, has kept
net migration at an average of 224,240 new residents a year from 1987
through 1996, with a low of 138,000 in 1992. The U.S. average population
increase since 1984 is about 1% annually, while Florida's average annual
rate of increase is about 1.8%. Florida continues to be one of the
fastest growing of the large states. This strong population growth is
one reason the state's economy is performing better than the nation as a
whole. In addition to attracting senior citizens to Florida as a place
for retirement, the state is also recognized as attracting a significant
number of working age individuals. Since 1987, the prime working age
population (18-44) has grown at an average annual rate of more than
2.0%. The share of Florida's total working age population (18-64) to
total state population is approximately 60%. This share is not expected
to change appreciably into the twenty-first century.
The state's personal income has been growing strongly the last several
years and has generally outperformed both the U.S. as a whole and the
southeast in particular, according to the U.S. Department of Commerce
and the Florida Consensus Economic Estimating Conference. This is
because Florida's population has been growing at a very strong pace, and
since the early 1970s, the state's economy has diversified so as to
provide a broader economic base. As a result, Florida's real per capita
personal income has tracked closely with the national average and has
surpassed the southeast. From 1992 to 1997, Florida's total nominal
personal income grew by 36.6% and per capita income expanded
approximately 25.9%. For the nation, total and per capita personal
income increased by 30.2% and 24.1%, respectively.
Because Florida has a proportionately greater retirement age population,
property income (dividends, interest and rent) and transfer payments
(Social Security and pension benefits, among other sources of income)
are relatively more important sources of income. Transfer payments are
typically less sensitive to the business cycle than employment income
and, therefore, act as stabilizing forces in weak economic periods.
Personal income is frequently used to make comparisons among the states.
However, using personal income to compare Florida to other states can be
misleading, because Florida's personal income is systematically
underestimated. Current contributions by employers to pension plans are
included in personal income, while payments from pension plans are
excluded to avoid double accounting. Because Florida retirees are more
likely to be collecting on benefits earned in another state, Florida
personal income is underestimated as a result.
The state's per capita personal income in 1997 of $24,795 was slightly
below the national average of $25,298 and significantly ahead of that
for the southeast United States, which was $22,776. Real personal income
in the state is forecasted to increase 4.9% in 1998-99 and 3.5% in 1999-
00. Real personal income per capita in the state is projected to grow at
3.1% in 1998-99 and 1.8% in 1999-00. The Florida economy appears to be
growing in line with, but stronger than, the U.S. economy and is
expected to experience steady if unspectacular growth over the next
couple years.
Since 1991, the state's population has increased an estimated 11.5%,
while the number of employed persons increased 13.3%. In that same
period, Florida's total non-farm employment has grown approximately
21.2%. Since 1991, the non-farm job creation rate in the state is more
than twice that of the nation as a whole. Contributing to the state's
rapid rate of growth in employment and income is international trade.
Overall changes to its economy have also contributed to the state's
strong performance. The state is gradually becoming less dependent on
employment related to construction, agriculture or manufacturing and
more dependent on employment related to trade and services. Presently,
services constitute 34.9% and trade 25.6% of the state's total non-farm
jobs. While the southeast and the nation have a greater proportion of
manufacturing jobs, which tend to pay higher wages, service jobs tend to
be less sensitive to swings in the business cycle. The state has a
concentration of manufacturing jobs in high-tech and high value-added
Page 6
sectors, such as electrical and electronic equipment, as well as
printing and publishing. These types of manufacturing jobs tend to be
less cyclical. The state's unemployment rate throughout the 1980's
tracked below or about the same as the nation's. In the 1990s, the trend
was reversed, until 1995, when the state's unemployment rate again
tracked below the nation's. According to the U.S. Department of
Commerce, the Florida Department of Labor and Employment Security, and
the Florida Consensus Economic Estimating Conference (together the
"Organization") the state's unemployment rate was 4.8% during 1997,
while the national average was 4.9%. As of October 1997, the
Organization estimates that the unemployment rate will be 4.5% in 1998-
99 and 4.7% in 1999-00.
The state's economy is expected to grow at a moderate rate along with
the nation, but is expected to outperform the nation as a whole. Total
non-farm employment in Florida is expected to increase 3.4% in 1998-99
and 2.9% in 1999-00. Trade and services, the two largest, account for
more than half of the total non-farm employment. Employment in the
service sectors should experience an increase of 5.5% in 1998-99, while
growing 4.4% in 1999-00. Trade is expected to expand 2.8% in 1999 and
2.8% in 2000. The service sector is now the state's largest employment
category.
