File No. 33-65646
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 2
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 195
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : December 1, 1995
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
September 18, 1995.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
2,534 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
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 Michigan State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Michigan Trust,
Series 27 - 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 Michigan, 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
Michigan State and local income taxes under existing law. At October 16,
1995, each Unit represented a 1/2,534 undivided interest in the principal and
net income of the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.1% of the Public Offering Price (4.275%
of the amount invested). At October 16, 1995, the Public Offering Price per
Unit was $997.72 plus net interest accrued to date of settlement (three
business days after such date) of $7.12 and $21.36 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 4.28% per annum on October 16, 1995, and 4.23% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 3.88% per annum on October 16, 1995, and 3.83%
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 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,440,000
Number of Units 2,534
Fractional Undivided Interest in the Trust per Unit 1/2,534
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,424,545
Aggregate Value of Bonds per Unit $956.81
Sales Charge 4.275% (4.1% of Public Offering Price) $40.91
Public Offering Price per Unit $997.72*
Redemption Price and Sponsor's Repurchase Price per Unit
($40.91 less than the Public Offering Price per Unit) $956.81*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $589,000
</TABLE>
Date Trust Established August 19, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $884 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
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<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 $44.63 $44.63
Less: Estimated Annual Expense
Excluding insurance $1.98 $1.45
Annual Premium on Portfolio Insurance $.48 $.48
Estimated Net Annual Interest Income $42.17 $42.70
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $42.17 $42.70
Divided by 12 and 2, Respectively $3.51 $21.35
Estimated Daily Rate of Net Interest Accrual $.1171 $.1186
Estimated Current Return Based on Public
Offering Price 4.23% 4.28%
Estimated Long-Term Return Based on Public
Offering Price 3.83% 3.88%
</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 195, The First Trust of Insured Municipal
Bonds - Multi-State, Michigan Trust, Series 27 - Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 195, The First
Trust of Insured Municipal Bonds - Multi-State, Michigan Trust, Series 27 -
Intermediate as of July 31, 1995, and the related statements of operations and
changes in net assets for the year then ended and for the period from the Date
of Deposit, August 19, 1993, to July 31, 1994. 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 July 31, 1995, 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 195, The First Trust of Insured Municipal Bonds - Multi-State, Michigan
Trust, Series 27 - Intermediate at July 31, 1995, and the results of its
operations and changes in its net assets for the year then ended and for the
period from the Date of Deposit, August 19, 1993, to July 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,485,031)
(Notes 1 and 3) $2,443,763
Accrued interest 29,929
__________
2,473,692
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 2,314
Cash overdraft 2,322
Accrued liabilities 117
__________
4,753
__________
Net assets, applicable to 2,591 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $2,485,031
Net unrealized depreciation (Note 2) (41,268)
Distributable funds 25,176
__________
$2,468,939
==========
Net asset value per unit $952.89
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
PORTFOLIO - See notes to portfolio.
July 31, 1995
<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>
Regents of the University of Michigan, Housing
Revenue, Series 1993A 4.45% 11/15/2000 AA $575,000 566,984
City of Grand Rapids Building Authority,
County of Kent, State of Michigan,
Building Authority Improvement and
Refunding, Series 1993 (General Obligation
Limited Tax) 4.90 4/01/2001 A+ 510,000 511,214
County of Oakland State of Michigan, Oakland
County Building Authority, Building Authority
Refunding, Series 1992 (General Obligation) 4.75 4/01/2002 1999 @ 101.5 AA 195,000 193,561
Gull Lake Community Schools, Counties of
Kalamazoo, Barry and Calhoun, State of
Michigan, 1993 Refunding Bonds (General
Obligation - Unlimited tax) (FGIC Insured) (c) 4.55 5/01/2002 AAA 85,000 82,590
Michigan Municipal Bond Authority, Local
Government Loan Program Refunding Revenue,
Series 1993B (AMBAC Insured) (c) 4.85 5/01/2002 AAA 100,000 99,425
Brighton Michigan Area School District
Series 1, Capital Appreciation (General
Obligation) (AMBAC Insured) (c) - (d) 5/01/2003 AAA 60,000 40,171
City of Bay City, County of Bay, State of
Michigan, Unlimited Tax General Obligation
Wastewater Disposal System Refunding
(AMBAC Insured) (c) 4.70 11/01/2003 AAA 365,000 357,663
Michigan Municipal Bond Authority, Local
Government Loan Program Refunding Revenue,
Series 1993B (AMBAC Insured) (c) 4.95 11/01/2003 2003 @ 102 AAA 100,000 99,657
Michigan Public Power Agency, Belle River
Project Refunding Revenue, 1993 Series B 4.90 1/01/2004 2003 @ 102 AA- 100,000 98,106
Michigan Municipal Bond Authority, Local
Government Loan Program, Revenue,
Series 1993D (MBIA Insured) (c) 4.95 5/01/2004 2003 @ 102 AAA 400,000 394,392
______________________
$2,490,000 2,443,763
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - Intermediate
NOTES TO PORTFOLIO
July 31, 1995
(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 8% 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 July 31, 1995.
(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 May 2, 1990 at a price of 39.877% of their original
principal amount.
(e) The Trust consists of ten obligations of issuers located in Michigan.
Five of the Bonds in the Trust, aggregating approximately 49% of the
aggregate principal amount of 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, 1; and Miscellaneous, 3. Approximately 23% of the aggregate
principal amount of the Bonds consist of university and school revenue
bonds. 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
74%. The largest such issue represents approximately 23%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $126,278 130,010
Expenses:
Trustee's fees and related expenses (3,571) (3,024)
Insurance expense (Note 3) (1,504) (1,501)
Evaluator's fees (884) (629)
Supervisory fees (712) (724)
__________________________
Investment income - net 119,607 124,132
Net gain (loss) on investments:
Net realized gain (loss) (42,187) (1,093)
Change in unrealized appreciation or
depreciation 76,848 (118,116)
__________________________
34,661 (119,209)
__________________________
Net increase in net assets resulting
from operations $154,268 4,923
==========================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $119,607 124,132
Net realized gain (loss) on investments (42,187) (1,093)
Change in unrealized appreciation or
depreciation on investments 76,848 (118,116)
_____________________________
154,268 4,923
Distributions to unit holders:
Investment income - net (119,454) (96,227)
Principal from investment transactions - -
_____________________________
(119,454) (96,227)
Unit redemptions (457 and 14 in 1995 and
1994, respectively):
Principal portion (399,996) (13,001)
Net interest accrued (4,052) (116)
_____________________________
(404,048) (13,117)
_____________________________
Total increase (decrease) in net assets (369,234) (104,421)
Net assets:
At the beginning of the period 2,838,173 2,942,594
_____________________________
At the end of the period (including
distributable funds applicable to
Trust units of $25,176 and $28,748 at
July 31, 1995 and 1994, respectively) $2,468,939 2,838,173
=============================
Trust units outstanding at the end of
the period 2,591 3,048
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - 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 (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, August 19, 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 United States Trust Company of New
York 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. Effective September 1, 1995, The Chase Manhattan Bank
(National Association) will succeed United States Trust Company of New York as
Trustee; the Trustee fees will not be affected by the change. Additionally, a
fee of $884 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 depreciation at July 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(43,352)
Unrealized appreciation 2,084
________
$(41,268)
========
</TABLE>
<PAGE>
3. Insurance
The issuers of six 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); the Trust has acquired
similar insurance coverage on all other bonds 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
$1,380.
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 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>
Period from the
Type of Date of Deposit,
distribution Year ended Aug. 19, 1993, to
plan July 31, 1995 July 31, 1994
<S> <C> <C>
Monthly $42.24 30.72*
Semi-annual 42.91 31.07
</TABLE>
[FN]
*Excludes $.67 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $11,498, plus net interest
accruing to the first settlement date, August 26, 1993, totaling $2,057, were
distributed to the Sponsor as the unit holder of record. The initial
subsequent distribution, $2.41 per unit, was paid on December 1, 1993 to all
unit holders of record on November 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $44.88 42.51
Expenses (2.37) (1.92)
___________________________
Investment income - net 42.51 40.59
Distributions to unit holders:
Investment income - net (42.41) (31.47)
Principal from investment transactions - -
Net gain (loss) on investments 21.63 (38.96)
___________________________
Total increase (decrease) in net assets 21.73 (29.84)
Net assets:
Beginning of the period 931.16 961.00
___________________________
End of the period $952.89 931.16
===========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MICHIGAN TRUST, SERIES 27 - 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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
3,086 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
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 Missouri State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Missouri Trust,
Series 19 (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 Missouri, 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 Missouri and local
income taxes under existing law. At October 16, 1995, each Unit represented a
1/3,086 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 October 16, 1995, the Public Offering Price per
Unit was $989.71 plus net interest accrued to date of settlement (three
business days after such date) of $7.58 and $24.83 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.23% per annum on October 16, 1995, and 5.18% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.11% per annum on October 16, 1995, and 5.05%
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 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,965,000
Number of Units 3,086
Fractional Undivided Interest in the Trust per Unit 1/3,086
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,877,112
Aggregate Value of Bonds per Unit $932.31
Sales Charge 6.157% (5.8% of Public Offering Price) $57.40
Public Offering Price per Unit $989.71*
Redemption Price and Sponsor's Repurchase Price per Unit
($57.40 less than the Public Offering Price per Unit) $932.31*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $593,000
</TABLE>
Date Trust Established August 19, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $890 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
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<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 $53.17 $53.17
Less: Estimated Annual Expense $1.95 $1.42
Estimated Net Annual Interest Income $51.22 $51.75
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $51.22 $51.75
Divided by 12 and 2, Respectively $4.27 $25.88
Estimated Daily Rate of Net Interest Accrual $.1423 $.1437
Estimated Current Return Based on Public Offering
Price 5.18% 5.23%
Estimated Long-Term Return Based on Public Offering
Price 5.05% 5.11%
</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 195, The First Trust of Insured Municipal
Bonds - Multi-State, Missouri Trust, Series 19
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 195, The First
Trust of Insured Municipal Bonds - Multi-State, Missouri Trust, Series 19 as
of July 31, 1995, and the related statements of operations and changes in net
assets for the year then ended and for the period from the Date of Deposit,
August 19, 1993, to July 31, 1994. 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 July 31, 1995, 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 195, The First Trust of Insured Municipal Bonds - Multi-State, Missouri
Trust, Series 19 at July 31, 1995, and the results of its operations and
changes in its net assets for the year then ended and for the period from the
Date of Deposit, August 19, 1993, to July 31, 1994, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,934,798)
(Note 1) $2,788,594
Accrued interest 38,991
__________
2,827,585
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 7,524
Cash overdraft 690
Accrued liabilities 13
__________
8,227
__________
Net assets, applicable to 3,086 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,934,798
Net unrealized depreciation (Note 2) (146,204)
Distributable funds 30,764
__________
$2,819,358
==========
Net asset value per unit $913.60
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
PORTFOLIO - See notes to portfolio.
July 31, 1995
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(f) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Public Water Supply District No. 3 of Jefferson
County, Missouri (Meramec Heights), Waterworks
System Refunding Revenue, Series 1993 (AMBAC
Insured) (c) 5.55% 12/01/2010 2001 @ 102 AAA $125,000 123,466
Kansas City Municipal Assistance Corporation
(Missouri), Leasehold Improvement Revenue,
Series 1991B (H. Roe Bartle Convention 2001 @ 100
Center Project) (AMBAC Insured) (c) (e) 6.00 4/15/2020 2016 @ 100 S.F. AAA 500,000 500,660
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue Refunding (SSM Health Care), 2002 @ 102
Series 1992 AA (MBIA Insured) (c) 6.25 6/01/2016 2011 @ 100 S.F. AAA 250,000 253,353
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue (The Children's Mercy Hospital 2003 @ 101
Project), Series 1993 (MBIA Insured) (c) 5.65 5/15/2023 2013 @ 100 S.F. AAA 500,000 468,740
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue (Lester E. Cox Medical Centers
Project), Series 1992-H (MBIA Insured) (c) - (d) 9/01/2020 AAA 165,000 37,018
Phelps County, Missouri, Hospital Refunding
Revenue (Phelps County Regional Medical 2003 @ 100
Center), Series 1993 (Connie Lee Insured) (c) 6.00 5/15/2013 2008 @ 100 S.F. AAA 225,000 222,313
St. Louis County, Missouri, General Obligation,
Public Improvement and Refunding, 2003 @ 100
Series 1993B (MBIA Insured) 5.50 2/01/2013 2011 @ 100 S.F. AAA 200,000 192,184
City of Sikeston, Missouri, Electric System
Revenue Refunding, 1992 Series (MBIA 2002 @ 102
Insured) (c) 6.25 6/01/2022 2013 @ 100 S.F. AAA 500,000 508,755
City of Springfield, Missouri, Waterworks
Refunding and Improvement Revenue,
Series 1993 A (MBIA Insured) (c) 5.50 5/01/2011 2003 @ 102 AAA 500,000 482,105
______________________
$2,965,000 2,788,594
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
NOTES TO PORTFOLIO
July 31, 1995
(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. None of the Bonds in
the Trust are subject to call within five years.
(b) The ratings shown are those effective at July 31, 1995.
(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 September 15, 1992 at a price of 15.838% of their original
principal amount.
(e) These bonds were issued at an original issue discount on May 1, 1991, at
a price of 89.731% of their original principal amount.
(f) The Trust consists of nine obligations of issuers located in Missouri.
One of the Bonds in the Trust, representing approximately 7% of the
aggregate principal amount of Bonds in the Trust, is a general
obligation of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Health Care, 4; Electric, 1;
Water, 2; and Miscellaneous, 1. Approximately 38% and 21% of the
aggregate principal amount of the Bonds consists of health care revenue
bonds and water revenue bonds, respectively. Each of four Bond issues
represents approximately 17% of the aggregate principal amount of the
Bonds in the Trust or a total of approximately 67%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $164,063 155,860
Expenses:
Trustee's fees and related expenses (3,800) (3,107)
Evaluator's fees (890) (744)
Supervisory fees (771) (731)
_____________________________
Investment income - net 158,602 151,278
Net gain (loss) on investments:
Net realized gain (loss) - -
Change in unrealized appreciation or
depreciation 46,260 (192,464)
_____________________________
46,260 (192,464)
_____________________________
Net increase (decrease) in net assets
resulting from operations $204,862 (41,186)
=============================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $158,602 151,278
Net realized gain (loss) on investments - -
Change in unrealized appreciation or
depreciation on investments 46,260 (192,464)
___________________________
204,862 (41,186)
Distributions to unit holders:
Investment income - net (158,993) (120,123)
Principal from investment transactions - -
___________________________
(158,993) (120,123)
___________________________
Total increase (decrease) in net assets 45,869 (161,309)
Net assets:
At the beginning of the period 2,773,489 2,934,798
___________________________
At the end of the period (including
distributable funds applicable to
Trust units of $30,764 and $31,155 at
July 31, 1995 and 1994, respectively) $2,819,358 2,773,489
===========================
Trust units outstanding at the end of the
period 3,086 3,086
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
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, August 19, 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 United States Trust Company of
New York 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. Effective September 1, 1995, The Chase Manhattan Bank
(National Association) will succeed United States Trust Company of New York as
Trustee; the Trustee fees will not be affected by the change. Additionally, a
fee of $890 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 depreciation at July 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(146,204)
Unrealized appreciation -
_________
$(146,204)
=========
</TABLE>
<PAGE>
3. Insurance
The issuers of all 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 acquired by
an issuer of bonds 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>
Period from the
Type of Date of Deposit,
distribution Year ended Aug. 19, 1993, to
plan July 31, 1995 July 31, 1994
<S> <C> <C>
Monthly $51.24 37.71*
Semi-annual 51.74 38.04
</TABLE>
[FN]
*Excludes $1.00 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $40,932, plus net interest
accruing to the first settlement date, August 26, 1993, totaling $3,086, were
distributed to the Sponsor as the unit holder of record. The initial
subsequent distribution, $3.55 per unit, was paid on December 1, 1993 to all
unit holders of record on November 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $53.16 50.50
Expenses (1.77) (1.48)
__________________________
Investment income - net 51.39 49.02
Distributions to unit holders:
Investment income - net (51.52) (38.93)
Principal from investment transactions - -
Net gain (loss) on investments 15.00 (62.36)
__________________________
Total increase (decrease) in net assets 14.87 (52.27)
Net assets:
Beginning of the period 898.73 951.00
__________________________
End of the period $913.60 898.73
==========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 19
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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
3,018 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
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 Pennsylvania State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Pennsylvania Trust,
Series 49 (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 Pennsylvania, 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 Pennsylvania State
and local income taxes under existing law. At October 16, 1995 each Unit
represented a 1/3,018 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 October 16, 1995, the Public Offering Price per
Unit was $978.28 plus net interest accrued to date of settlement (three
business days after such date) of $7.92 and $25.17 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.29% per annum on October 16, 1995, and 5.24% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.22% per annum on October 16, 1995, and 5.17%
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 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,935,000
Number of Units 3,018
Fractional Undivided Interest in the Trust per Unit 1/3,018
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,781,193
Aggregate Value of Bonds per Unit $921.54
Sales Charge 6.157% (5.8% of Public Offering Price) $56.74
Public Offering Price per Unit $978.28*
Redemption Price and Sponsor's Repurchase Price per Unit
($56.74 less than the Public Offering Price per Unit) $921.54*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $587,000
</TABLE>
Date Trust Established August 19, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $881 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
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<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 $53.19 $53.19
Less: Estimated Annual Expense $1.96 $1.42
Estimated Net Annual Interest Income $51.23 $51.77
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $51.23 $51.77
Divided by 12 and 2, Respectively $4.27 $25.89
Estimated Daily Rate of Net Interest Accrual $.1423 $.1438
Estimated Current Return Based on Public
Offering Price 5.24% 5.29%
Estimated Long-Term Return Based on Public
Offering Price 5.17% 5.22%
</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 195, The First Trust of Insured Municipal
Bonds - Multi-State, Pennsylvania Trust, Series 49
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 195, The First
Trust of Insured Municipal Bonds - Multi-State, Pennsylvania Trust, Series 49
as of July 31, 1995, and the related statements of operations and changes in
net assets for the year then ended and for the period from the Date of
Deposit, August 19, 1993, to July 31, 1994. 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 July 31, 1995, 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 195, The First Trust of Insured Municipal Bonds - Multi-State,
Pennsylvania Trust, Series 49 at July 31, 1995, and the results of its
operations and changes in its net assets for the year then ended and for the
period from the Date of Deposit, August 19, 1993, to July 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,872,029)
(Note 1) $2,685,424
Accrued interest 52,729
__________
2,738,153
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 17,015
Distributions payable and accrued to unit holders 6,284
Accrued liabilities 12
__________
23,311
__________
Net assets, applicable to 3,018 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,872,029
Net unrealized depreciation (Note 2) (186,605)
Distributable funds 29,418
__________
$2,714,842
==========
Net asset value per unit $899.55
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
PORTFOLIO - See notes to portfolio.
July 31, 1995
<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>
Allegheny County Hospital Development
Authority (Pennsylvania), Hospital Revenue,
Series 1993 (Magee-Womans Hospital) 2003 @ 102
(FGIC Insured) (c) 5.625% 10/01/2023 2021 @ 100 S.F. AAA $265,000 $245,796
Delaware County, Pennsylvania, University
Revenue, Villanova University 2002 @ 102
(MBIA Insured) (c) 6.00 8/01/2018 2013 @ 100 S.F. AAA 500,000 490,225
Derry Area School District (Westmoreland
County, Pennsylvania), General Obligation, 2003 @ 100
Refunding Series of 1993 (MBIA Insured) (c) 5.50 2/01/2021 2015 @ 100 S.F. AAA 500,000 461,445
Lancaster County Hospital Authority
(Pennsylvania), Hospital Revenue, Series
of 1992 (The Lancaster General Hospital 2002 @ 100
Project) (AMBAC Insured) (c) 6.125 7/01/20 12 2008 @ 100 S.F. AAA 500,000 502,895
Montour School District (Allegheny County,
Pennsylvania), General Obligation, Series B
of 1993 (MBIA Insured) (c) - (d) 1/01/2023 AAA 170,000 30,078
Pennsylvania State Higher Education Facilities
Authority, College and University Revenue
Refunding, Duquesne University Project,
Series A (MBIA Insured) (c) 5.50 9/01/2020 2003 @ 102 AAA 500,000 461,690
Pennsylvania State Turnpike Commission,
Turnpike Revenue, Series P (AMBAC 2002 @ 102
Insured) (c) 6.00 12/01/2017 2013 @ 100 S.F. AAA 500,000 493,295
______________________
$2,935,000 2,685,424
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
NOTES TO PORTFOLIO
July 31, 1995
(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. None of the Bonds in
the Trust are subject to call within five years.
(b) The ratings shown are those effective at July 31, 1995.
(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 19, 1993 at a price of 17.873% of their original
principal amount.
(e) The Trust consists of seven obligations of issuers located in
Pennsylvania. Two of the Bonds in the Trust, representing approximately
23% 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, 2; and Transportation, 1. Approximately 34% and 26% of
the aggregate principal amount of the Bonds consist of university and
school revenue bonds and health care revenue bonds, respectively. Each
of five Bond issues represents approximately 17% of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
85%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $160,531 152,505
Expenses:
Trustee's fees and related expenses (3,818) (3,268)
Evaluator's fees (881) (737)
Supervisory fees (755) (715)
__________________________
Investment income - net 155,077 147,785
Net gain (loss) on investments:
Net realized gain (loss) - -
Change in unrealized appreciation
or depreciation 45,600 (232,205)
__________________________
45,600 (232,205)
__________________________
Net increase (decrease) in net assets
resulting from operations $200,677 (84,420)
==========================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $155,077 147,785
Net realized gain (loss) on investments - -
Change in unrealized appreciation
or depreciation on investments 45,600 (232,205)
________________________________
200,677 (84,420)
Distributions to unit holders:
Investment income - net (155,438) (116,177)
Principal from investment transactions - -
________________________________
(155,438) (116,177)
Unit redemptions (2 in 1995):
Principal Portion (1,805) -
Net interest accrued (24) -
________________________________
Total increase (decrease) in net assets (1,829) -
________________________________
43,410 (200,597)
Net assets:
At the beginning of the period 2,671,432 2,872,029
________________________________
At the end of the period (including
distributable funds applicable to
Trust units of $29,418 and $31,608 at
July 31, 1995 and 1994, respectively) $2,714,842 2,671,432
================================
Trust units outstanding at the end of
the period 3,018 3,020
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
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, August 19, 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 United States Trust Company of
New York 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. Effective September 1, 1995, The Chase Manhattan Bank
(National Association) will succeed United States Trust Company of New York as
Trustee; the Trustee fees will not be affected by the change. Additionally, a
fee of $881 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 depreciation at July 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(186,605)
Unrealized appreciation -
_________
$(186,605)
=========
</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>
Period from the
Type of Date of Deposit,
distribution Year ended Aug. 19, 1993, to
plan July 31, 1995 July 31, 1994
<S> <C> <C>
Monthly $51.24 37.32*
Semi-annual 51.72 37.64
</TABLE>
[FN]
*Excludes $1.00 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $15,751, plus interest
accruing to the first settlement date, August 26, 1993, totaling $3,019, were
distributed to the Sponsor as the unit holder of record. The initial
subsequent distribution, $3.16 per unit, was paid on December 1, 1993 to all
unit holders of record on November 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $53.16 50.50
Expenses (1.81) (1.56)
_________________________
Investment income - net 51.35 48.94
Distributions to unit holders:
Investment income - net (51.47) (38.47)
Principal from investment transactions - -
Net gain (loss) on investments 15.09 (76.89)
_________________________
Total increase (decrease) in net assets 14.97 (66.42)
Net assets:
Beginning of the period 884.58 951.00
_________________________
End of the period $899.55 884.58
=========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 49
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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
3,032 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
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 Mississippi State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, Mississippi Trust, Series 9 (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
Mississippi, 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 Mississippi State and local income taxes under existing law. At
October 16, 1995, each Unit represented a 1/3,032 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 October 16, 1995, the Public Offering Price per
Unit was $993.01 plus net interest accrued to date of settlement (three
business days after such date) of $7.87 and $25.28 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
_____________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_____________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.26% per annum on October 16, 1995, and 5.21% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.00% per annum on October 16, 1995, and 4.95%
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 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,865,000
Number of Units 3,032
Fractional Undivided Interest in the Trust per Unit 1/3,032
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,836,185
Aggregate Value of Bonds per Unit $935.42
Sales Charge 6.157% (5.8% of Public Offering Price) $57.59
Public Offering Price per Unit $993.01*
Redemption Price and Sponsor's Repurchase Price per Unit
($57.59 less than the Public Offering Price per Unit) $935.42*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $591,000
</TABLE>
Date Trust Established August 19, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $887 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
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<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 $53.63 $53.63
Less: Estimated Annual Expense $1.94 $1.41
Estimated Net Annual Interest Income $51.69 $52.22
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $51.69 $52.22
Divided by 12 and 2, Respectively $4.31 $26.11
Estimated Daily Rate of Net Interest Accrual $.1436 $.1451
Estimated Current Return Based on Public
Offering Price 5.21% 5.26%
Estimated Long-Term Return Based on Public
Offering Price 4.95% 5.00%
</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 195, The First Trust Advantage,
Mississippi Trust, Series 9
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 195, The First
Trust Advantage, Mississippi Trust, Series 9 as of July 31, 1995, and the
related statements of operations and changes in net assets for the year then
ended and for the period from the Date of Deposit, August 19, 1993, to July
31, 1994. 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 July 31, 1995, 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 195, The First Trust Advantage, Mississippi Trust, Series 9 at July 31,
1995, and the results of its operations and changes in its net assets for the
year then ended and for the period from the Date of Deposit, August 19, 1993,
to July 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,881,054)
(Note 1) $2,754,684
Accrued interest 50,843
__________
2,805,527
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 14,850
Distributions payable and accrued to unit holders 4,385
Accrued liabilities 9
__________
19,244
__________
Net assets, applicable to 3,032 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,881,054
Net unrealized depreciation (Note 2) (126,370)
Distributable funds 31,599
__________
$2,786,283
==========
Net asset value per unit $918.96
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
PORTFOLIO - See notes to portfolio.
July 31, 1995
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal Market
Name of issuer and title of bond(f) rate maturity provisions(a) Rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Combined Water and Sewer System Revenue,
Series 1992, of the City of Columbus,
Mississippi (MBIA Insured) 6.50% 5/01/2009 2004 @ 102 AAA $255,000 273,094
Gautier Utility District of Jackson County,
Mississippi, Combined Utility System
Revenue Refunding, Series 1992 (FGIC 2002 @ 102
Insured) 6.375 3/01/2019 2013 @ 100 S.F. AAA 500,000 506,715
Mississippi Housing Finance Corporation,
Singe Family Mortgage (e) - (c) 9/15/2016 AA 140,000 37,022
Mississippi Hospital Equipment and Facilities
Authority, Revenue, Series 1992, (Rush
Medical Foundation Project) (Connie Lee 2002 @ 102
Insured) 6.40 1/01/2007 2003 @ 100 S.F. AAA 500,000 527,185
Mississippi Hospital Equipment and Facilities
Authority, Revenue Refunding and Improvement
(North Mississippi Health Services), 1993 2003 @ 102
Series 1 (AMBAC Insured) 5.50 5/15/2009 2006 @ 100 S.F. AAA 500,000 487,235
State of Mississippi, General Obligation 5.20 8/01/2009 2003 @ 100 AA- 200,000 191,374
Capital Improvement, Series 1993A 5.20 8/01/2011 2003 @ 100 AA- 200,000 186,810
5.20 8/01/2012 2003 @ 100 AA- 100,000 92,451
Certificates of Participation, (State of
Mississippi Department of Rehabilitation 2003 @ 100
Services Project) 6.10 3/01/2014 2009 @ 100 S.F. A(d) 470,000 452,798
______________________
$2,865,000 2,754,684
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
NOTES TO PORTFOLIO
July 31, 1995
(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. None of the Bonds in
the Trust are subject to call within five years.
(b) The ratings shown are those effective at July 31, 1995. All ratings are
by Standard & Poor's Corporation unless otherwise indicated.
(c) 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 October 10, 1994 at a price of 2.814% of their original
principal amount.
(d) Rating by Moody's Investors Service, Inc.
(e) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(f) The Trust consists of seven obligations of issuers located in
Mississippi. One of the Bonds, representing approximately 17% of the
aggregate principal amount of the Bonds in the Trust, is a general
obligation of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Health Care, 2; Water and
Sewer, 2; Single Family Housing, 1; and Miscellaneous, 1.
Approximately 35%, 26%, and 5% of the aggregate principal amount of the
Bonds in the Trust consist of health care revenue bonds, water and sewer
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 86%. The four largest such issues represent approximately
17% each.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $163,077 156,228
Expenses:
Trustee's fees and related expenses (3,837) (2,610)
Evaluator's fees (887) (631)
Supervisory fees (763) (731)
________________________________
Investment income - net 157,590 152,256
Net gain (loss) on investments:
Net realized gain (loss) (6,614) -
Change in unrealized appreciation or
depreciation 59,317 (185,687)
________________________________
52,703 (185,687)
________________________________
Net increase (decrease) in net assets
resulting from operations $210,293 (33,431)
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $157,590 152,256
Net realized gain (loss) on investments (6,614) -
Change in unrealized appreciation
or depreciation on investments 59,317 (185,687)
__________________________________
210,293 (33,431)
Distributions to unit holders:
Investment income - net (157,187) (120,341)
Principal from investment transactions - -
__________________________________
(157,187) (120,341)
Unit redemptions (39 and 7 in 1995
and 1994, respectively):
Principal portion (32,932) (6,418)
Net interest accrued (822) (69)
__________________________________
(33,754) (6,487)
__________________________________
Total increase (decrease) in net assets 19,352 (160,259)
Net assets:
At the beginning of the period 2,766,931 2,927,190
__________________________________
At the end of the period (including
distributable funds applicable to
Trust units of $31,599 and $25,428 at
July 31, 1995 and 1994, respectively) $2,786,283 2,766,931
==================================
Trust units outstanding at the end
of the period 3,032 3,071
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
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, August 19, 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 United States Trust Company of
New York 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. Effective September 1, 1995, The Chase Manhattan Bank
(National Association) will succeed United States Trust Company of New York as
Trustee; the Trustee fees will not be affected by the change. Additionally, a
fee of $887 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 depreciation at July 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(126,749)
Unrealized appreciation 379
__________
$(126,370)
==========
</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>
Period from the
Type of Date of Deposit,
distribution Year ended Aug. 19, 1993, to
plan July 31, 1995 July 31, 1994
<S> <C> <C>
Monthly $51.59 37.99*
Semi-annual 52.16 38.36
</TABLE>
[FN]
*Excludes $1.01 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $36,411, plus interest
accruing to the first settlement date, August 26, 1993, totaling $3,094, were
distributed to the Sponsor as the unit holder of record. The initial
subsequent distribution, $3.66 per unit, was paid on December 1, 1993 to all
unit holders of record on November 15, 1993.
<PAGE>
Selected data for a unit of the Trust outstanding throughout
each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $53.53 50.81
Expenses (1.80) (1.29)
___________________________
Investment income - net 51.73 49.52
Distributions to unit holders:
Investment income - net (51.74) (39.14)
Principal from investment transactions - -
Net gain (loss) on investments 17.98 (60.39)
___________________________
Total increase (decrease) in net assets 17.97 (50.01)
Net assets:
Beginning of the period 900.99 951.00
___________________________
End of the period $918.96 900.99
===========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
MISSISSIPPI TRUST, SERIES 9
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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
2,764 UNITS
PROSPECTUS
Part One
Dated November 22, 1995
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 North Carolina State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, North Carolina Trust, Series 8 - Intermediate (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 North Carolina, 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 North Carolina State and local income taxes under
existing law. At October 16, 1995, each Unit represented a 1/2,764 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 4.4% of the Public Offering Price (4.603%
of the amount invested). At October 16, 1995, the Public Offering Price per
Unit was $1,008.14 plus net interest accrued to date of settlement (three
business days after such date) of $6.62 and $21.77 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 4.50% per annum on October 16, 1995, and 4.45% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 3.93% per annum on October 16, 1995, and 3.88%
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 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $2,635,000
Number of Units 2,764
Fractional Undivided Interest in the Trust per Unit 1/2,764
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,663,898
Aggregate Value of Bonds per Unit $963.78
Sales Charge 4.603% (4.4% of Public Offering Price) $44.36
Public Offering Price per Unit $1,008.14*
Redemption Price and Sponsor's Repurchase Price per Unit
($44.36 less than the Public Offering Price per Unit) $963.78*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $582,000
</TABLE>
Date Trust Established August 19, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $873 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.