The state's economy has in the past been highly dependent on the
construction industry and construction related manufacturing. This
dependency has declined in recent years and continues to do so as a
result of continued diversification of the state's economy. For example,
in 1980, total contract construction employment as a share of total non-
farm employment was about 7.5%, and in 1997, the share had edged
downward to 5.7%. This trend is expected to continue as the state's
economy continues to diversify. Florida, nevertheless, has a dynamic
construction industry, with single and multi-family housing starts
accounting for about 9.2% of total U.S. housing starts in 1997 while the
state's population is 5.5% of the nation's. Florida's housing starts in
1997 were 132,813.
A driving force behind the state's construction industry has been the
state's rapid rate of population growth. Although the state currently is
the fourth most populous state, its annual population growth is now
projected to slow somewhat as the number of people moving into the state
is expected to average 257,000 a year throughout the 1990s. This
population trend should provide fuel for business and home builders to
keep construction activity lively in Florida in the next few years.
However, other factors do influence the level of construction in the
state. For example, federal tax reform in 1986 and other changes to the
federal income tax code have eliminated tax deductions for owners of
more than two residential real estate properties and have lengthened
depreciation schedules on investment and commercial properties. Economic
growth and existing supplies of homes and buildings also contribute to
the level of construction in the state.
Single and multi-family housing starts in 1989-99 are projected to reach
a combined level of 144,000, decreasing slightly to 143,000 next year.
Total construction expenditures are forecasted to increase 8.6% this
year and increase 2.5% next year.
Tourism is one of state's most important industries. Approximately 47
million tourists visited the state in 1997, as reported by the Florida
Department of Commerce. In terms of business activities and state tax
revenues, tourists in Florida in 1996 represented an estimated 4.8
million additional residents. Visitors to the state tend to arrive
slightly more by air than by auto. The state's tourist industry over the
years has become more sophisticated, attracting visitors year-round and,
to a degree, reducing its seasonality. Tourist arrivals are forecasted
to increase by 2.0% in 1998-99 and 1.7% the next fiscal year. Tourist
arrivals to Florida by air are expected to increase by 4.1% this year
and increase by 3.9% next year, while arrivals by car are expected to
increase by 0.6% this year and decrease 1.0% next year. By the end of
the state's current fiscal year, 49.7 million domestic and international
tourists are expected to have visited the state. In 1990-00, tourist
arrivals should approximate 50.6 million.
Revenues and Expenditures. Estimated fiscal year 1998-99 General Revenue
plus Working Capital and Budget Stabilization funds available to the
state total $19.46 billion, a 5.1% increase over 1997-98. Of the total
General Revenue plus Working Capital and Budget Stabilization funds
available to the state, $17.69 billion is Estimated Revenues
representing an increase of 4.4% over the previous year's Estimated
Revenues. With effective General Revenues plus Working Capital Fund and
Budget Stabilization appropriations at $18.19 billion, including a
$100.9 million transfer to the Budget Stabilization Fund, unencumbered
reserves at the end of 1998-99 are estimated at $1.38 billion. Estimated
fiscal year 1999-00 General Revenue plus Working Capital and Budget
Stabilization funds available total $19.92 billion, a 2.4% increase over
Page 7
1998-99. The $18.39 billion in Estimated Revenues represents an increase
of 3.9% over the previous year's Estimated Revenues.
In fiscal year 1996-97, approximately 67% of the state's total direct
revenue to its three operating funds were derived from state taxes and
fees, with Federal grants and other special revenue accounting for the
balance. State sales and use tax, corporate income tax, intangible
personal property tax, beverage tax and estate tax amounted to 68%, 8%,
4%, 3% and 3%, respectively, of total General Revenue Funds available
during fiscal 1996-97. In that same year, expenditures for education,
health and welfare, and public safety amounted to approximately 53%, 26%
and 14%, respectively, of total expenditures from the General Revenue
Fund.
The state's sales and use tax (6%) currently accounts for the state's
single largest source of tax receipts. Slightly less than 10% of the
state's sales and use tax is designated for local governments and is
distributed to the respective counties in which it is collected for use
by the counties and the municipalities therein. In addition to this
distribution, local government may (by referendum) assess a 0.5% or a
1.0% discretionary sales surtax within their county. Proceeds from this
local option sales tax are earmarked for funding local infrastructure
programs and acquiring land for public recreation or conservation or
protection of natural resources as provided under applicable Florida
law. Certain charter counties have other taxing powers in addition, and
non-consolidated counties with a population in excess of 800,000 may
levy a local option sales tax to fund indigent health care. It alone
cannot exceed 0.5% and, when combined with the infrastructure surtax,
cannot exceed 1.0%. For the fiscal year ended June 30, 1997, sales and
use tax receipts (exclusive of the tax on gasoline and special fuels)
totalled $12.1 billion, an increase of 5.5% over fiscal year 1995-96.
The second largest source of state tax receipts is the tax on motor
fuels. However, these revenues are almost entirely dedicated trust funds
for specific purposes and are not included in the state's General
Revenue Fund.