[FN]
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF OCTOBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<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 $46.80 $46.80
Less: Estimated Annual Expense $1.93 $1.41
Estimated Net Annual Interest Income $44.87 $45.39
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $44.87 $45.39
Divided by 12 and 2, Respectively $3.74 $22.70
Estimated Daily Rate of Net Interest Accrual $.1246 $.1261
Estimated Current Return Based on Public Offering Price 4.45% 4.50%
Estimated Long-Term Return Based on Public Offering Price 3.88% 3.93%
</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 195, The First Trust Advantage,
North Carolina Trust, Series 8 - Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 195, The First
Trust Advantage, North Carolina Trust, Series 8 - Intermediate as of July 31,
1995, and the related statements of operations and changes in net assets for
the year then ended and for the period from the Date of Deposit, August 19,
1993, to July 31, 1994. 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 July 31, 1995, 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 195, The First Trust Advantage, North Carolina Trust, Series 8 -
Intermediate, at July 31, 1995, and the results of its operations and changes
in its net assets for the year then ended and for the period from the Date of
Deposit, August 19, 1993, to July 31, 1994, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 27, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost
$2,833,569) (Note 1) $2,799,596
Accrued interest 25,444
__________
2,825,040
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 2,847
Distributions payable and accrued to unit holders 2,301
Accrued liabilities 3
__________
5,151
__________
Net assets, applicable to 2,943 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,833,569
Net unrealized depreciation (Note 2) (33,973)
Distributable funds 20,293
__________
$2,819,889
==========
Net asset value per unit $958.17
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
PORTFOLIO - See notes to portfolio.
July 31, 1995
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(c) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Metropolitan Sewerage District of Buncombe
County (North Carolina), Sewerage System
Revenue Refunding, Series 1993A (FGIC
Insured) 4.875% 7/01/2003 AAA $500,000 497,544
Refunding Certificates of Participation
(Convention Facility Project), Series 1993C,
City of Charlotte, North Carolina
(AMBAC Insured) 4.75 12/01/2002 AAA 500,000 495,395
Craven Regional Medical Authority, Insured
Health Care Facilities Revenue, Series 1993 4.80 10/01/2001 AAA 200,000 201,046
(MBIA Insured) 5.10 10/01/2004 2003 @ 102 AAA 110,000 110,000
County of Duplin, North Carolina, Certificates
of Participation, Law Enforcement Project
and Public School Project, Series 1993
(FGIC Insured) 4.50 8/01/2000 AAA 300,000 299,334
North Carolina Eastern Municipal Power Agency, 5.125 1/01/2003 A- 350,000 348,810
Power System Revenue, Refunding Series 1993C 5.25 1/01/2004 A- 150,000 149,187
North Carolina Medical Care Commission,
Hospital Revenue Refunding (Memorial Mission
Hospital Project), Series 1993 (MBIA Insured) 5.10 10/01/2004 2003 @ 102 AAA 200,000 200,000
North Carolina Municipal Power Agency
Number 1, Catawba Electric Revenue,
Series 1993 (MBIA Insured) 5.00 1/01/2004 AAA 500,000 498,280
______________________
$2,810,000 2,799,596
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
NOTES TO PORTFOLIO
July 31, 1995
(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. None of the Bonds in
the Trust are subject to call within five years.
(b) The ratings shown are those effective at July 31, 1995.
(c) The Trust consists of seven obligations of issuers located in North
Carolina. None of the Bonds in the Trust are general obligations of a
governmental entity. All issues are revenue bonds payable from the
income of a specific project or authority and are divided by purpose of
issue as follows: Electric, 2; Health Care, 2; Sewer, 1, and
Miscellaneous, 2. Approximately 36% of the aggregate principal amount
of the Bonds consist of electric revenue bonds. Each of six Bond issues
represents 10% or more of the aggregate principal amount of the Bonds in
the Trust or a total of approximately 93%. The four largest such issues
represent approximately 18% each.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $138,890 $135,373
Expenses:
Trustee's fees and related expenses (3,738) (2,673)
Evaluator's fees (873) (657)
Supervisory fees (747) (722)
________________________________
Investment income - net 133,532 131,321
Net gain (loss) on investments:
Net realized gain (loss) (6,585) (1,170)
Change in unrealized appreciation or
depreciation 79,050 (113,023)
________________________________
72,465 (114,193)
________________________________
Net increase in net assets resulting from
operations $205,997 17,128
================================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $133,532 131,321
Net realized gain (loss) on investments (6,585) (1,170)
Change in unrealized appreciation or
depreciation on investments 79,050 (113,023)
_____________________________
205,997 17,128
Distributions to unit holders:
Investment income - net (133,185) (104,475)
Principal from investment transactions - -
_____________________________
(133,185) (104,475)
Unit redemptions (95 and 16 in 1995 and
1994, respectively):
Principal portion (84,718) (14,600)
Net interest accrued (1,050) (113)
_____________________________
(85,768) (14,713)
_____________________________
Total increase (decrease) in net assets (12,956) (102,060)
Net assets:
At the beginning of the period 2,832,845 2,934,905
_____________________________
At the end of the period (including
distributable funds applicable to
Trust units of $20,293 and $26,163 at
July 31, 1995 and 1994, respectively) $2,819,889 2,832,845
=============================
Trust units outstanding at the end
of the period 2,943 3,038
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - 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, August 19, 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 United States Trust Company of
New York 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. Effective September 1, 1995, The Chase Manhattan Bank
(National Association) will succeed United States Trust Company of New York as
Trustee; the Trustee fees will not be affected by the change. Additionally, a
fee of $873 annually is payable to the Evaluator and the Trust pays all
related expenses of the Trustee and recurring financial reporting costs.
2. Unrealized appreciation and depreciation
An analysis of net unrealized depreciation at July 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(33,973)
Unrealized appreciation -
_________
$(33,973)
=========
</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 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>
Period from the
Type of Date of Deposit,
distribution Year ended Aug. 19, 1993, to
plan July 31, 1995 July 31, 1994
<S> <C> <C>
Monthly $44.83 33.30*
Semi-annual 45.36 33.67
</TABLE>
[FN]
*Excludes $.87 per unit distributed to the Sponsor as discussed below.
Accrued interest to the Date of Deposit, totaling $11,706, plus interest
accruing to the first settlement date, August 26, 1993, totaling $2,671, were
distributed to the Sponsor as the unit holder of record. The initial
subsequent distribution, $3.46 per unit, was paid on December 1, 1993 to all
unit holders of record on November 15, 1993.
<PAGE>
Selected data for a unit of the Trust outstanding
throughout each period -
<TABLE>
<CAPTION>
Period from the
Date of Deposit,
Year ended August 19, 1993, to
July 31, 1995 July 31, 1994
<S> <C> <C>
Interest income $46.75 44.39
Expenses (1.80) (1.33)
__________________________
Investment income - net 44.95 43.06
Distributions to unit holders:
Investment income - net (44.90) (34.26)
Principal from investment transactions - -
Net gain (loss) on investments 25.65 (37.33)
__________________________
Total increase (decrease) in net assets 25.70 (28.53)
Net assets:
Beginning of the year 932.47 961.00
__________________________
End of the year $958.17 932.47
==========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 195
THE FIRST TRUST ADVANTAGE
NORTH CAROLINA TRUST, SERIES 8 - 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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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
Supplement to the Prospectus
Commencing September 1, 1995, The Chase Manhattan Bank
(National Association) became successor to United States Trust
Company of New York as Trustee of each Series of The First Trust
Combined Series. This change will have no material effect upon
Unit holders of a Series of The First Trust Combined Series. In
addition, the address and phone number for the Trustee listed in
the Prospectus will remain the same.
September 5, 1995
The First Trust (registered trademark) Combined Series
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated March 13, 1995 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 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 INDEMNITY 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 INDEMNITY 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 14. 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
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 "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 "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, United States Trust Company of New York, 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 Indemnity Corporation ("AMBAC Indemnity")
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 Indemnity, 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.
Page 3
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 obtained by the Bond issuer,
the underwriters, 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 underwriters, 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 Indemnity 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 Indemnity "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. If
such interest rates for newly issued comparable bonds increase,
the market discount of previously issued bonds will become greater,
and if such interest rates for newly issued comparable bonds decline,
the market discount of previously issued bonds will be reduced,
other things being equal. Investors should also note that the
value of bonds purchased at a market discount will increase in
value faster than bonds purchased at a market premium if interest
rates decrease. Conversely, if interest rates increase, the value
of bonds purchased at a market discount will decrease faster than
bonds purchased at a market premium. In addition, if interest
rates rise, the prepayment risk of higher yielding, premium bonds
and the prepayment benefit for lower yielding, discount bonds
will be reduced. 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
Page 4
Status of Unit Holders?" appearing in Part Three for each Trust.
Market discount attributable to interest changes does not indicate
a lack of market confidence in the issue. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure
or defect in any of the Bonds.
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, 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 Bonds may be
subject to more price volatility than conventional bonds. While
some types of Zero Coupon Bonds, such as multipliers and capital
appreciation bonds, define par as the initial offering price rather
than the maturity value, they share the basic Zero Coupon bond
features of (1) not paying interest on a semi-annual basis and
(2) providing for the reinvestment of the bond's semi-annual earnings
at the bond's stated yield to maturity. While Zero Coupon Bonds
are frequently marketed on the basis that their fixed rate of
return minimizes reinvestment risk, this benefit can be negated
in large part by weak call protection, i.e., a bond's provision
for redemption at only a modest premium over the accreted value
of the bond.
Certain of the Bonds in the 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. If
such interest rates for newly issued and otherwise comparable
bonds decrease, the market premium of previously issued bonds
will be increased, and if such interest rates for newly issued
comparable bonds increase, the market premium of previously issued
bonds will be reduced, other things being equal. The current returns
of bonds trading at a market premium are initially higher than
the current returns of comparable bonds of a similar type issued
at currently prevailing interest rates because premium bonds tend
to decrease in market value as they approach maturity when the
face amount becomes payable. Because part of the purchase price
is thus returned not at maturity but through current income payments,
early redemption of a premium bond at par or early prepayments
of principal will result in a reduction in yield. Redemption pursuant
to call provisions generally will, and redemption pursuant to
sinking fund provisions may, occur at times when the redeemed
Bonds have an offering side valuation which represents a premium
over par or for original issue discount Bonds a premium over the
accreted value. To the extent that the Bonds were deposited in
the Fund at a price higher than the price at which they are redeemed,
this will represent a loss of capital when compared to the original
Public Offering Price of the Units. Because premium bonds generally
pay a higher rate of interest than bonds priced at or below par,
the effect of the redemption of premium bonds would be to reduce
Estimated Net Annual Unit Income by a greater percentage than
the par amount of such bonds bears to the total par amount of
Bonds in 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 the event
that all the Bonds in the portfolio other than the Zero Coupon
Bonds are called or redeemed 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
Page 5
from the Fund?" and "Other Information-How May the Indenture be
Amended or Terminated?" See the "Portfolio" appearing in Part
One for each Trust for the earliest scheduled call date and the
initial redemption price for each Bond or, for the Bonds that
are currently redeemable, the next scheduled call date and the
current redemption price.
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 health care revenue
bonds. Ratings of bonds issued for health care facilities are
sometimes based on feasibility studies that contain projections
of occupancy levels, revenues and expenses. A facility's gross
receipts and net income available for debt service may be affected
by future events and conditions including among other things,
demand for services, the ability of the facility to provide the
services required, physicians' confidence in the facility, management
capabilities, competition with other hospitals, efforts by insurers
and governmental agencies to limit rates, legislation establishing
state rate-setting agencies, expenses, government regulation,
the cost and possible unavailability of malpractice insurance
and the termination or restriction of governmental financial assistance,
including that associated with Medicare, Medicaid and other similar
third party payor programs. Pursuant to recent Federal legislation,
Medicare reimbursements are currently calculated on a prospective
basis utilizing a single nationwide schedule of rates. Prior to
such legislation Medicare reimbursements were based on the actual
costs incurred by the health facility. The current legislation
may adversely affect reimbursements to hospitals and other facilities
for services provided under the Medicare program.
Certain of the Bonds in the Trusts may be single family mortgage
revenue bonds, which are issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages
on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities
as a result of events such as sale of the mortgaged premises,
default, condemnation or casualty loss. Because these Bonds are
subject to extraordinary mandatory redemption in whole or in part
from such prepayments of mortgage loans, a substantial portion
of such Bonds will probably be redeemed prior to their scheduled
maturities or even prior to their ordinary call dates. The redemption
price of such issues may be more or less than the offering price
of such Bonds. Extraordinary mandatory redemption without premium
could also result from the failure of the originating financial
institutions to make mortgage loans in sufficient amounts within
a specified time period or, in some cases, from the sale by the
Bond issuer of the mortgage loans. Failure of the originating
financial institutions to make mortgage loans would be due principally
to the interest rates on mortgage loans funded from other sources
becoming competitive with the interest rates on the mortgage loans
funded with the proceeds of the single family mortgage revenue
bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single
family mortgage revenue bonds issued after December 31, 1980 were
issued under Section 103A of the Internal Revenue Code, which
Section contains certain ongoing requirements relating to the
use of the proceeds of such Bonds in order for the interest on
such Bonds to retain its tax-exempt status. In each case, the
issuer of the Bonds has covenanted to comply with applicable ongoing
requirements and bond counsel to such issuer has issued an opinion
that the interest on the Bonds is exempt from Federal income tax
under existing laws and regulations. There can be no assurances
that the ongoing requirements will be met. The failure to meet
these requirements could cause the interest on the Bonds to become
taxable, possibly retroactively from the date of issuance.
Page 6
Certain of the Bonds in the Trusts may be obligations of issuers
whose revenues are primarily derived from mortgage loans to housing
projects for low to moderate income families. The ability of such
issuers to make debt service payments will be affected by events
and conditions affecting financed projects, including, among other
things, the achievement and maintenance of sufficient occupancy
levels and adequate rental income, increases in taxes, employment
and income conditions prevailing in local labor markets, utility
costs and other operating expenses, the managerial ability of
project managers, changes in laws and governmental regulations,
the appropriation of subsidies and social and economic trends
affecting the localities in which the projects are located. The
occupancy of housing projects may be adversely affected by high
rent levels and income limitations imposed under Federal and state
programs. Like single family mortgage revenue bonds, multi-family
mortgage revenue bonds are subject to redemption and call features,
including extraordinary mandatory redemption features, upon prepayment,
sale or non-origination of mortgage loans as well as upon the
occurrence of other events. Certain issuers of single or multi-family
housing bonds have considered various ways to redeem bonds they
have issued prior to the stated first redemption dates for such
bonds. In one situation the New York City Housing Development
Corporation, in reliance on its interpretation of certain language
in the indenture under which one of its bond issues was created,
redeemed all of such issue at par in spite of the fact that such
indenture provided that the first optional redemption was to include
a premium over par and could not occur prior to 1992. In connection
with the housing Bonds held by a Trust, the Sponsor has not had
any direct communications with any of the issuers thereof, but
at the date hereof it is not aware that any of the respective
issuers of such Bonds are actively considering the redemption
of such Bonds prior to their respective stated initial call dates.
However, there can be no assurance that an issuer of a Bond in
a Trust will not attempt to so redeem a Bond in a Trust.
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. All of such issuers have been
experiencing certain of these problems in varying degrees.
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
on an approved asset base. The problems faced by such issuers
include the difficulty in obtaining approval for timely and adequate
rate increases from the governing public utility commission, the
difficulty in financing large construction programs, 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. All of such issuers have been experiencing
certain of these problems in varying degrees. In addition, Federal,
state and municipal governmental authorities may from time to
time review existing and impose additional regulations governing
the licensing, construction and operation of nuclear power plants,
which may adversely affect the ability of the issuers of such
Bonds to make payments of principal and/or interest on such Bonds.
Certain of the Bonds in the Trusts may be lease obligations issued
for the most part 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 (schools, administrative offices,
convention centers and prisons, for example) or the purchase of
equipment (police cars and computer systems, for example) that
will be used by a state or local government (the "lessee"). Thus,
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 the
Page 7
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. These obligations are also subject
to construction and abatement risk in many states-rental obligations
cease in the event that delays in building, damage, destruction
or condemnation of the project prevents its use by the lessee.
In these cases, insurance provisions designed to alleviate this
risk become important credit factors. In the event of default
by the lessee government, there may be significant legal and/or
practical difficulties involved in the re-letting or sale of the
project. Some of these issues, particularly those for equipment
purchases, contain the so-called "substitution safeguard," which
bars the lessee government, in the event it defaults on its rental
payments, from the purchase or use of similar equipment for a
certain period of time. This safeguard is designed to insure that
the lessee government will appropriate, even though it is not
legally obligated to do so, but the legality of the safeguard
remains untested in most, if not all, states.