The state imposes an alcoholic beverage, wholesale tax (excise tax) on
beer, wine and liquor. This tax is one of the state's major tax sources,
with revenues totalling $447.2 million in the fiscal year ending June
30, 1997. Ninety-eight percent of the revenues collected from this tax
are deposited into the state's General Revenue Fund.
The state imposes a corporate income tax. All receipts of the corporate
income tax are credited to the General Revenue Fund. For the fiscal year
ended June 30, 1997, receipts from this source were $1.36 billion, an
increase of 17.2% from fiscal year 1995-96.
The state imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of
indebtedness, promissory notes, wage assignments and retail charge
accounts. The documentary stamp tax collections totalled $844.2 million
during fiscal year 1996-97, an 8.9% increase from the previous fiscal
year. For fiscal year 1996-97, 62.63% of these taxes were deposited to
the General Revenue Fund.
The state imposes a gross receipts tax on electric, natural gas and
telecommunications services. All gross receipts utilities tax
collections are credited to the state's Public Education Capital Outlay
and Debt Service Trust Fund. In fiscal year 1996-97, this amounted to
$575.7 million, an increase of 6.0% over the previous fiscal year.
The state imposes an intangible personal property tax on stocks, bonds
(including bonds secured by liens in Florida real property) notes,
governmental leaseholds and certain other intangibles not secured by a
lien on Florida real property. The annual rate of tax is 2 mils (a mil
is $1.00 of tax per $1,000.00 of property value). Second, the state
imposes a non-recurring 2 mil tax on mortgage and other obligations
secured by liens on Florida real property. In fiscal year 1996-97, total
intangible personal property tax collections were $952.4 million, a 6.3%
increase from the prior year. Of the net tax proceeds, 66.5% are
distributed to the General Revenue Fund.
The state imposes an estate tax on the estate of a decedent for the
privilege of transferring property at death. All receipts of the estate
tax are credited to the General Revenue Fund. For the fiscal year that
ended June 30, 1997, receipts from this source were $546.9 million, an
increase of 30% from fiscal year 1995-96.
The state began its own lottery in 1988. State law requires that lottery
revenues be distributed 50% to the public in prizes, 38.0% for use in
Page 8
enhancing education and the balance of 12.0% for costs of administering
the lottery. Fiscal year 1996-97 lottery ticket sales totalled $2.09
billion, providing education with approximately $792.3 million.
Debt Management. At the end of fiscal 1997, approximately $7.89 billion
in principal amount of debt secured by the full faith and credit of the
state was outstanding. In addition, since July 1, 1997, the state issued
about $1.65 billion in principal amount of full faith and credit bonds.
The State Constitution and statutes mandate that the state budget, as a
whole, and each separate fund within the state budget, be kept in
balance from currently available revenues each fiscal year. If the
Governor or Comptroller believes a deficit will occur in any state fund,
by statute, he must certify his opinion to the Administrative
Commission, which then is authorized to reduce all state agency budgets
and releases by a sufficient amount to prevent a deficit in any fund.
Additionally, the State Constitution prohibits issuance of state
obligations to fund state operations.
Litigation. Currently under litigation are several issues relating to
state actions or state taxes that put at risk a portion of General
Revenue Fund monies. There is no assurance that any of such matters,
individually or in the aggregate, will not have a material adverse
affect on the state's financial position. A brief summary of these
matters follows.
Nathan M. Hameroff, M.D., et al. v. Agency for Healthcare
Administration, et al. The plaintiff challenged the constitutionality of
Florida's Public Medical Assistance Trust Fund annual assessment on net
operating revenue of free standing outpatient facilities offering
sophisticated radiology services. The trial has not been scheduled. If
the state is unsuccessful in its action, the potential refund liability
could approximate $70 million.
The Florida Casualty Insurance Risk Management Trust Fund has deficit
retained earnings of approximately $567 million. These represent long
term liabilities of the state as a whole. These liabilities include
claims pertaining to state employee Workers' Compensation, federal civil
rights and general and automotive liability.
Ratings. The state maintains a bond rating of Aa, AA, and AA from
Moody's Investors Service, Standard & Poor's Corporation and Fitch,
respectively, on the majority of its general obligation bonds, although
the rating of a particular series of revenue bonds relates primarily to
the project, facility, or other revenue source from which such series
derives funds for repayment. While these ratings and some of the
information presented above indicate that the state is in satisfactory
economic health, there can be no assurance that there will not be a
decline in economic conditions or that particular Florida Municipal
Obligations held by a Trust will not be adversely affected by any such
changes.
The sources for the information presented above include official
statements and financial statements of the State of Florida. While the
Sponsor has not independently verified this information, the Sponsor has
no reason to believe that the information is not correct in all material
respects.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the Florida Trusts are
subject. Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within the
control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the Florida Trusts to pay interest on or principal
of the Bonds.