Certain of the Bonds in the Trusts may be industrial revenue bonds
("IRBs"), including pollution control revenue bonds, which are
tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. These projects
are usually operated by corporate entities. Issuers are obligated
only to pay amounts due on the IRBs to the extent that funds are
available from the unexpended proceeds of the IRBs or receipts
or revenues of the issuer under an arrangement between the issuer
and the corporate operator of a project. The arrangement may be
in the form of a lease, installment sale agreement, conditional
sale agreement or loan agreement, but in each case the payments
to the issuer are designed to be sufficient to meet the payments
of amounts due on the IRBs. Regardless of the structure, payment
of IRBs is solely dependent upon the creditworthiness of the corporate
operator of the project or corporate guarantor. Corporate operators
or guarantors may be affected by many factors which may have an
adverse impact on the credit quality of the particular company
or industry. These include cyclicality of revenues and earnings,
regulatory and environmental restrictions, litigation resulting
from accidents or environmentally-caused illnesses, extensive
competition and financial deterioration resulting from a complete
restructuring pursuant to a leveraged buy-out, takeover or otherwise.
Such a restructuring may result in the operator of a project becoming
highly leveraged which may impact on such operator's creditworthiness,
which in turn would have an adverse impact on the rating and/or
market value of such Bonds. Further, the possibility of such a
restructuring may have an adverse impact on the market for and
consequently the value of such Bonds, even though no actual takeover
or other action is ever contemplated or affected. The IRBs in
a Trust may be subject to special or extraordinary redemption
provisions which may provide for redemption at par or, with respect
to original issue discount bonds, at issue price plus the amount
of original issue discount accreted to the redemption date plus,
if applicable, a premium. The Sponsor cannot predict the causes
or likelihood of the redemption of IRBs or other Bonds in the
Trusts prior to the stated maturity of such Bonds.
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 major portion
of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements
which consist of annual payments for leases, occupancy of certain
terminal space and service fees. Airport operating income may
therefore be affected by the ability of the airlines to meet their
obligations under the use agreements. The air transport industry
is experiencing significant variations in earnings and traffic,
due to increased competition, excess capacity, increased costs,
deregulation, traffic constraints and other factors, and several
airlines are experiencing severe financial difficulties. The Sponsor
cannot predict what effect these industry conditions may have
on airport revenues which are dependent for payment on the financial
condition of the airlines and their usage of the particular airport
facility. Similarly, payment on Bonds related to other facilities
is dependent on revenues from the projects, such as user fees
from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased
use of a facility, lower cost of alternative modes of transportation,
scarcity of fuel and reduction or loss of rents.
Page 8
Certain of the Bonds in the Trusts may be obligations of issuers
which are, or which govern the operation of, schools, colleges
and universities and whose revenues are derived mainly from ad
valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endowments. General problems relating
to school bonds include litigation contesting the state constitutionality
of financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools
in wealthy areas and schools in poor areas. Litigation or legislation
on this issue may affect the sources of funds available for the
payment of school bonds in the Trusts. General problems relating
to college and university obligations would include the prospect
of a declining percentage of the population consisting of "college"
age individuals, possible inability to raise tuitions and fees
sufficiently to cover increased operating costs, the uncertainty
of continued receipt of Federal grants and state funding and new
government legislation or regulations which may adversely affect
the revenues or costs of such issuers. All of such issuers have
been experiencing certain of these problems in varying degrees.
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 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.
The Sponsor cannot predict the causes or likelihood of the redemption
of resource recovery bonds in the Trusts prior to the stated maturity
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 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 and sinking fund provisions described in the section
in Part One for each Trust entitled "Portfolio" or pursuant to
special or extraordinary redemption provisions. A bond subject
to optional call is one which is subject to redemption or refunding
prior to maturity at the option of the issuer. A refunding is
a method by which a bond issue is redeemed, at or before maturity,
by the proceeds of a new bond issue. A bond subject
Page 9
to sinking fund redemption is one which is subject to partial
call from time to time at par or, in the case of a zero coupon
bond, at the accreted value from a fund accumulated for the scheduled
retirement of a portion of an issue prior to maturity. Special
or extraordinary redemption provisions may provide for redemption
at par (or for original issue discount bonds at issue price plus
the amount of original issue discount accreted to redemption date
plus, if applicable, some premium) of all or a portion of an issue
upon the occurrence of certain circumstances. Generally, events
that may permit the extraordinary optional redemption of Bonds
or may require mandatory redemption of Bonds include, among others:
a final determination that the interest on the Bonds is taxable;
the substantial damage or destruction by fire or other casualty
of the project for which the proceeds of the Bonds were used;
an exercise by a local, state or Federal governmental unit of
its power of eminent domain to take all or substantially all of
the project for which the proceeds of the Bonds were used; changes
in the economic availability of raw materials, operating supplies
or facilities or technological or other changes which render the
operation of the project, for which the proceeds of the Bonds
were used, uneconomic; changes in law or an administrative or
judicial decree which renders the performance of the agreement
under which the proceeds of the Bonds were made available to finance
the project impossible or which creates unreasonable burdens or
which imposes excessive liabilities, such as taxes, not imposed
on the date the Bonds are issued on the issuer of the Bonds or
the user of the proceeds of the Bonds; an administrative or judicial
decree which requires the cessation of a substantial part of the
operations of the project financed with the proceeds of the Bonds;
an overestimate of the costs of the project to be financed with
the proceeds of the Bonds resulting in excess proceeds of the
Bonds which may be applied to redeem Bonds; or an underestimate
of a source of funds securing the Bonds resulting in excess funds
which may be applied to redeem Bonds. See also the discussion
of single family mortgage and multi-family mortgage revenue bonds
above for more information on the call provisions of such bonds.
The exercise of redemption or call provisions will (except to
the extent the proceeds of the called Bonds are used to pay for
Unit redemptions) result in the distribution of principal and
may result in a reduction in the amount of subsequent interest
distributions; it may also affect the 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.
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.
To the extent that any Units of a Trust are redeemed by the Trustee,
the fractional undivided interest in such Trust represented by
each unredeemed Unit will increase, although the actual interest
in such Trust represented by such fraction will remain substantially
unchanged. Units will remain outstanding until redeemed upon tender
to the Trustee by any Unit holder, which may include the Sponsor,
or until the termination of the Trust Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
At the date of this Prospectus, the Estimated Current Return and
the Estimated Long-Term Return, under the monthly, quarterly (if
applicable) and semi-annual (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
Page 10
Net Annual Interest Income per Unit by the Public Offering Price.
Any change in either the Estimated Net Annual Interest Income
per Unit or the Public Offering Price will result in a change
in the Estimated Current Return. For each 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 takes
into account the amortization of premiums and the accretion of
discounts) and estimated retirements of all of the Bonds in the
Trust; (2) takes into account the expenses and sales charge associated
with each Unit of a Trust; and (3) takes into effect the tax-adjusted
yield from potential capital gains at the Initial Date of Deposit.
Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance
that the 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.
Record Dates for the distribution of interest under the semi-annual
distribution plan (if applicable) are the fifteenth day of June
and December, and the Distribution Dates are as set forth in Part
One. 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. See Part One for each Trust.
Record Dates for monthly distributions are the fifteenth day of
each month. Record Dates for quarterly distributions (if applicable)
are the fifteenth day of March, June, September and December.
The Distribution Dates for distributions of interest under the
monthly and quarterly distribution plans are as indicated in Part
One. All Unit holders will receive the first distribution of interest
regardless of the plan of distribution chosen and all Unit holders
will receive such distributions, if any, from the Principal Account
as are made as of the Record Dates for monthly distributions.
See Part One for each 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
Page 11
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 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 Indemnity Corporation ("AMBAC Indemnity" 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 Indemnity 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 the Trust (see Part One for each Insured Trust).
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 Indemnity 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 Indemnity 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, beginning with Series
25 and subsequent Series, no premiums for insurance are paid by
the Insured Trust.
Page 12
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 the principal of the 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
("Corporation"), a Delaware holding company. The Corporation is
a wholly owned subsidiary of General Electric Capital Corporation
("GECC"). Neither the Corporation nor GECC is obligated to pay
the debts of or the claims against Financial Guaranty. Financial
Guaranty is domiciled in the State of New York and is subject
to regulation by the State of New York Insurance Department. As
of December 31, 1994, the total capital and surplus of Financial
Guaranty was approximately $893,700,000. Copies of Financial Guaranty's
financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared
on the basis of generally accepted accounting principles, may
be obtained by writing to Financial Guaranty at 115 Broadway,
New York, New York 10006, Attention: Communications Department
(telephone number is (212) 312-3000) or to the New York State
Insurance Department at 160 West Broadway, 18th Floor, New York,
New York 10013, Attention: Properties Companies Bureau (telephone
number is (212) 621-0389).
Page 13
In addition, Financial Guaranty is currently authorized to write
insurance in all fifty states and in 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 Indemnity Corporation ("AMBAC Indemnity"). The Insurance
Policy of AMBAC Indemnity 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 full
amount of each installment of the insurance premium. Pursuant
to a binding agreement with AMBAC Indemnity, in the event of a
sale of a Bond covered by the AMBAC Indemnity 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 Indemnity agrees
to pay to the Trustee that portion of the principal of and interest
on the Bonds insured by AMBAC Indemnity 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 Indemnity will make payment to the Trustee not later than
thirty days after notice from the Trustee is received by AMBAC
Indemnity 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 Indemnity 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 Indemnity 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 Indemnity or its nominee.
In cases where Bonds are issuable only in a form whereby interest
is payable to registered holders or their assigns, AMBAC Indemnity
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 Indemnity all right under such Bonds to
receive the interest in respect of which the insurance payment
was made.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance company,
regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin, and licensed to do business in fifty states,
the District of Columbia and the Commonwealth of Puerto Rico,
with admitted assets of approximately $1,988,000,000 (unaudited)
and statutory capital of approximately $1,148,000,000 (unaudited)
as of March 31, 1994. Statutory capital consists of AMBAC Indemnity's
policyholders' surplus and statutory contingency reserve. AMBAC
Indemnity is a wholly owned subsidiary of AMBAC Inc., a 100%
publicly-held company. Moody's Investors Service, Inc. and Standard
& Poor's have both assigned a triple-A claims-paying ability rating
to AMBAC Indemnity.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and
Page 14
its telephone number are One State Street Plaza, 17th Floor, New
York, New York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has
been furnished by AMBAC Indemnity. No representation is made herein
as to the accuracy or adequacy of such information, or as to the
existence of any adverse changes in such information, subsequent
to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or
AMBAC Indemnity 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. 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 Indemnity and the Fund. Otherwise neither
Financial Guaranty nor its parent, FGIC Corporation, or any affiliate
thereof, nor AMBAC Indemnity 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 Indemnity. 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.
Municipal Bond Investors Assurance Corporation. Municipal Bond
Investors Assurance 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
Page 15
Corporation is a limited liability corporation rather than a several
liability association. MBIA Corporation is domiciled in the State
of New York and licensed to do business in all fifty states, the
District of Columbia and the Commonwealth of Puerto Rico.
As of December 31, 1993 MBIA had admitted assets of $3.1 billion
(audited), total liabilities of $2.1 billion (audited), and total
capital and surplus of $978 million (audited) determined in accordance
with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of September 30, 1994, MBIA
had admitted assets of $3.3 billion (unaudited), total liabilities
of $2.2 billion (unaudited), and total capital and surplus of
$1.1 billion (unaudited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's financial statements prepared in
accordance with statutory accounting practices are available from
MBIA. The address of MBIA Corporation is 113 King Street, Armonk,
New York 10504.
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 know 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, Inc. 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. Capital Guaranty Insurance
Company ("Capital Guaranty") is a "Aaa/AAA" rated monoline stock
insurance company incorporated in the State of Maryland, and is
a wholly owned subsidiary of Capital Guaranty Corporation, a Maryland
insurance holding company. Capital Guaranty Corporation is a publicly
owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all 50
states, the District of Columbia, the Commonwealth of Puerto Rico,
Guam and the U.S. Virgin Islands. Capital Guaranty focuses on
insuring municipal securities, and its policies guaranty the timely
payment of principal and interest when due for payment on new
issue and secondary market issue municipal bond transactions.
Capital Guaranty's claims-paying ability is rated "Triple-A" by
both Moody's Investors Service, Inc. and Standard & Poor's.
As of December 31, 1994, Capital Guaranty had more than $15.7
billion in net exposure outstanding (excluding defeased issues).
The total statutory policyholders' surplus and contingency reserve
of Capital Guaranty was $196,529,000 (audited) and the total admitted
assets were $303,723,316 (audited) as reported to the Insurance
Department of the State of Maryland as of December 31, 1994. The
address of Capital Guaranty's headquarters and its telephone number
are Steuart Tower, 22nd Floor, One Market Plaza, San Francisco,
CA 94105-1413 and (415) 995-8000.
CapMAC. CapMAC is a New York-domiciled monoline stock insurance
company which engages only in the business of financial guarantee
and surety insurance. CapMAC is licensed in 49 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and
the territory of Guam. CapMAC insures structured asset-backed,
corporate and other financial obligations in the domestic and
foreign capital markets. CapMAC may also provide financial guarantee
reinsurance for structured asset-backed, corporate and municipal
obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's, and "AAA"
by Duff & Phelps, Inc. ("Duff & Phelps"). 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.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a
company that is owned by a group of institutional and other investors,
including CapMAC's management and employees. CapMAC commenced
operations on December 24, 1987 as an indirect, wholly-owned subsidiary
of Citibank (New York State), a wholly-owned subsidiary of Citicorp.
On June 25, 1992, Citibank (New York State) sold CapMAC to Holdings
(the "Sale").
Page 16
Neither Holdings nor any of its stockholders is obligated to pay
any claims under any surety bond issued by CapMAC or any debts
of CapMAC or to make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the
State of New York. In addition, CapMAC is subject to regulation
by the insurance departments of the other jurisdictions in which
it is licensed. CapMAC is subject to periodic regulatory examinations
by the same regulatory authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and
acquisitions. The amount of exposure per risk that CapMAC may
retain, after giving effect to reinsurance, collateral or other
securities, is also regulated. Statutory and regulatory accounting
practices may prescribe appropriate rates at which premiums are
earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form
of surety bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured.
Such reinsurance does not relieve CapMAC of any of its obligations
under the Surety Bond(s).
THE SURETY BONDS ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE
LAW.
In connection with the Sale, Holdings and CapMAC entered into
an Ownership Policy Agreement (the "Ownership Policy Agreement"),
which sets forth Holdings' intent with respect to its ownership
and control of CapMAC and provides for certain policies and agreements
with respect to Holdings' exercise of its control of CapMAC. In
the Ownership Policy Agreement, Holdings has agreed that, during
the term of the Ownership Policy Agreement, it will not and will
not permit any stockholder of Holdings to enter into any transaction
the result of which would be a change of control (as defined in
the Ownership Policy Agreement) of CapMAC, unless the long-term
debt obligations or claims-paying ability of the person which
would control CapMAC after such transaction or its direct or indirect
parent are rated in a high investment grade category, unless Holdings
or CapMAC has confirmed that CapMAC's claims-paying ability rating
by Moody's (the "Rating") in effect immediately prior to any such
change of control will not be downgraded by Moody's upon such
change of control or unless such change of control occurs as a
result of a public offering of Holdings' capital stock.
In addition, the Ownership Policy Agreement includes agreements
(i) not to change the "zero-loss" underwriting standards or policies
and procedures of CapMAC in a manner that would materially and
adversely affect the risk profile of CapMAC's book of business,
(ii) that CapMAC will adhere to the aggregate leverage limitations
and maintain capitalization levels considered by Moody's from
time to time as consistent with maintaining CapMAC's Rating and
(iii) that until CapMAC's statutory capital surplus and contingency
reserve ("qualified statutory capital") equal $250 million, CapMAC
will maintain a specified amount of qualified statutory capital
in excess of the amount of qualified statutory capital that CapMAC
is required at such time to maintain under the aggregate leverage
limitations set forth in Article 69 of the New York Insurance
Law.
The Ownership Policy Agreement will terminate on the earlier of
the date on which a change of control of CapMAC occurs and the
date on which CapMAC and Holdings agree in writing to terminate
the Ownership Policy Agreement; provided that, CapMAC or Holdings
has confirmed that CapMAC's Rating in effect immediately prior
to any such termination will not be downgraded upon such termination.
As of December 31, 1992 and 1991, CapMAC had statutory capital
and surplus of approximately $148 million and $232 million, respectively,
and had not incurred any debt obligations. On June 26, 1992, CapMAC
made a special distribution (the "Distribution") to Holdings in
connection with the Sale in an aggregate amount that caused the
total of CapMAC's statutory capital and surplus to decline to
approximately $150 million. Holdings applied substantially all
of the proceeds of the Distribution to repay debt owed to Citicorp
that was incurred in connection with the capitalization of CapMAC.
As of June 30, 1992, CapMAC had statutory capital and surplus
of approximately $150 million and had not incurred any debt obligations.
In addition, on December 31, 1992 CapMAC had a statutory contingency
reserve of approximately $15 million, which is
Page 17
also available to cover claims under surety bonds issued by CapMAC.
Article 69 of the New York State Insurance Law requires that CapMAC
establishes and maintains the contingency reserve.
In addition to its capital (including contingency reserve) and
other reinsurance available to pay claims under its surety bonds,
on June 25, 1992, CapMAC entered into a Stop Loss Reinsurance
Agreement (the "Stop Loss Agreement") with Winterthur Swiss Insurance
Company (the "Reinsurer"), which is rated AAA by Standard & Poor's
and Aaa by Moody's, pursuant to which the Reinsurer will be required
to pay any losses incurred by CapMAC during the term of the Stop
Loss Agreement on the surety bonds covered under the Stop Loss
Agreement in excess of a specified amount of losses incurred by
CapMAC under such surety bonds (such specified amount initially
being $100 million and increasing annually by an amount equal
to 66 2/3% of the increase in CapMAC's statutory capital and surplus)
up to an aggregate limit payable under the Stop Loss Agreement
of $50 million. The Stop Loss Agreement has an initial term of
seven years, is extendable for one-year periods and is subject
to early termination upon the occurrence of certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of
banks rated A1+/P1 by Standard & Poor's and Moody's, respectively,
having a term of 360 days. Under the Liquidity Facility CapMAC
will be able, subject to satisfying certain conditions, to borrow
funds from time to time in order to enable it to fund any claim
payments or payments made in settlement or mitigation of claims
payments under its surety bonds, including the Surety Bond(s).
Copies of CapMAC's financial statements prepared in accordance
with statutory accounting standards, which differ from generally
accepted accounting principles, and filed with the Insurance Department
of the State of New York are available upon request. CapMAC is
located at 885 Third Avenue, New York, New York 10022, and its
telephone number is (212) 755-1155.
Financial Security Assurance. Financial Security Assurance ("Financial
Security") is a monoline insurance company incorporated on March
16, 1984 under the laws of the State of New York. The operations
of Financial Security commenced on July 25, 1985, and Financial
Security received its New York State insurance license on September
23, 1985. Financial Security and its two wholly owned subsidiaries
are licensed to engage in financial guaranty insurance business
in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively
in the business of writing financial guaranty insurance, principally
in respect of asset-backed and other collateralized securities
offered in domestic and foreign markets. Financial Security and
its subsidiaries also write financial guaranty insurance in respect
of municipal and other obligations and reinsure financial guaranty
insurance policies written by other leading insurance companies.
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 is approximately 91.6% owned by US West, Inc.
and 8.4% owned by The Tokio Marine and Fire Insurance Co., Ltd.
("Tokio Marine"). US West, Inc. operates businesses involved in
communications, data solutions, marketing services and capital
assets, including the provision of telephone services in 14 states
in the western and mid-western United States. Tokio Marine is
the largest property and casualty insurance company in Japan.
No shareholder of Financial Security is obligated to pay any debt
of Financial Security or any claim under any insurance policy
issued by Financial Security or to make any additional contribution
to the capital of Financial Security.
As of March 31, 1993, 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
$479,110,000 (unaudited) and $220,078,000 (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
$628,119,000 (unaudited), and $202,493,000 (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 18
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security of either of
its 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
unaffiliated reinsurers under various quota share treaties and
on a transaction-by-transaction basis. Such reinsurance is utilized
by Financial Security as a risk management device and to comply
with certain statutory and rating agency requirements; it does
not alter or limit Financial Security's obligations under any
financial guaranty insurance policy.
Financial Security's claims-paying ability is rated "Aaa" by Moody's
Investors Service, Inc. and "AAA" by Standard & Poor's, Nippon
Investors Service Inc., Duff & Phelps Inc. and Australian Ratings
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. Connie Lee Insurance Company ("Connie
Lee"), 2445 M Street, N.W., Washington D.C. 20037, is a stock
insurance company incorporated in Wisconsin and a wholly-owned
subsidiary of College Construction Loan Insurance Association
("CCLIA"), a District of Columbia insurance holding company. As
of September 30, 1994, the total policyholders' surplus of Connie
Lee was approximately $106,000,000 (unaudited) and total admitted
assets was approximately $193,000,000 (unaudited), as reported
to the Commissioner of Insurance of the State of Wisconsin.
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. 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 hereinbefore described.
Chapman and Cutler, Counsel for the Sponsor, has given an opinion
(with respect to Insured Bonds) to the effect that the payment
of insurance proceeds representing maturing interest on defaulted
municipal obligations paid by Financial Guaranty or another insurer
would be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid
by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies
are reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations. See "What is the Federal
Tax Status of Unit Holders?" appearing in Part Three of each Trust.
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.
Page 19
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses
of creating and establishing the Fund, including the cost of the
initial preparation, printing and execution of the Indenture and
the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. With
the exception of bookkeeping and other administrative services
provided to certain Trusts, for which the Sponsor will be reimbursed
in amounts as set forth in Part One for such Trusts, the Sponsor
will not receive any fees in connection with its activities relating
to any Trust. Such bookkeeping and administrative charges 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. The fees payable to the
Sponsor for such services may exceed the actual costs of providing
such services for this Fund, but at no time will the total amount
received for such services rendered to unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year
exceed the aggregate cost to the Sponsor of supplying such services
in such year. 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. The fee
may exceed the actual costs of providing such supervisory services
for this Fund, but at no time will the total amount received for
portfolio supervisory services rendered to unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year
exceed the aggregate cost to First Trust Advisors L.P. of supplying
such services in such year.
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. Both 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.
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 Indemnity 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,
Page 20
except in the event of negligence, bad faith or willful misconduct
on its part; the expenses and costs of any action undertaken by
the Trustee to protect the Trust and the rights and interests
of the Unit holders; fees of the Trustee for any extraordinary
services 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
and the costs of the Trustee in transferring and recording the
ownership of Units, will be borne by the Sponsor. If the supply
of Units exceeds demand, or for some other business reason, the
Sponsor may discontinue purchases of Units at such prices. IF
A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS, HE SHOULD INQUIRE
OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER
FOR REDEMPTION TO THE TURSTEE. 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.
Page 21
The effect of this method of sales charge computation will be
that different sales charge rates will be applied to each of the
various Bonds in the Trusts based upon the maturities of such
bonds, in accordance with the following schedule:
<TABLE>
<CAPTION>
Secondary Offering Period
Sales Charge
________________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ __________ __________
<S> <C> <C>
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
</TABLE>
There will be no reduction of the sales charges for volume purchases.
A dealer will receive from the Sponsor a dealer concession of
70% of the total sales charges for Units sold by such dealer and
dealers will not be eligible for additional concessions for Units
sold pursuant to the above schedule.
An investor may aggregate purchases of Units of two 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 and officers (including their immediate
families and trustees, custodians or a fiduciary for the benefit
of such person) of Nike Securities L.P., the sales charge is reduced
by 2% of the Public Offering Price for purchases of Units during
the secondary offering period.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer except that with respect to purchases
of Units of $500,000 or more, the Sponsor will reimburse the selling
Underwriter or dealer in an amount equal to $2.50 per Unit (in
the case of a Discount Trust, .25% of the Public Offering Price).
The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any
one Underwriter or dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from such
Underwriter or dealer of units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser 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
Underwriters and dealers of the Fund may receive nominal awards
from the Sponsor for each of their registered representatives
who have sold a minimum number of UIT Units during a specified
time period. In addition, at various times the Sponsor may implement
other programs under which the sales force of an Underwriter or
dealer may be eligible to win other nominal awards for certain
sales efforts, or under which the Sponsor will allow to any such
Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are
Page 22
primarily intended to result in sales of Units of the Trusts.
Such payments are made by the Sponsor out of its own assets, and
not out of the assets of the Trusts. These programs will not change
the price Unit holders pay for their Units or the amount that
the Trusts will receive from the Units sold.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising
and sales materials compare the then current estimated returns
on the Trust and returns over specified periods on other similar
Trusts sponsored by Nike Securities L.P. with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs
and money market accounts or money market funds, each of which
has investment characteristics that may differ from those of the
Trust. U.S. Government bonds, for example, are backed by the full
faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability
of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
The aggregate price of the Bonds in each Trust is determined by
whomever from time to time is acting as evaluator (the "Evaluator"),
on the basis of bid prices or offering prices as is appropriate,
(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 Indemnity 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. For a description of the circumstances under which a
full or partial suspension of the right of Unit holders to redeem
their Units may occur, see "Rights of Unit Holders-How May Units
be Redeemed?"
The Evaluator may be attributing value to insurance for the purpose
of computing the price or redemption value of Units for certain
previous series of the First Trust of Insured Municipal Bonds,
an investment company sponsored by Nike Securities L.P. See Part
One for further information with respect to whether value is being
attributed to insurance in determining the value of Units for
that series of the Fund.
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.
The secondary market Public Offering Price of the Units will be
equal to the bid price per Unit of the Bonds in a Trust, plus
(less) any balance (overdraft) in the principal cash account of
such Trust, plus the applicable sales charge and the amount of
Purchased Interest (if any).
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. A person
will become owner of the Units on the date of settlement provided
payment has
Page 23
been received. Cash, if any, made available to the Sponsor prior
to the date of settlement for the purchase of Units may be used
in the Sponsor's business and may be deemed to be a benefit to
the Sponsor, subject to the limitations of the Securities Exchange
Act of 1934. Delivery of Certificates representing Units so ordered
will be made five business days following such order or shortly
thereafter. See "Rights of Unit Holders-How May Units Be Redeemed?"
for information regarding the ability to redeem Units ordered
for purchase.
How are Units Distributed?
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,
but the Sponsor 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 second preceding sentence. Under the Glass-Steagall
Act, banks are prohibited from underwriting Fund Units; however,
the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available
must be registered as broker/dealers under state law.
What are the Sponsor's Profits?
The Sponsor and participating dealers will receive a 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 five
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
Page 24
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.
How are Interest and Principal Distributed?
Interest from each Trust will be distributed on the dates specified
in Part One on a pro rata basis to Unit holders of record as of
the preceding Record Date who are entitled to distributions at
that time under the plan of distribution chosen. All distributions
for a Trust will be net of applicable expenses for such Trust.
The pro rata share of cash in the Principal Account of each Trust
will be computed 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 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) nor 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
as is consistent with the distribution plan chosen. Because interest
payments are not received by a Trust at a constant rate throughout
the year, such interest distribution may be more or less than
the amount credited to the Interest Account of such Trust as of
the Record Date. For the purpose of minimizing fluctuations in
the distributions from the Interest Account of a Trust, the Trustee
is authorized to advance such amounts as may be necessary to provide
interest distributions of approximately equal amounts. The Trustee
shall be reimbursed, without interest, for any such advances from
funds in the Interest Account 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
Page 25
the Interest Account and the Principal Account of a Trust such
amounts as may be necessary to cover redemption of Units of such
Trust by the Trustee.
Record Dates for monthly distributions will be the fifteenth day
of each month, Record Dates for quarterly distributions (if applicable)
will be the fifteenth day of March, June, September and December
and Record Dates for semi-annual distributions (if applicable)
will be the fifteenth day of June and December. Distributions
will be made on the dates specified in Part One.
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 (assuming the Trust
has more than one distribution option) and return same, together
with their certificate, to the Trustee. If the card and certificate
are returned to the Trustee, the change will become effective
as of June 16 of that year. If the card and certificate are not
returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve
months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income or principal on the participant's Units to,
among other investment vehicles, a Unit holder's checking, bank
savings, money market, insurance, reinvestment or any other account.
All such distributions, of course, are subject to the minimum
investment and sales charges, if any, of the particular investment
vehicle to which distributions are directed. The Trustee will
notify the participant of each distribution pursuant to the Universal
Distribution Option. The Trustee will distribute directly to the
Unit holder any distributions which are not accepted by the specified
investment vehicle. A participant may at any time, by so notifying
the Trustee in writing, elect to terminate his participation in
the Universal Distribution Option and receive directly future
distributions on his Units.
Distribution Reinvestment Option. The Sponsor has entered into
an arrangement with Oppenheimer Management Corporation, which
permits any Unit holder of a Trust to elect to have each distribution
of interest income or principal on his Units automatically reinvested
in shares of either the Oppenheimer Intermediate Tax-Exempt Bond
Fund (the "Intermediate Series") or the Oppenheimer Insured Tax-Exempt
Bond Fund (the "Insured Series"). Oppenheimer Management Corporation
is the investment adviser of each Series which are open-end, diversified
management investment companies. The investment objective of the
Intermediate Series is to provide a high level of current interest
income exempt from Federal income tax through the purchase of
investment grade securities. The investment objective of the Insured
Series is to provide as high a level of current interest income
exempt from Federal income tax as is consistent with the assurance
of the scheduled receipt of interest and principal through insurance
and the preservation of capital (the income of either Series may
constitute an item of preference for determining the Federal alternative
minimum tax). The objectives and policies of each Series are presented
in more detail in the prospectus for each Series.
Each person who purchases Units of a Trust may use the card attached
to this prospectus to request a prospectus describing each Series
and a form by which such person may elect to become a participant
in 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
Page 26
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), 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 seventh
calendar day following such tender, or if the seventh calendar
day is not a business day, on the first business day prior thereto,
the Unit holder will be entitled to receive in cash an amount
for each Unit equal to the Redemption Price per Unit next computed
after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received
by the Trustee, except that as regards Units received after the
close of trading on the New York Stock Exchange, 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
Page 27
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 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 Trustee may obtain Permanent Insurance on the
Bonds in an Insured Trust. Accordingly, any Bonds so insured must
be sold on an insured basis (as will Bonds on which insurance
has been obtained by the Bond issuer, the underwriters, the Sponsor
or others).
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 12:00 p.m. Eastern time
on the next succeeding business day and by making payment therefor
to the Unit holder not later than the day on which the Units would
otherwise have been redeemed by the Trustee. Units held by the
Sponsor may be tendered to the Trustee for redemption as any other
Units.
Page 28
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
currently effective prospectus describing such Units. Any profit
or loss resulting from the resale or redemption of such Units
will belong to the Sponsor.
How May Bonds be Removed from the Fund?
The Trustee is empowered to sell, for the purpose of redeeming
Units tendered by any Unit holder and for the payment of expenses
for which funds may not be available, such of the Bonds in each
Trust on a list furnished by the Sponsor as the Trustee in its
sole discretion may deem necessary. As described in the following
paragraph and in certain other unusual circumstances for which
it is determined by the 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 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 First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $9 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994, the total partners' capital of Nike Securities
L.P. was $10,863,058 (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
Page 29
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 United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Fund may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
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 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
Page 30
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 & 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.
Page 31
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.
DESCRIPTION OF BOND RATINGS*
*As published by the rating companies.
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.**
**Bonds insured by Financial Guaranty Insurance Company, AMBAC
Indemnity 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.
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.
Page 32
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.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings
follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair
the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat large than in Aaa
securities. Their market value is virtually immune to all but
money market influences, with the occasional exception of oversupply
in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future. The market value of A-rated
bonds may be influenced to some degree by economic performance
during a sustained period of depressed business conditions, but,
during periods of normalcy, A-rated bonds frequently move in parallel
with Aaa and Aa obligations, with the occasional exception of
oversupply in a few specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum
in security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness
of offerings in the market place.
Baa-Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well. The market value of Baa-rated bonds is more sensitive
to changes in economic circumstances, and aside from occasional
speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of
a generic rating classification. The modifier 1 indicates that
the bond ranks at the high end of its category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
Con.(---)-Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments
to which some other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion of construction
or elimination of basis of condition.
Page 33
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 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 34
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Page 35
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
The First Trust Combined Series:
What is The First Trust Combined Series? 3
What are Estimated Long-Term Return and
Estimated Current Return? 10
How are Purchased Interest and Accrued
Interest Treated? 11
Why and How are the Insured Trusts Insured? 12
What is the Federal Tax Status of Unit Holders? 19
What are the Expenses and Charges? 20
Public Offering:
How is the Public Offering Price Determined? 21
How are Units Distributed? 24
What are the Sponsor's Profits? 24
Rights of Unit Holders:
How are Certificates Issued and Transferred? 24
How are Interest and Principal Distributed? 25
How can Distributions to Unit Holders be
Reinvested? 26
What Reports will Unit Holders Receive? 27
How May Units be Redeemed? 27
How May Units be Purchased by the Sponsor? 28
How May Bonds be Removed from the Fund? 29
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 29
Who is the Trustee? 30
Limitations on Liabilities of Sponsor and Trustee 30
Who is the Evaluator? 30
Other Information:
How May the Indenture be Amended or Terminated? 31
Legal Opinions 31
Experts 32
Description of Bond Ratings 32
</TABLE>
________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL 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
March 13, 1995
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE
AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Michigan 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 September 25, 1995 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations
for Federal income tax purposes. Tax-exempt interest received
by each of the Trusts on Bonds deposited therein will retain its
status as tax-exempt interest, for Federal income tax purposes,
when distributed to a Unit holder except that the alternative
minimum tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
received, if any, on Bonds delivered after the date the Unit holders
pay for their Units and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unit holder.