Page 9
Florida 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: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 10
GEORGIA 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 28, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
Page 2
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
she receives any tax-exempt interest. A taxpayer whose modified adjusted
Page 3
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Georgia Tax Status of Unit Holders
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited in and held in the Trust. However, although no
opinion is expressed herein regarding such matters, it is assumed that:
(i) the Bonds were validly issued, (ii) the interest thereon is
excludable from gross income for Federal income tax purposes, and (iii)
interest on the Bonds, if received directly by a Unit holder would be
exempt from the Georgia income tax. We have assumed that at the
respective times of issuance of the Bonds, opinions relating to the
validity thereof and to the exemption of interest thereon from Federal
income tax were rendered by bond counsel to the respective issuing
authorities. In addition, with respect to the Bonds, bond counsel to the
issuing authorities rendered opinions that the interest on the Bonds is
exempt from the Georgia income tax. Neither the Sponsor nor its counsel
has made any review for the Georgia Insured Trust of the proceedings
relating to the issuance of the Bonds or of the bases for the opinions
rendered in connection therewith.
At the time of the closing for each Georgia Trust, Chapman and Cutler,
Special Counsel to the Fund for Georgia tax matters, rendered an opinion
under then existing Georgia income tax law applicable to taxpayers whose
income is subject to Georgia income taxation substantially to the effect
that:
For Georgia income tax purposes, each Georgia Insured Trust is not an
association taxable as a corporation, and the income of a Georgia
Insured Trust will be treated as the income of the Unit holders.
Interest on the Bonds which is exempt from Georgia income tax when
received by a Georgia Insured Trust, and which would be exempt from
Georgia income tax if received directly by a Unit holder, will retain
its status as tax-exempt interest when distributed by a Georgia Insured
Trust and received by the Unit holders.
If the Trustee disposes of a Bond (whether by sale, exchange, payment on
maturity, retirement or otherwise) or if a Unit holder redeems or sells
his Unit, the Unit holder will recognize gain or loss for Georgia income
tax purposes to the same extent that gain or loss would be recognized
for federal income tax purposes (except in the case of Bonds issued
before March 11, 1987 issued with original issue discount owned by a
Georgia Insured Trust, in which case gain or loss for Georgia income tax
purposes may differ from the amount recognized for federal income tax
purposes because original issue discount on such Bonds may be determined
by accruing said original issue discount on a ratable basis). Due to the
amortization of bond premium and other basis adjustments required by the
Internal Revenue Code, a Unit holder, under some circumstances, may
realize taxable gain when his or her Units are sold or redeemed for an
amount less than or equal to their original cost.
Amounts paid by the Insurer under an insurance policy or policies issued
to a Georgia Insured Trust, if any, with respect to the Bonds in a
Georgia Insured Trust which represent maturing interest on defaulted
obligations held by the Trustee will be exempt from State income taxes
if, and to the extent as, such interest would have been so exempt if
paid by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Neither the Bonds nor the Units will be subject to Georgia sales or use
tax.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Georgia law. Ownership of the Units may
result in collateral Georgia tax consequences to certain taxpayers.
Prospective investors should consult their tax advisors as to the
applicability of any such collateral consequences.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER
TAX MATTERS SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?"
Page 5
Certain Considerations
The following brief summary regarding the economy of Georgia is based
upon information drawn from publicly available sources and is included
for purposes of providing information about general economic conditions
that may or may not affect issuers of the Georgia obligations. The
Sponsor has not independently verified any of the information contained
in such publicly available documents.
Economic Outlook. Georgia's recovery from the economic recession of the
early 1990s has been steady and is better than regional trends. The
nation's economy expanded by 3.7% in 1998, while Georgia's economy
increased considerably more, with the state's real Gross State Product
("GSP", inflation adjusted) jumping by 5.8%. The 1999 forecast
anticipates that Georgia's real GSP will grow by 3.5%, significantly
less than in 1998, but higher than the expected rate of growth in the
national Gross Domestic Product (2.4%). While this recovery does not
meet the explosive patterns set in past cycles, recent data reveal that
Georgia ranks among the top six states in the nation in employment and
total population growth.
The state's personal income rose by 6.9% last year, compared with the
1997 increase of 6.5%. Higher employment was the most important factor
in 1998 income gains, but a tight labor market ensured that wage and
salary increases also contributed substantially to income growth. This
reverses the pattern of the first five years of the current expansion,
when wages and salaries lagged behind increases in the number of jobs,
causing personal income to rise less rapidly than expected. Georgia's
above-average gain in personal income, at a rate even higher than the
state's above-average rate of population growth, will help lessen the
diminishing gap between the state's per capita personal income and that
of the nation.