The amount of any such gain or loss is measured by comparing the
Unit holder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed
of. In the case of a Unit holder who purchases his Units, such
basis is determined by apportioning the tax basis for the Units
among each of the Trust assets ratably according to value as of
the date of acquisition of the Units. The basis of each Unit and
of each Bond which was issued with original issue discount must
be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased
by a Trust at a premium must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 2
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. THE TRUSTS DO NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of
Page 3
corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Booth & Baron, Special Counsel to
Series 1-3 of The First Trust Combined Series for New York tax
matters, rendered an opinion under then existing income tax laws
of the State and City of New York, substantially to the effect
that each Trust in Series 1-3 of The First Trust Combined Series
is not an association taxable as a corporation and the income
of each such Trust will be treated as the income of the Unit holder.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of The First Trust
Combined Series for New York tax matters, rendered an opinion
under then existing income tax laws of the State and City of New
York, substantially to the effect that each Trust in Series 4-125
of The First Trust Combined Series is not an association taxable
as a corporation and the income of each Trust in Series 4-125
of The First Trust Combined Series will be treated as the income
of the Unit holder in the same manner as for Federal income tax
purposes (subject to differences in accounting for discount and
premium to the extent the State and/or City of New York do not
conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special
Counsel to The First Trust Combined Series for New York tax matters
for Series 126 and subsequent Series of The First Trust Combined
Series, rendered an opinion under then existing income tax laws
of the State and City of New York, substantially to the effect
that each Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax. Under the income tax laws of the State
and City of New York, the income of each Trust will be considered
the income of the holders of the Units.
Booth & Baron has served as Special Counsel to Series 1-9 of The
First Trust of Insured Municipal Bonds-Multi-State, inclusive,
and Winston & Strawn (previously named Cole & Deitz) has served
as Special Counsel to Series 10 and 11 of The First Trust of Insured
Municipal Bonds-Multi-State for New York tax matters. In the opinion
of such Special Counsels, under the existing income tax laws of
the State and City of New York, each Trust is not an association
taxable as a corporation and the income of each such Trust will
be treated as the income of the Unit holder.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
Michigan Tax Status of Unit Holders
At the time of the closing for each Michigan Trust, Special Counsel
to the Fund for Michigan tax matters rendered an opinion under
then existing Michigan income tax law applicable to taxpayers
whose income is subject to Michigan income taxation substantially
to the effect that:
Each Michigan Trust and the owners of Units will, in our opinion,
be treated for purposes of the Michigan income tax laws and the
Single Business Tax in substantially the same manner as they are
for purposes of the Federal income tax laws, as currently enacted.
Accordingly, Special Counsel has relied upon the opinion of Messrs.
Chapman and Cutler as to the applicability of Federal income tax
laws under the Internal Revenue Code of 1986, as currently amended,
to a Michigan Trust and the Unit holders.
Under the income tax laws of the State of Michigan, a Michigan
Trust is not an association taxable as a corporation; the income
of a Michigan Trust will be treated as the income of the Unit
holders of a Michigan Trust and be deemed to have been received
by them when received by a Michigan Trust. Interest on the Bonds
in a Michigan Trust which is exempt from tax under the Michigan
income tax laws when received by a Michigan Trust will retain
its status as tax exempt interest to the Unit holders of a Michigan
Trust.
For purposes of the Michigan income tax laws, each Unit holder
of a Michigan Trust will be considered to have received his pro
rata share of interest on each Bond in a Michigan Trust when it
is received by a Michigan Trust, and each Unit holder will have
a taxable event when a Michigan Trust disposes of a Bond (whether
Page 4
by sale, exchange, redemption or payment at maturity) or when
the Unit holder redeems or sells his Unit, to the extent the
transaction constitutes a taxable event for Federal income tax
purposes. The tax cost of each Unit to a Unit holder will be
established and allocated for purposes of the Michigan income
tax laws in the same manner as such cost is established and
allocated for Federal income tax purposes.
Under the Michigan Intangibles Tax, a Michigan Trust is not taxable
and the pro rata ownership of the underlying bonds, as well as
the interest thereon, will be exempt to the Unit holders to the
extent a Michigan Trust consists of obligations of the State of
Michigan or its political subdivisions or municipalities, or of
obligations of possessions of the United States.
The Michigan Single Business Tax replaced the tax on corporate
and financial institution income under the Michigan Income Tax,
and the intangible tax with respect to those intangibles of persons
subject to the Single Business Tax the income from which would
be considered in computing the Single Business Tax. Persons are
subject to the Single Business Tax only if they are engaged in
"business activity," as defined in the Act. Under the Single Business
Tax, both interest received by a Michigan Trust on the underlying
Bonds and any amount distributed from a Michigan Trust to a Unit
holder, if not included in determining taxable income for Federal
income tax purposes, is also not included in the adjusted tax
base upon which the Single Business Tax is computed, of either
a Michigan Trust or the Unit holders. If a Michigan Trust or the
Unit holders have a taxable event for Federal income tax purposes
when a Michigan Trust disposes of a Bond (whether by sale, exchange,
redemption or payment at maturity) or the Unit holder redeems
or sells his Unit, an amount equal to any gain realized from such
taxable event which was included in the computation of taxable
income for Federal income tax purposes (plus an amount equal to
any capital gain of an individual realized in connection with
such event but excluded in computing that individual's Federal
taxable income) will be included in the tax base against which,
after allocation, apportionment and other adjustments, the Single
Business Tax is computed. The tax base will be reduced by an amount
equal to any capital loss realized from such a taxable event,
whether or not the capital loss was deducted in computing Federal
taxable income in the year the loss occurred. Unit holders should
consult their tax advisor as to their status under Michigan law.
Any proceeds paid under an insurance policy issued to the Trustee
of the Fund, or paid under individual policies obtained by issuers
of Bonds, or by the underwriter of the Bonds, or the Sponsor or
others which, when received by the Unit holders, represent maturing
interest on defaulted obligations held by the Trustee, will be
excludable from the Michigan income tax laws and the Single Business
Tax if, and to the same extent as, such interest would have been
so excludable if paid by the issuer of the defaulted obligations.
While treatment under the Michigan Intangibles Tax is not premised
upon the characterization of such proceeds under the Internal
Revenue Code, the Michigan Department of Treasury should adopt
the same approach as under the Michigan income tax laws and the
Single Business Tax.
As the Tax Reform Act of 1986 eliminates the capital gain deduction
for tax years beginning after December 31, 1986, the Federal adjusted
gross income, the computation base for the Michigan Income Tax,
of a Unit holder will be increased accordingly to the extent such
capital gains are realized when a Michigan Trust disposes of a
Bond or when the Unit holder redeems or sells a Unit, to the extent
such transaction constitutes a taxable event for Federal income
tax purposes.
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
Investors should be aware that the economy of the State of Michigan
has, in the past, proven to be cyclical, due primarily to the
fact that the leading sector of the State's economy is the manufacturing
of durable goods. While the State's efforts to diversify its economy
have proven successful, as reflected by the fact that the share
of employment in the State in the durable goods sector has fallen
from 33.1 percent in 1960 to 17.9 percent in 1990, durable goods
manufacturing still represents a sizable portion of the State's
economy. As a result, any substantial national economic downturn
is likely to have an adverse effect on the economy of the State
and on the revenues of the State and some of its local governmental
units.
Page 5
In May 1986, Moody's Investors Service raised the State`s general
obligation bond rating to "A1." In October 1989, Standard & Poor's
raised its rating on the State's general obligations bonds to
"AA."
The State's economy could continue to be affected by changes in
the auto industry, notably consolidation and plant closings resulting
from competitive pressures and over-capacity. Such actions could
adversely affect State revenues and the financial impact on the
local units of government in the areas in which plants are closed
could be more severe.
General Motors Corporation has announced the scheduled closing
of several of its plants in Michigan in 1993 and 1994. The ultimate
impact these closures will have on the State's revenues and expenditures
is not currently known. The impact on the financial condition
of the municipalities in which the plants are located may be more
severe than the impact on the State itself.
In recent years, the State has reported its financial results
in accordance with generally accepted accounting principles. For
the five fiscal years ending with the fiscal year ended September
30, 1989, the State reported positive year-end General Fund balances
and positive cash balances in the combined General Fund/School
Aid Fund. For the fiscal years ending September 30, 1990 and 1991,
the State reported negative year-end General Fund Balance of $310.4
million and $169.4 million respectively, but ended the 1992 fiscal
year with its general fund in balance and ended the 1993 fiscal
year with a small general fund surplus. A positive cash balance
in the combined General Fund/School Aid Fund was recorded at September
30, 1990. In the 1991 through 1993 fiscal years, the State experienced
deteriorating cash balances which necessitated short term borrowing
and the deferral of certain scheduled cash payments. The State
borrowed $900 million for cash flow purposes in the 1993 fiscal
year, which was repaid on September 30, 1993. The State's Budget
Stabilization Fund received a $283 million transfer from the General
Fund in the 1993 State fiscal year, bringing the fund balance
to $303 million at September 30, 1993.
The Michigan Constitution of 1963 limits the amount of total revenues
of the State raised from taxes and certain other sources to a
level for each fiscal year equal to a percentage of the State's
personal income for the prior calendar year. In the event that
the State's total revenues exceed the limit by 1 percent or more,
the Michigan Constitution of 1963 requires that the excess be
refunded to taxpayers.
On March 15, 1993, Michigan voters approved a school finance reform
amendment to the State's Constitution which, among other things,
increased the State sales tax rate from 4% to 6% and placed a
cap on property assessment increases for all property taxes. Concurrent
legislation cut the State's income tax rate from 4.6% to 4.4%,
reduced some property taxes and altered local school funding sources
to a combination of property taxes and state revenues, some of
which is provided from new or increased State taxes. The legislation
also contained other provisions that alter (and, in some cases,
may reduce) the revenues of local units of government, and tax
increment bonds could be particularly affected. While the ultimate
impact of the constitutional amendment and related legislation
cannot yet be accurately predicted, investors should be alert
to the potential effect of such measures upon the operations and
revenues of Michigan local units of government.
Although all or most of the Bonds in the Michigan Trusts are revenue
obligations or general obligations of local governments or authorities
rather than general obligations of the State of Michigan itself,
there can be no assurance that any financial difficulties the
State may experience will not adversely affect the market value
or marketability of the Bonds or the ability of the respective
obligors to pay interest on or principal of the Bonds, particularly
in view of the dependency of local governments and other authorities
upon State aid and reimbursement programs and, in the case of
bonds issued by the State Building Authority, the dependency of
the State Building Authority on the receipt of rental payments
from the State to meet debt service requirements upon such bonds.
In the 1991 fiscal year, the State deferred certain scheduled
cash payments to municipalities, school districts, universities
and community colleges. While such deferrals were made up at specified
later dates, similar future deferrals could have an adverse impact
on the cash position of some local governmental units. Additionally,
the State reduced revenue sharing payments to municipalities below
that level provided under formulas by $10.9 million in the 1991
fiscal year, $34.4 million in the 1992 fiscal year, $45.5 million
in the 1993 fiscal year and $64.6 million (budgeted) in the 1994
fiscal year.
Page 6
Each Michigan Trust may contain general obligation bonds of local
units of government pledging the full faith and credit of the
local unit which are payable from the levy of ad valorem taxes
on taxable property within the jurisdiction of the local unit.
Such bonds issued prior to December 22, 1978, or issued after
December 22, 1978 with the approval of the electors of the local
unit, are payable from property taxes levied without limitation
as to rate or amount. With respect to bonds issued after December
22, 1978, and which were not approved by the electors of the local
unit, the tax levy of the local unit for debt service purposes
is subject to constitutional, statutory and charter tax rate limitations.
In addition, several major industrial corporations have instituted
challenges of their ad valorem property tax assessments in a number
of local municipal units in the State. If successful, such challenges
could have an adverse impact on the ad valorem tax bases of such
units which could adversely affect their ability to raise funds
for operation and debt service requirements.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above.
Page 7
However, no assessment can be made at this time of the economic
and other effects of a change in federal laws affecting Puerto
Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact certain issuers of
Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of Bonds held by
the Michigan 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 Michigan Trusts to pay interest on or principal of the
Bonds.
Page 8
Michigan 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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 9
Missouri 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 September 25, 1995 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes. Tax-exempt interest received by each
of the Trusts on Bonds deposited therein will retain its status
as tax-exempt interest, for Federal income tax purposes, when
distributed to a Unit holder except that the alternative minimum
tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
received, if any, on Bonds delivered after the date the Unit holders
pay for their Units and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unit holder.
The amount of any such gain or loss is measured by comparing the
Unit holder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed
of. In the case of a Unit holder who purchases his Units, such
basis is determined by apportioning the tax basis for the Units
among each of the Trust assets ratably according to value as of
the date of acquisition of the Units. The basis of each Unit and
of each Bond which was issued with original issue discount must
be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased
by a Trust at a premium must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 2
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. THE TRUSTS DO NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations
Page 3
for Federal income tax purposes, "adjusted current earnings" includes
all tax-exempt interest, including interest on all Bonds in the
Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of the Fund for
New York tax matters, rendered an opinion under then existing
income tax laws of the State and City of New York, substantially
to the effect that each Trust in Series 4-125 of the Fund is not
an association taxable as a corporation and the income of each
Trust in Series 4-125 of the Fund will be treated as the income
of the Unit holder in the same manner as for Federal income tax
purposes (subject to differences in accounting for discount and
premium to the extent the State and/or City of New York do not
conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special
Counsel to the Fund for New York tax matters for Series 126 and
subsequent Series of the Fund, rendered an opinion under then
existing income tax laws of the State and City of New York, substantially
to the effect that each Trust will not constitute an association
taxable as a corporation under New York law, and accordingly will
not be subject to the New York State franchise tax or the New
York City general corporation tax. Under the income tax laws of
the State and City of New York, the income of each Trust will
be considered the income of the holders of the Units.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
Missouri Tax Status of Unit Holders
The assets of each Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Missouri (the "State")
or counties, municipalities, authorities or political subdivisions
thereof (the "Missouri 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 each 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 Missouri Bonds, if received
directly by a Unit holder, would be exempt from the Missouri income
tax applicable to individuals and corporations ("Missouri State
Income Tax"). The opinion set forth below does not address the
taxation of persons other than full-time residents of Missouri.
At the time of the closing for each Missouri Trust, Chapman and
Cutler, Special Counsel to the Fund for Missouri tax matters rendered
an opinion under then existing Missouri tax law applicable to
taxpayers whose income is subject to Missouri income taxation
substantially to the effect that:
Each Trust is not an association taxable as a corporation for
Missouri income tax purposes, and each Unit holder of a Trust
will be treated as the owner of a pro rata portion of the Trust
and the income of such portion of the Trust will be treated as
the income of the Unit holder for Missouri State Income Tax purposes.
Interest paid and original issue discount, if any, on the Bonds
which would be exempt from the Missouri State Income Tax if received
directly by a Unit holder will be exempt from the Missouri State
Income Tax when received by a Trust and distributed to such Unit
holder; however, no opinion is expressed herein regarding taxation
of interest paid and original issue discount, if any, on the Bonds
received by a Trust and distributed to Unit holders under any
other tax imposed pursuant to Missouri law, including but not
limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
To the extent that interest paid and original issue discount,
if any, derived from a Trust by a Unit holder with respect to
Possession Bonds is excludable from gross income for Federal income
tax purposes pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section
1423a, and 48 U.S.C. Section 1403, such interest paid and original
issue discount, if any, will not be subject to the Missouri State
Income Tax; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received
Page 4
by a Trust and distributed to Unit holders under any other tax
imposed pursuant to Missouri law, including but not limited to
the franchise tax imposed on financial institutions pursuant to
Chapter 148 of the Missouri Statutes.
Each Unit holder of a Trust will recognize gain or loss for Missouri
State 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 a Trust to the extent that such a transaction
results in a recognized gain or loss to such Unit holder for Federal
income tax purposes. 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 equal
to their original cost.
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
Missouri State Income Tax to the same extent as such interest
would have been so excludable if paid by the issuer of such Bonds
held by a Trust; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by a Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
The Missouri State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase
or carry Units in a Trust, the interest on which is exempt from
such Tax.
The Trust will not be subject to the Kansas City, Missouri Earnings
and Profits Tax and each Unit holder's share of income of the
Bonds held by a Trust will not generally be subject to the Kansas
City, Missouri Earnings and Profits Tax or the City of St. Louis
Earnings Tax (except in the case of certain Unit holders, including
corporations, otherwise subject to the St. Louis City Earnings
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
The following discussion regarding constitutional limitations
and the economy of the State of Missouri is included for the purpose
of providing general information that may or may not affect issuers
of the Bonds in Missouri.
Missouri's population was 5,117,000 according to the 1990 census
of the United States Bureau of the Census, which represented an
increase of 200,000 or 4.1% from the 1980 census of 4,917,000
inhabitants. Based on the 1990 population, Missouri was the 15th
largest state in the nation and the third most populous state
west of the Mississippi River, ranking behind California and Texas.
In 1994, the State's population was estimated to be 5,278,000
by the United States Bureau of the Census.
Agriculture is a significant component of Missouri's economy.
According to data of the United States Department of Agriculture,
Missouri ranked 16th in the nation in 1993 in the value of cash
receipts from farm marketing, with over $4.1 billion. Missouri
is one of the nation's leading purebred livestock producers. In
1993, sales of livestock and livestock products constituted nearly
56% of the State's total agricultural receipts.
The average value of farm land and buildings is $762 per acre
as of January 1, 1994, which is 102% of the U.S. average. The
State improved its ranking to second in 1980 (and continues that
position to date) in the total number of farms, although the trend
continues toward fewer, larger farms.
Missouri is one of the leading mineral producers in the Midwest,
and ranked 15th nationally in 1993 in the production of nonfuel
minerals. Total preliminary value of mineral production in 1993
was approximately $832 million. The State continues to rank first
in the nation in the production of lead. Lead production in 1993
was valued at over $193 million. Missouri also ranks first in
the production of refractory clay, third in barite, fourth in
production of zinc and is a leading producer of lime, cement and
stone.
According to data obtained by the Missouri Division of Employment
Security, in 1993 over two million workers had nonagricultural
jobs in Missouri. Nearly 27% of these workers were employed in
services, approximately 24% were employed in wholesale and retail
trade, and 17% were employed in manufacturing.
Page 5
In the last ten years, Missouri has experienced a significant
increase in employment in the service sector and in wholesale
and retail trade.
In 1993, per capita personal income in Missouri was $19,463, a
2.6% increase over the 1992 figure of $18,970. For the United
States as a whole, per capita income in 1993 was $20,817, a 3.6%
increase over the 1992 per capita income of $20,105.
Although the June 1993 revenue estimate had been revised downward
by $27.5 million, the State budget for fiscal year 1993 remained
balanced due primarily to delayed spending for desegregation capital
projects. The downward revision in revenues was considered necessary
because of weak economic performance, and more importantly an
economic outlook for the second half of fiscal year 1993 which
projected slower growth than was anticipated in June 1992.
For fiscal year 1994, the majority of revenues for the State of
Missouri will be obtained from individual income taxes (53.1%),
sales and use taxes (30.0%), corporate income taxes (5.9%) and
county foreign insurance taxes (3.0%). Major expenditures for
fiscal year 1994 include elementary and secondary education (30.6%),
human services (25.4%), higher education (14.8%) and desegregation
(8.9%).
The fiscal year 1994 budget balances resources and obligations
based on the consensus revenue and refund estimate and an opening
balance resulting from continued withholdings and delayed spending
for desegregation capital projects. The total general revenue
operating budget for fiscal year 1994 exclusive of desegregation
is $3,844.6 million.
As of December 31, 1994, the state has spent $2.2 billion on the
desegregation cases in St. Louis and Kansas City. At the end of
fiscal year 1995, that total will rise to an estimated $2.6 billion.
The revised estimate for fiscal year 1995 is $358.9 million and
the projection for fiscal year 1996 is $344.4 million. This expected
decline is due to the completion of many of the court-ordered
capital improvements projections. The state's obligation for desegregation
capital improvements was paid for with one-time revenue sources.
After deducting the one-time capital improvements costs, the ongoing
increase required from general revenue growth is $42.3 million.
The increase is due to significant increases required by new St.
Louis magnet schools, general salary increases ordered by the
federal district court in Kansas City and the costs of voluntary
interdistrict transfers in both cases. These estimates are subject
to variables including actions of the school districts and participating
students, future court orders and the expenditure rates of the
school districts.
According to the United States Bureau of Labor Statistics, the
1993 unemployment rate in Missouri was 6.4% and the 1994 rate
was 4.9%. Although not strictly comparable, the preliminary seasonally
adjusted rate for March of 1995 was 4.7%.
Currently, Moody's Investors Service, Inc. rates Missouri general
obligation bonds "Aaa" and Standard & Poor's rates Missouri general
obligation bonds "AAA." Although these ratings indicate that the
State of Missouri is in relatively good economic health, there
can be, of course, no assurance that this will continue or that
particular bond issues may not be adversely affected by changes
in the State or local economic or political conditions.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production.
Page 6
The level of tourism is affected by various factors including
the strength of the U.S. dollar. During periods when the dollar
is strong, tourism in foreign countries becomes relatively more
attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the 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 Missouri 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 Missouri Trusts to pay interest on or principal of the
Bonds.
Page 7
Missouri 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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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
Pennsylvania Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Pennsylvania Series
The First Trust of Insured Municipal Bonds-Multi-State
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated September 25, 1995 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations
for Federal income tax purposes. Tax-exempt interest received
by each of the Trusts on Bonds deposited therein will retain its
status as tax-exempt interest, for Federal income tax purposes,
when distributed to a Unit holder except that the alternative
minimum tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
received, if any, on Bonds delivered after the date the Unit holders
pay for their Units and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unit holder.
The amount of any such gain or loss is measured by comparing the
Unit holder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed
of. In the case of a Unit holder who purchases his Units, such
basis is determined by apportioning the tax basis for the Units
among each of the Trust assets ratably according to value as of
the date of acquisition of the Units. The basis of each Unit and
of each Bond which was issued with original issue discount must
be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased
by a Trust at a premium must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 2
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate
returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. THE TRUSTS DO NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations
Page 3
for Federal income tax purposes, "adjusted current earnings" includes
all tax-exempt interest, including interest on all Bonds in the
Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of The First Trust
Combined Series for New York tax matters, rendered an opinion
under then existing income tax laws of the State and City of New
York, substantially to the effect that each Trust in Series 4-125
of The First Trust Combined Series is not an association taxable
as a corporation and the income of each Trust in Series 4-125
of The First Trust Combined Series will be treated as the income
of the Unit holder in the same manner as for Federal income tax
purposes (subject to differences in accounting for discount and
premium to the extent the State and/or City of New York do not
conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special
Counsel to The First Trust Combined Series for New York tax matters
for Series 126 and subsequent Series of The First Trust Combined
Series, rendered an opinion under then existing income tax laws
of the State and City of New York, substantially to the effect
that each Trust will not constitute an association taxable as
a corporation under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax. Under the income tax laws of the State
and City of New York, the income of each Trust will be considered
the income of the holders of the Units.
Booth & Baron has served as Special Counsel to Series 1-9 of The
First Trust of Insured Municipal Bonds-Multi-State, inclusive,
and to all Series of the Pennsylvania Trust included in a Series
of The First Trust of Insured Municipal Bonds-Pennsylvania. Winston
& Strawn (previously named Cole & Deitz) has served as Special
Counsel to Series 10 and 11 of The First Trust of Insured Municipal
Bonds-Multi-State for New York tax matters. In the opinion of
such Special Counsels, under the existing income tax laws of the
State and City of New York, each Trust is not an association taxable
as a corporation and the income of each such Trust will be treated
as the income of the Unit holder.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
Pennsylvania Tax Status of Unit Holders
In rendering its opinion, Special Counsel has not, for timing
reasons, made an independent review of proceedings related to
the issuance of the Bonds. It has relied on the Sponsor for assurance
that the Bonds have been issued by the Commonwealth of Pennsylvania
or by or on behalf of municipalities or other governmental agencies
within the Commonwealth.
At the time of the closing for each Pennsylvania Trust, Special
Counsel to the Fund for Pennsylvania tax matters rendered an opinion
under then existing Pennsylvania income tax law applicable to
taxpayers whose income is subject to Pennsylvania income taxation
substantially to the effect that:
Units evidencing fractional undivided interests in a Pennsylvania
Trust, which are represented by obligations issued by the Commonwealth
of Pennsylvania, any public authority, commission, board or other
agency created by the Commonwealth of Pennsylvania, any political
subdivision of the Commonwealth of Pennsylvania or any public
authority created by any such political subdivision, are not taxable
under any of the personal property taxes presently in effect in
Pennsylvania;
Distributions of interest income to Unit holders that would not
be taxable if received directly by a Pennsylvania resident are
not subject to personal income tax under the Pennsylvania Tax
Reform Code of 1971; nor will such interest be taxable under the
Philadelphia School District Investment Income Tax imposed on
Philadelphia resident individuals;
A Unit holder will have a taxable event under the Pennsylvania
state and local income taxes referred to in the preceding paragraph
upon the redemption or sale of his Units. Units will be taxable
under the Pennsylvania inheritance and estate taxes;
Page 4
A Unit holder which is a corporation will have a taxable event
under the Pennsylvania Corporate Net Income Tax when it redeems
or sells its Units. Interest income distributed to Unit holders
which are corporations is not subject to Pennsylvania Corporate
Net Income Tax or Mutual Thrift Institutions Tax. However, banks,
title insurance companies and trust companies may be required
to take the value of the Units into account in determining the
taxable value of their shares subject to the Shares tax;
Under Act No. 68 of December 3, 1993, gains derived by a Pennsylvania
Trust from the sale, exchange or other disposition of Bonds may
be subject to Pennsylvania personal or corporate income taxes.
Those gains which are distributed by a Pennsylvania Trust to Unit
holders who are individuals may be subject to Pennsylvania Personal
Income Tax. For Unit holders which are corporations, the distributed
gains may be subject to Corporate Net Income Tax or Mutual Thrift
Institutions Tax. Gains which are not distributed by a Pennsylvania
Trust may nevertheless be taxable to Unit holders if derived by
a Pennsylvania Trust from the sale, exchange or other disposition
of Bonds issued on or after February 1, 1994. Gains which are
not distributed by a Pennsylvania Trust will remain nontaxable
to Unit holders if derived by a Pennsylvania Trust from the sale,
exchange or other disposition of Bonds issued prior to February
1, 1994.
Any proceeds paid under insurance policies issued to the Trustee
or obtained by issuers of the Bonds with respect to the Bonds
which represent maturing interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income
if, and to the same extent as, such interest would have been so
excludable if paid by the issuer of the defaulted obligations;
A Pennsylvania Trust is not taxable as a corporation under Pennsylvania
tax laws applicable to corporations.
On December 3, 1993, changes to Pennsylvania laws affecting taxation
of income and gains from the sale of Pennsylvania and local obligations
were enacted. Among these changes was the repeal of the exemption
from tax of gains realized upon the sale or other disposition
of such obligations. The Pennsylvania Department of Revenue has
issued proposed regulations concerning these changes. The opinions
expressed above are based on Special Counsel's analysis of the
law and proposed regulations, but are subject to modification
upon review of final regulations or other guidance that may be
issued by the Department of Revenue or future court decisions.
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
Investors should be aware of certain factors that might affect
the financial conditions of the Commonwealth of Pennsylvania.
Pennsylvania historically has been identified as a heavy industry
state although that reputation has changed recently as the industrial
composition of the Commonwealth diversified when the coal, steel
and railroad industries began to decline. A more diversified economy
was necessary as the traditionally strong industries in the Commonwealth
declined due to a long-term shift in jobs, investment and workers
away from the northeast part of the nation. The major sources
of growth in Pennsylvania are in the service sector, including
trade, medical and the health services, education and financial
institutions. Pennsylvania's agricultural industries are also
an important component of the Commonwealth's economic structure,
accounting for more than $3.6 billion in crop and livestock products
annually, while agribusiness and food related industries support
$39 billion in economic activity annually.
Non-agricultural employment in the Commonwealth declined by 5.1
percent during the recessionary period from 1980 to 1983. In 1984,
the declining trend was reversed as employment grew by 2.9 percent
over 1983 levels. From 1983 to 1990, Commonwealth employment continued
to grow each year, increasing an additional 14.3 percent. For
the last three years, unemployment in the Commonwealth has declined
1.2 percent. The growth in employment experienced in Pennsylvania
is comparable to the growth in employment in the Middle Atlantic
Region which has occurred during this period.
Back-to-back recessions in the early 1980s reduced the manufacturing
sector's employment levels moderately during 1980 and 1981, sharply
during 1982, and even further in 1983. Non-manufacturing employment
has increased steadily since 1980 to its 1993 level of 81.6 percent
of total Commonwealth employment.
Page 5
Consequently, manufacturing employment constitutes a diminished
share of total employment within the Commonwealth. Manufacturing,
contributing 18.4 percent of 1993 non-agricultural employment,
has fallen behind both the services sector and the trade sector
as the largest single source of employment within the Commonwealth.
In 1993 the services sector accounted for 29.9 percent of all
non-agricultural employment while the trade sector accounted for
22.4 percent.
From 1983 to 1989, Pennsylvania's annual average unemployment
rate dropped from 11.8 percent to 4.5 percent, falling below the
national rate in 1986 for the first time in over a decade. Pennsylvania's
annual average unemployment rate remained below the national average
from 1986 until 1990. Slower economic growth caused the unemployment
rate in the Commonwealth to rise to 6.9 percent in 1991 and 7.5
percent in 1992. The resumption of faster economic growth resulted
in a decrease in the Commonwealth's unemployment rate to 7.1 percent
in 1993. As of July 1994, the seasonally adjusted unemployment
rate for the Commonwealth was 6.5 percent compared to 6.1 percent
for the United States.
The five-year period from fiscal 1989 through fiscal 1993 was
marked by public health and welfare costs growing at a rate double
the growth rate for all the state expenditures. Rising caseloads,
increased utilization of services and rising prices joined to
produce the rapid rise of public health and welfare costs at a
time when a national recession caused tax revenues to stagnate
and even decline. During the period from fiscal 1989 through fiscal
1993, public health and welfare costs rose by an average annual
rate of 10.9 percent while tax revenues were growing at an average
annual rate of 5.5 percent. Consequently, spending on other budget
programs was restrained to a growth rate below 5.0 percent and
sources of revenues other than taxes became larger components
of fund revenues. Among those sources are transfers from other
funds and hospital and nursing home pooling of contributions to
use as federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession
in the economy. A $2.7 billion tax increase enacted for fiscal
1992 brought financial stability to the General Fund. That tax
increase included several taxes with retroactive effective dates
which generated some one-time revenues during fiscal 1992. The
absence of those revenues in fiscal 1993 contributed to the decline
in tax revenues shown for fiscal 1993.
It should be noted that the creditworthiness of obligations issued
by local Pennsylvania issuers may be unrelated to the creditworthiness
of obligations issued by the Commonwealth of Pennsylvania, and
there is no obligation on the part of the Commonwealth to make
payment on such local obligations in the event of default.
Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting.
A budgetary basis of accounting is used for the purpose of ensuring
compliance with the enacted operating budget and is governed by
applicable statutes of the Commonwealth and by administrative
procedures. The Commonwealth also prepares annual financial statements
in accordance with generally accepted accounting principles ("GAAP").
The budgetary basis financial information maintained by the Commonwealth
to monitor and enforce budgetary control is adjusted at fiscal
year-end to reflect appropriate accruals for financial reporting
in conformity with GAAP.
Fiscal 1991 Financial Results. GAAP Basis: During fiscal 1991
the General Fund experienced an $861.2 million operating deficit
resulting in a fund balance deficit of $980.9 million at June
30, 1991. The operating deficit was a consequence of the effect
of a national recession that restrained budget revenues and pushed
expenditures above budgeted levels. At June 30, 1991, a negative
unreserved-undesignated balance of $1,146.2 million was reported.
During fiscal 1991, the balance then available in the Tax Stabilization
Reserve Fund was used to maintain vital state spending.
Budgetary Basis: A deficit of $453.6 million was recorded by the
General Fund at June 30, 1991. The deficit was a consequence of
higher-than-budgeted expenditures and lower-than-estimated revenues
during the fiscal year brought about by the national economic
recession that began during the fiscal year. The budgetary basis
deficit at June 30, 1991 was carried into the 1992 fiscal year
and funded in the fiscal 1992 budget. A number of actions were
taken throughout the fiscal year by the Commonwealth to mitigate
the effects of the recession on budget revenues and expenditures.