Total employment in Georgia grew by 3.3% in 1998, compared with the
34.6% gain in 1997. In contrast, the state's labor force increased by
only 2.9% this year, indicating further tightening of the labor market.
During 1998, the state's total employment averaged 3.85 million, up from
3.73 million in 1997. Preliminary figures for March 1999 indicate that
employment reached 3.87 million and growth is expected to be above
average again through the rest of the year.
Although prospects are best for services, the outlook for the other
sectors of the Georgia economy varies. Growth in the transportation,
communications and public utilities sector will come from cyclical
gains, the stimulative effects of deregulation and the opening of new
markets by technological advances. Wholesale and retail trade will see
above-average growth, and finance, insurance and real estate will expand
moderately. Slow growth is forecast for manufacturing and government,
and activity in construction and mining will decline moderately.
The 1997 and 1998 annual average unemployment rates (not seasonally
adjusted) for Georgia were 4.5% and 4.2%, respectively, as compared to
the national unemployment rates of 4.9% and 4.5%. Georgia's unemployment
rate has decreased every year since 1992 and averaged 4.0% during the
first three months of 1999.
Because labor markets will remain stable, wages are not expected to
climb faster in Georgia than in the nation as a whole. Georgia's per
capita personal income grew by 4.8% to $25,020 in 1998, compared to the
4.3% increase the previous year. The state currently ranks twenty-third
in the nation in per capita personal income and third among the twelve
states of the Southeast region after Virginia and Florida. The national
average increase in per capita personal income was 4.4% during 1998,
down from 4.7% in 1997.
The State's annual rate of population growth is dipping slightly-from
2.1% in 1996, to 2% in 1997, to 1.9% in 1998. Georgia's total
population, however, will continue to grow faster than any state outside
of the Rocky Mountain region, at almost twice the national rate of about
1% annually. The State's population has risen by 18.0% since 1990, more
than twice the rate of the nation as a whole. The Census Bureau
estimates that in July 1998 Georgia's population reached 7.46 million
and will exceed 7.8 million by the end of 1999, a gain of 145,000 over
the previous year.
Revenues and Expenditures. Total revenues in Fiscal Year 1998 (ended
June 30) reached $23.20 billion, including $1.46 billion carried over
from Fiscal 1997. The state General Fund accounted for $13.15 billion of
these collections, an increase of 4.3% over Fiscal 1997. The top revenue
producers were the personal income tax and the general sales tax,
together accounting for about 75% of state income. All other categories
of income showed increases during Fiscal 1998 except for non-business
licenses and permits and lottery proceeds. General Fund revenues were
offset by $12.47 billion in General Fund spending (up 4.8%), leaving a
Page 6
$676.8 million balance at the end of Fiscal 1998. Overall governmental
expenditures totaled $21.75 billion, generating a surplus of $1.45
billion for use the next fiscal year.
State income growth estimates during Fiscal 1999 are based upon cyclical
gains, an expected loss from the elimination of the State's sales tax on
eligible food and beverages (effective October 1, 1998), and an expected
boost from changes in the federal capital gains tax. Total revenue
collections in Fiscal 1999 are projected to rise by 4.8%. Through March
1999, the Georgia Department of Revenue has collected $7.76 billion in
their major tax categories, up $685 million over the same period in
Fiscal 1998. The largest increases occurred in the estate tax and the
individual income tax, up 59.5% and 13.3%, respectively.
Debt Management. The Georgia Constitution permits the issuance by the
State of general obligation debt and of certain guaranteed revenue debt.
The State may incur guaranteed revenue debt by guaranteeing the payment
of certain revenue obligations issued by an instrumentality of the
State. The Georgia Constitution prohibits the incurring of any general
obligation debt or guaranteed revenue debt if the highest aggregate
annual debt service requirement for the then current year or any
subsequent fiscal year for outstanding general obligation debt and
guaranteed revenue debt, including the proposed debt, exceed 10% of the
total revenue receipts, less refunds, of the State treasury in the
fiscal year immediately preceding the year in which any such debt is to
be incurred.
The Georgia Constitution also permits the State to incur public debt to
supply a temporary deficit in the State treasury in any fiscal year
created by a delay in collecting the taxes of that year. Such debt must
not exceed, in the aggregate, 5% of the total revenue receipts, less
refunds, of the State treasury in the fiscal year immediately preceding
the year in which such debt is incurred. The debt incurred must be
repaid on or before the last day of the fiscal year in which it is to be
incurred out of the taxes levied for that fiscal year. No such debt may
be incurred in any fiscal year if there is then outstanding unpaid debt
from any previous fiscal year which was incurred to supply a temporary
deficit in the State treasury. No such short-term debt has been incurred
under this provision since the inception of the constitutional authority
referred to in this paragraph.
Virtually all of the issues of long-term debt obligations issued by or
on behalf of the State of Georgia and counties, municipalities and other
political subdivisions and public authorities thereof are required by
law to be validated and confirmed in a judicial proceeding prior to
issuance. The legal effect of an approved validation in Georgia is to
render incontestable the validity of the pertinent bond issue and the
security therefor.
As of October 31, 1996, Georgia had authorized total aggregate general
obligation debt of $7,995,920,000. In the amended Fiscal Year 1996 and
1997 appropriations, $495,450,000 in general obligation debt was
authorized. For Fiscal 1998, the Governor recommended $508,800,000 in
bonds, the proceeds of which are to be used for various planned capital
projects of the State, its departments and agencies. Total direct
obligations issued for fiscal years ended June 30, 1975 through June 30,
1997 was $8,189,495,000. Georgia has no direct obligations authorized
but unissued during that period.
Georgia's total outstanding debt as of October 31, 1996 was
$4,727,630,000. Georgia's aggregate fiscal year debt service on all
outstanding bonds as of October 31, 1996 is approximately $7.15 billion.
Georgia is involved in certain legal proceedings that, if decided
against the State, may require the State to make significant future
expenditures or may substantially impair revenues. An adverse final
decision could materially affect the State's governmental operations
and, consequently, its ability to pay debt service on its obligations.
Bond Ratings. State of Georgia general obligation bonds are currently
rated as follows: Standard & Poor's Ratings Services, AAA (upgraded from
AA+ on July 29, 1997); Moody's Investors Service, Inc., Aaa; and Fitch
IBCA, Inc., AAA.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the Georgia Trusts are
subject. Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within the
control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the Georgia Trusts to pay interest on or principal
of the Bonds.
Page 7
Georgia 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: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 8
IDAHO TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated May 28, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, where
applicable, bond counsel to the issuing authorities rendered opinions as
to the exemption of interest on such Bonds when held by residents of the
State in which the issuers of such Bonds are located, from State income
taxes and certain state or local intangibles and local income taxes.
Neither the Sponsor, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. If the interest
on a Bond should be determined to be taxable, the Bond would generally
have to be sold at a substantial discount. In addition, investors could
be required to pay income tax on interest received prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds provided
that, at the time such policies are purchased, the amounts paid for such
policies are reasonable, customary and consistent with the reasonable
expectation that the issuer of the Bonds, rather than the insurer, will
pay debt service on the Bonds.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
she receives any tax-exempt interest. A taxpayer whose modified adjusted
Page 3
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all of the Bonds in the Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation,
corporations, subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Idaho Tax Status of Unit Holders
The assets of the Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Idaho ("Idaho") or counties,
municipalities, authorities or political subdivisions thereof (the
"Idaho Bonds") or by the Commonwealth of Puerto Rico, Guam and the
United States Virgin Islands (the "Possession Bonds") (collectively, the
"Bonds").
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited in and held in the Trust. However, although no
opinion is expressed herein regarding such matters, it is assumed that:
(i) the Bonds were validly issued, (ii) the Idaho Bonds meet the
classification and registration requirements of Idaho Income Tax
Regulation 35.01.01.019, (iii) the interest on the Bonds is excludable
from gross income for Federal income tax purposes and (iv) the interest
on the Bonds is exempt from taxation under the provisions of the Idaho
Income Tax Act (the "Idaho income tax"). The opinion set forth below
does not address the taxation of persons other than full time residents
of Idaho.
In the opinion of Chapman and Cutler, Special Counsel to the Fund for
Idaho tax matters, under existing law as of the date of this prospectus
and based upon the assumptions set forth above:
(1) The Trust is not an association taxable as a corporation for Idaho
income tax purposes and each Unit holder of the Trust will be treated as
the owner of a pro rata portion of each of the assets held by the Trust
and the income of such portion of the Trust will be treated as income of
the Unit holder for Idaho income tax purposes.
(2) Income on the Bonds which is exempt from the Idaho income tax when
received by the Trust, and which would be exempt from the Idaho income
tax if received directly by a Unit holder, will retain its status as
exempt from such tax when received by the Trust and distributed to such
Unit holder.
(3) To the extent that interest income derived from the Trust by a Unit
holder with respect to Possession Bonds is excludable from gross income
for Federal income tax purposes and is exempt from State income taxation
pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section 1423a or 48 U.S.C.
Section 1403, such interest income will not be subject to the Idaho
income tax.
(4) In general, each Unit holder will recognize gain or loss for Idaho
income tax purposes if the Trustee disposes of a Bond (whether by
redemption, sale or otherwise) or if the Unit holder redeems or sells
Units of the Trust to the extent that such a transaction results in a
recognized gain or loss to such Unit holder for Federal income tax
purposes. However, Idaho income tax law may prevent a Unit holder from
taking a recognized loss into account for Idaho income tax purposes,
under certain circumstances.
(5) The Idaho income tax does not permit a deduction of interest paid
on indebtedness incurred or continued to purchase or carry Units in the
Trust to the extent that interest income related to the ownership of
Units is exempt from the Idaho income tax.
(6) Any insurance proceeds paid under policies which represent maturing
interest on defaulted obligations which are excludable from gross income
for Federal income tax purposes will be excludable from the Idaho income
tax to the same extent as such interest would have been so excludable if
paid by the issuer of such Bonds held by the Trust provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds.
Units may be subject to the Idaho estate and transfer tax. Idaho has
special rules regarding a taxpayer's ability to recognize capital losses
that apply in certain cases. Unit holders should consult their tax
advisors regarding these rules.
Page 5
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Idaho law. Ownership of the Units may
result in other Idaho tax consequences to certain taxpayers. Prospective
investors should consult their tax advisors as to the applicability of
any such collateral consequences.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER
TAX MATTERS, SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?" IN
PART II OF THIS PROSPECTUS.
Certain Considerations
Economic Outlook. At the close of 1998, Idaho completed the twelfth
consecutive year of economic expansion, but at a much slower pace than
previous years. Exports of agricultural and manufactured goods play an
increasingly important role in Idaho's economic performance. Japan, the
United Kingdom, Canada, Singapore and Taiwan are the state's biggest
customers. It should be noted that the recent Asian currency crises
could dampen the outlook for food exports. Exports of American-style
snack and fast foods, including frozen french fries and other potato
products, to this region have expanded with rising incomes and the
westernization of Asian diets. These products will become relatively
more expensive due to the devaluation of several Asian currencies.
Agriculture has traditionally played a central role in the Idaho
economy, representing approximately 16% of the Gross State Product.
Livestock, beef, dairy cattle and sheep are the leading animal products,
while the major crops of Idaho's farmers include potatoes, wheat,
barley, sugar beets, peas, lentils, seed crops and fruit. According to
the 1997 Census of Agriculture, Idaho's annual agricultural products
were valued at $3.3 billion. This 1997 figure shows a 10% decline from
the previous year, and through 1999 low prices continue to plague the
state's huge agricultural industry. Currently, prices for hay, barley
and beans are down approximately 20% from 1998 values, while potatoes,
wheat and milk are down only 4%-8%.
Most of Idaho's other natural resource-based industries also continue to
struggle despite growing state and national economies. Overall non-farm
employment grew by 3.5% in 1998, but the mining and lumber-related
industries lost jobs. Soft commodities prices took a toll on mining
employment, which dropped in 1998 for the first time since 1993. And
while it was once the state's largest durable manufacturing employer,
the lumber and wood products sector also continues to shed jobs. Losses
in these sectors are expected through 2000.
The rapid employment increases enjoyed by the state for the last ten
years have already begun to slow and are anticipated to continue
slowing. With the exception of mining, the goods-producing sectors
(manufacturing, mining and construction) have been the star performers
in the state's economic expansion, particularly in the electronics
industries. With regards to the most important economic measures, the
service-producing sectors are central to Idaho's economy, because they
account for 68% of the Gross State Product and 78% of all
nonagricultural jobs. Among the service-producing sectors, the weakest
performer is expected to be the federal government, which will have
stable employment with some decreases due to downsizing of services and
employees. The remaining components of the service-producing sectors,
including the finance, insurance, real estate, transportation,
communication and public utility industries, are expected to continue to
have mixed experiences with employment, that is, growth partly offset by
right-sizing. The net result is that these industries are expected to
average around 1.5% per year employment growth through 2000.
Idaho's unemployment rate dropped to 5.0% in 1998, its lowest level
since 1978, although it jumped to a 5.9% average during the first three
months of 1999. Per capita personal income in the state reached $21,081,
reflecting 3.4% growth during 1998. This figure is 80% of the national
per capita personal income level ($26,412), ranking Idaho 43rd among the
states. Idaho's population growth, which peaked at 3.0% in 1994, has
tapered gradually to 1.6% during 1998, where it is expected to remain
over the next few years.
The current outlook for Idaho's economy is for further deceleration in
1999, then a modest increase in the growth rate in the next century.
Although the state's employment growth in 1999 is likely to be only half
the rate of the past four years, it is still expected to outpace
national job growth. Idaho's weakness in 1999 will come primarily from
the goods-producing sector, with a 1.5% employment decline forecasted.
Particularly weak sectors will include lumber and wood processing,
construction and mining. Nevertheless, strong gains in electrical and
high-tech manufacturing, services and education are projected to offset
these losses.
Page 6
Revenues and Expenditures. According to State of Idaho law, at no time
can governmental expenditures exceed appropriations, so that financially-
related legal compliance is assured. At fiscal year end, unexpended
appropriation balances may: (1) revert to unreserved fund equity
balances and be available for future appropriations; (2) be
reappropriated as part of the spending authority for the future year; or
(3) may be carried forward to subsequent years as outstanding
encumbrances with the approval of the Division of Financial Management.
Total revenues available for all government fund types during Fiscal
Year 1998 totaled $3.39 billion, reflecting a 6.4% gain from the
previous year. This increase was caused by continued growth in Idaho's
core revenue sources, with sales tax receipts rising 6.4% and individual
and corporate income taxes growing 8.4%, demonstrating the continued
strength of the Idaho economy.
The state General Fund accounted for $1.85 billion of these collections
and was offset by $1.69 billion in General Fund spending. During Fiscal
1998 every category of appropriations increased over the previous year
except transportation and natural resources, both of which had
experienced a jump in spending during Fiscal 1997 due to a major flood
in northern Idaho in 1996 requiring emergency appropriations from the
State Budget Reserve Fund. Public safety/corrections and general
government spending showed the greatest gains during Fiscal 1998. The
General Fund balance as of June 30, 1998 was $262.3 million, and overall
governmental expenditures totaled $3.33 billion, up 3.6%.
The total funding available to the General Fund during Fiscal Year 1999
is projected to reflect 6.8% net growth, including a Fiscal 1998
carryover of $14.2 million. The largest source of income is the
individual income tax, representing 51% of all receipts. Sales tax
receipts, the corporate income tax and product taxes (beer, wine, liquor
and cigarette taxes) represent 36%, 6.9% and 1%, respectively, of
General Fund revenues. With three months remaining in Fiscal 1999, the
State Division of Financial Management reports that General Fund
revenues are $14 million ahead of targeted goals.
General Fund spending currently authorized for Fiscal 1999 is $1.561
billion. The estimated fund balance for the General Fund at the end of
Fiscal 1999 is anticipated to be $2.28 million. Expenditures during
Fiscal 1999 consist of $1.42 billion in base spending plus $136.2
million in salary increases, inflation adjustments and non-standard
adjustments, replacement capital outlays, annualizations, enhancements,
personnel benefit roll-up costs and public school spending. Above-base
increases in public school expenditures are the largest item of
increase, with $44.81 million provided as a lump sum.
Debt Management. The State of Idaho has no outstanding general
obligation bond debt. By law, if the General Fund cash flow shortages
exist for more than 30 days, the State Treasurer must issue a tax
anticipation note to correct the shortfall. The State Treasurer has in
the past issued internal General Fund tax anticipation notes to borrow
monies from other available state funds or accounts, as well as external
tax anticipation notes which were sold in the open market. All notes
issued by the state must mature not later than the end of the then-
current fiscal year. Each note when duly issued is a valid and binding
obligation of the State of Idaho, backed by the full faith and credit of
the State of Idaho.
The State issued $300 million in Tax Anticipation Notes ("TANs") on July
1, 1997, which matured on June 30, 1998. The 1997 Notes were issued in
anticipation of the income and revenues and taxes to be received by the
General Fund during the fourth quarter of Fiscal 1998. As required by
law, all income and revenues from the taxes collected during the fourth
quarter of the 1998 fiscal year were deposited into the Note Payment
Account as received until the monies therein together with investment
earnings were sufficient to pay principal and interest on the Notes at
maturity.
Ratings. Because the State of Idaho does not issue general obligation
debt, it has not been assigned any ratings by the major ratings
services. Fitch IBCA, Inc., however, has assigned a F1+ rating to
Idaho's TANs.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the Idaho Trusts are
subject. Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within the
control of the issuers of the Bonds, could affect or could have an
adverse impact on the financial condition of the issuers. The Sponsor is
unable to predict whether or to what extent such factors or other
factors may affect the issuers of the Bonds, the market value or
marketability of the Bonds or the ability of the respective issuers of
the Bonds acquired by the Idaho Trusts to pay interest on or principal
of the Bonds.
Page 7
Idaho Trust Series
The First Trust (registered trademark) Combined Series
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 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 Combined Series 193, 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 October 29, 1999.
THE FIRST TRUST COMBINED SERIES 193
(Registrant)
ByNIKE SECURITIES L.P.
(Depositor)
ByRobert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, ) October 29, 1999
the General Partner )
of Nike Securities L.P. )
)
David J. Allen Director of Nike ) Robert M. Porcellino
Securities Corporation, ) Attorney-in-Fact**
the General Partner of
Nike Securities L.P.
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated October 7, 1999 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Combined Series dated
October 26, 1999.
ERNST & YOUNG LLP
Chicago, Illinois
October 25, 1999