Actions taken, together with normal appropriation
Page 6
lapses, produced $871 million in expenditure reductions and increases
in revenues and other transfers for the fiscal year. The most
significant of these actions were a $214 million transfer from
the Pennsylvania Industrial Development Authority, a $134 million
transfer from the Tax Stabilization Reserve Fund, and a pooled
financing program to match federal Medicaid funds replacing $145
million of state funds.
Fiscal 1992 Financial Results. GAAP Basis: During fiscal 1992
the General Fund reported a $1.1 billion operating surplus. This
operating surplus was achieved through legislated tax rate increases
and tax base broadening measures enacted in August 1991 and by
controlling expenditures through numerous cost reduction measures
implemented throughout the fiscal year. As a result of the fiscal
1992 operating surplus, the fund balance increased to $87.5 million
and the unreserved-undesignated deficit dropped to $138.6 million
from its fiscal 1991 level of $1,146.2 million.
Budgetary Basis: Eliminating the budget deficit carried into fiscal
1992 from fiscal 1991 and providing revenues for fiscal 1992 budgeted
expenditures required tax revisions that were estimated to have
increased receipts for the 1992 fiscal year by over $2.7 billion.
Total revenues for the fiscal year were $14,516.8 million, a $2,654.5
million increase over cash revenues during fiscal 1991. Originally
based on forecasts for an economic recovery, the budget revenue
estimates were revised downward during the fiscal year to reflect
continued recessionary economic activity. Largely due to the tax
revisions enacted for the budget, corporate tax receipts totalled
$3,761.2 million, up from $2,656.3 million in fiscal 1991, sales
tax receipts increased by $302 million to $4,499.7 million, and
personal income tax receipts totalled $4,807.4 million, an increase
of $1,443.8 million over receipts in fiscal 1991.
As a result of the lowered revenue estimate during the fiscal
year, increased emphasis was placed on restraining expenditure
growth that reducing expenditure levels. A number of cost reductions
were implemented during the fiscal year that contributed to $296.8
million of appropriation lapses. These appropriation lapses were
responsible for the $8.8 million surplus at fiscal year-end, after
accounting for the required ten percent transfer of the surplus
to the Tax Stabilization Reserve Fund.
Spending increases in the fiscal 1992 budget were largely accounted
for by increases for education, social services and corrections
programs. Commonwealth funds for the support of public schools
were increased by 9.8 percent to provide a $438 million increase
to $4.9 billion for fiscal 1992. The fiscal 1992 budget provided
additional funds for basic and special education and included
provisions designed to help restrain the annual increase of special
education costs, an area of recent rapid cost increases. Child
welfare appropriations supporting county operated child welfare
programs were increased $67 million, more than 31.5 percent over
fiscal 1991. Other social service areas such as medical and cash
assistance also received significant funding increases as costs
rose quickly as a result of the economic recession and high inflation
rates of medical care costs. The costs of corrections programs,
reflecting the marked increase in the prisoner population, increased
by 12 percent. Economic development efforts, largely funded from
bond proceeds in fiscal 1991, were continued with General Fund
appropriations for fiscal 1992.
The budget included the use of several Medicaid pooled financing
transactions. These pooling transactions replaced $135 million
of Commonwealth funds, allowing total spending under the budget
to increase by an equal amount.
Fiscal 1993 Financial Results. GAAP Basis: The fund balance of
the General Fund increased by $611.4 million during the fiscal
year, led by an increase in the unreserved balance of $576.8 million
over the prior fiscal year balance. At June 30, 1993, the fund
balance totaled $698.9 and the unreserved/undesignated balance
totaled $64.4 million. A continuing recovery of the Commonwealth's
financial condition from the effects of the national economic
recession of 1990 and 1991 is demonstrated by this increase in
the balance and a return to a positive unreserved/undesignated
balance. The previous positive unreserved/undesignated balance
was recorded in fiscal 1987. For the second consecutive fiscal
year the increase in the unreserved/undesignated balance exceeded
the increase recorded in the budgetary basis unappropriated surplus
during the fiscal year.
Budgetary Basis: The 1993 fiscal year closed with revenues higher
than anticipated and expenditures about as projected, resulting
in an ending unappropriated balance surplus (prior to the ten
percent transfer to
Page 7
the Tax Stabilization Reserve Fund) of $242.3 million, slightly
higher than estimated in May 1993. Cash revenues were $41.5 million
above the budget estimate and totaled $14.633 billion representing
less than a one percent increase over revenues for the 1992 fiscal
year. A reduction in the personal income tax rate in July 1992
and the one-time receipt of revenues from retroactive corporate
tax increases in fiscal 1992 were responsible, in part, for the
low revenue growth in fiscal 1993.
Appropriations less lapses totaled $13.870 billion representing
a 1.1 percent increase over expenditures during fiscal 1992. The
low growth in spending is a consequence of a low rate of revenue
growth, significant one-time expenses during fiscal 1992, increased
tax refund reserves to cushion against adverse decisions on pending
litigations, and the receipt of federal funds for expenditures
previously paid out of Commonwealth funds.
By state statute, ten percent of the budgetary basis unappropriated
surplus at the end of a fiscal year is to be transferred to the
Tax Stabilization Reserve Fund. The transfer for the fiscal 1993
balance was $24.2 million. The remaining unappropriated surplus
of $218.0 million was carried forward into the 1994 fiscal year.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth
revenues during the fiscal year totaled $15,210.7 million, $38.6
million above the fiscal year estimate, and 3.9 percent over Commonwealth
revenues during the previous fiscal year. The sales tax was an
important contributor to the higher than estimated revenues. Collections
from the sales tax were $5.124 billion, a 6.1 percent increase
from the prior fiscal year and $81.3 million above estimate. The
strength of collections from the sales tax offset the lower than
budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the
personal income tax was largely due to shortfalls in income not
subject to withholding such as interest, dividends and other income.
Tax refunds in fiscal 1994 were reduced substantially below the
$530 million amount provided in fiscal 1993. The higher fiscal
1993 amount and the reduced fiscal 1994 amount occurred because
reserves of approximately $160 million were added to fiscal 1993
tax refunds to cover potential payments if the Commonwealth lost
litigation known as Philadelphia Suburban Corp. v. Commonwealth.
Those reserves were carried into fiscal 1994 until the litigation
was decided in the Commonwealth's favor in December 1993 and $147.3
million of reserves for tax refunds were released.
Expenditures, excluding pooled financing expenditures and net
of all fiscal 1994 appropriation lapses, totaled $14,934.4 million
representing a 7.2 percent increase over fiscal 1993 expenditures.
Medical assistance and corrections spending contributed to the
rate of spending growth for the fiscal year.
The Commonwealth maintained an operating balance on a budgetary
basis for fiscal 1994 producing a fiscal year ending unappropriated
surplus of $335.8 million. By state statute, ten percent ($33.6
million) of that surplus will be transferred to the Tax Stabilization
Reserve Fund and the remaining balance will be carried over into
the fiscal 1995 fiscal year.
Fiscal 1995 Budget. The fiscal 1995 budget was approved by the
Governor on June 16, 1994 and provided for $15,652.9 million of
appropriations from Commonwealth funds, an increase of 3.9 percent
over appropriations, including supplemental appropriations, for
fiscal 1994. Medical assistance expenditures represent the largest
single increase in the budget ($221 million) representing a nine
percent increase over the prior fiscal year. The budget includes
a reform of the state-funded public assistance program that added
certain categories of eligibility to the program but also limited
the availability of such assistance to other eligible persons.
Education subsidies to local school districts were increased by
$132.2 million to continue the increased funding for the poorest
school districts in the state.
The budget also includes tax reductions totaling an estimated
$166.4 million. Low income working families will benefit from
an increase of the dependent exemption to $3,000 from $1,500 for
the first dependent and from $1,000 for all additional dependents.
A reduction to the corporate net income tax rate from 12.25 percent
to 9.99 percent to be phased in over a period of four years was
enacted. A net operating loss provision has been added to the
corporate net income tax and will be phased in over three years
with a $500,000 per firm annual cap on losses used to offset profits.
Several other tax changes to the sales tax, the inheritance tax
and the capital stock and franchise tax were also enacted.
Page 8
The fiscal 1995 budget projects a $4 million fiscal year-end unappropriated
surplus. No assumption as to appropriation lapses in fiscal 1995
has been made.
All outstanding general obligation bonds of the Commonwealth are
rated AA- by S&P and A1 by Moody's.
Any explanation concerning the significance of such ratings must
be obtained from the rating agencies. There is no assurance that
any ratings will continue for any period of time or that they
will not be revised or withdrawn.
The City of Philadelphia ("Philadelphia") is the largest city
in the Commonwealth, with an estimated population of 1,585,577
according to the 1990 Census. Philadelphia functions both as a
city of the first class and a county for the purpose of administering
various governmental programs.
For the fiscal year ended June 30, 1991, Philadelphia experienced
a cumulative General Fund balance deficit of $153.5 million. The
audit findings for the fiscal year ended June 30, 1992, place
the Cumulative General Fund balance deficit at $224.9.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first
class cities in remedying fiscal emergencies was enacted by the
General Assembly and approved by the Governor in June 1991. PICA
is designed to provide assistance through the issuance of funding
debt to liquidate budget deficits and to make factual findings
and recommendations to the assisted city concerning its budgetary
and fiscal affairs. An intergovernmental cooperation agreement
between Philadelphia and PICA was approved by City Council on
January 3, 1992, and approved by the PICA Board and signed by
the Mayor on January 8,1992. At this time, Philadelphia is operating
under a five-year fiscal plan approved by PICA on April 6, 1992.
Full implementation of the five-year plan was delayed due to labor
negotiations that were not completed until October 1992, three
months after the expiration of the old labor contracts. The terms
of the new labor contracts are estimated to cost approximately
$144.0 million more than what was budgeted in the original five-year
plan. An amended five-year plan was approved by PICA in May 1993.
The audit findings show a surplus of approximately $3 million
for the fiscal year ending June 30, 1993. The fiscal 1994 budget
projects no deficit and a balanced budget for the year ending
June 30, 1994. The Mayor's latest update of the five-year financial
plan was approved by PICA on May 2, 1994.
In June 1992, PICA issued $474,555,000 of its Special Tax Revenue
Bonds to provide financial assistance to Philadelphia and to liquidate
the cumulative General Fund balance deficit. PICA issued $643,430,000
in July 1993 and $178,675,000 in August 1993 of Special Tax Revenue
Bonds to refund certain general obligation bonds of the City and
to fund additional capital projects.
As of the date hereof, the ratings on the City's long-term obligations
supported by payments from the City's General Fund are rated Ba
by Moody's and BB by S&P. Any explanation concerning the significance
of such ratings must be obtained from the rating agencies. There
is no assurance that any ratings will continue for any period
of time or that they will not be revised or withdrawn.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production.
Page 9
The level of tourism is affected by various factors including
the strength of the U.S. dollar. During periods when the dollar
is strong, tourism in foreign countries becomes relatively more
attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the 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 Pennsylvania 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 Pennsylvania Trusts to pay interest on or principal
of the Bonds.
Page 10
Pennsylvania Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Pennsylvania 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
(National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 11
Mississippi 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 October 23, 1995 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes. Tax-exempt interest received by each
of the Trusts on Bonds deposited therein will retain its status
as tax-exempt interest, for Federal income tax purposes, when
distributed to a Unit holder except that (i) interest income on
certain Bonds in certain Mississippi Trusts will be included as
an item of tax preference in calculating the Alternative Minimum
Tax applicable to both individuals and corporations and (ii) the
alternative minimum tax and the environmental tax (the "Superfund
Tax") applicable to corporate Unit holders may, in certain circumstances,
include in the amount on which such tax is calculated, 75% of
the interest income received by the Trust. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
received, if any, on Bonds delivered after the date the Unit holders
pay for their Units and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unit holder.
The amount of any such gain or loss is measured by comparing the
Unit holder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed
of. In the case of a Unit holder who purchases his Units, such
basis is determined by apportioning the tax basis for the Units
among each of the Trust assets ratably according to value as of
the date of acquisition of the Units. The basis of each Unit and
of each Bond which was issued with original issue discount must
be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased
by a Trust at a premium must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 2
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. EXCEPT AS OTHERWISE NOTED
IN PART ONE FOR CERTAIN MISSISSIPPI TRUSTS, THE TRUSTS DO NOT
INCLUDE ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations
Page 3
for Federal income tax purposes, "adjusted current earnings" includes
all tax-exempt interest, including interest on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of the Fund for
New York tax matters, rendered an opinion under then existing
income tax laws of the State and City of New York, substantially
to the effect that each Trust in Series 4-125 of the Fund is not
an association taxable as a corporation and the income of each
Trust in Series 4-125 of the Fund will be treated as the income
of the Unit holder in the same manner as for Federal income tax
purposes (subject to differences in accounting for discount and
premium to the extent the State and/or City of New York do not
conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special
Counsel to the Fund for New York tax matters for Series 126 and
subsequent Series of the Fund, rendered an opinion under then
existing income tax laws of the State and City of New York, substantially
to the effect that each Trust will not constitute an association
taxable as a corporation under New York law, and accordingly will
not be subject to the New York State franchise tax or the New
York City general corporation tax. Under the income tax laws of
the State and City of New York, the income of each Trust will
be considered the income of the holders of the Units.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
Mississippi Tax Status of Unit Holders
The assets of a Mississippi Trust will consist of interest bearing
obligations issued by, or on behalf of, the State of Mississippi,
and counties, municipalities, authorities and other political
subdivisions thereof and may consist of such bonds issued by the
Commonwealth of Puerto Rico (the "Bonds").
At the time of the closing for each Mississippi Trust, Special
Counsel to the Fund for Mississippi tax matters rendered an opinion
under then existing Mississippi income tax law applicable to taxpayers
whose income is subject to Mississippi income taxation substantially
to the effect that:
For purposes of Mississippi income taxation, a Mississippi Trust
will be recognized as a trust and not as a corporation or as an
association taxable as a corporation. A Mississippi Trust will
not be subject to Mississippi income tax.
With respect to Unit holders who are residents of Mississippi,
the income of a Mississippi Trust which is allocable to each such
Unit holder will be treated as the income of such Unit holder
under the Mississippi income tax laws. Interest on the Underlying
Bonds which would be exempt from Mississippi income tax if directly
received by such Unit holder will retain its status as tax-exempt
interest when received by a Mississippi Trust and distributed
to such Unit holder.
To the extent that gain or loss is recognized for Federal income
tax purposes, each Unit holder of a Mississippi Trust will recognize
gain or loss for Mississippi income tax purposes if the Trustee
disposes of a Bond (whether by sale, payment on maturity, retirement
or otherwise) or if the Unit holder redeems or sells such Units.
Due to the amortization of Bond premium and other basis adjustments,
a Unit holder, under some circumstances, may realize taxable gain
when his or her Units are sold or redeemed for an amount equal
to their original cost.
The Units are not exempt from Mississippi estate tax and are subject
to assessment for Mississippi ad valorem tax purposes. (However,
it is not the current practice of the State of Mississippi to
assess intangible personal property owned by individuals or corporations,
other than certain financial institutions, for ad valorem tax purposes.)
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 4
Certain Considerations
Investors should be aware that the State of Mississippi ranks
50th among the fifty states in per capita total personal income,
largely due to a lack of an educated work force, a smaller percentage
of the population in the work force, and higher unemployment rates
as compared to the national average. Economic conditions in Mississippi
are improving, as evidenced by an increase in per capita total
personal income of 4.7% in 1993 while the per capita total personal
income in the United States increased by 3.2%. Mississippi's unemployment
rate fell to 6.4% in 1993, lower than the national rate for the
first time since 1979, and also the lowest rate in 13 years. The
gross State product rose an estimated 7.6% in 1993, compared to
a rise in the United States gross domestic product of 5.6%. Some
of the State's economic growth is attributable to the introduction
of the gaming industry into Mississippi's economy.
The manufacturing sector, a substantial contributor to Mississippi's
economy, has experienced varied growth in recent years. Manufacturing
employment increased from 238,500 in 1988 to 243,400 in 1989 while
dropping to 241,800 in 1990. Manufacturing employment rose only
1% in 1993, resulting in slow growth for the State's economy.
Job openings in the manufacturing sector are projected to be very
limited due to the substitution of more sophisticated equipment
for labor. Manufacturing jobs account for 26% of nonfarm establishment-based
employment in MIssissippi, compared to only 17% of U.S. establishment-based
employment. Mississippi's manufacturing employment is forecast
to increase somewhat between 1993 to 2003 at an annual growth rate of 0.7%.
Employment in contract construction in Mississippi increased 11.3%
in 1993. For the same year employment in services grew 11.5%,
in retail trade 4.6% and in transportation and utilities 1.6%.
Apparel suffered an employment fall of 3.3%. Employment in the
transportation equipment industry is expected to suffer a sizeable
drop at an annual rate of 1.9% between the years of 1993 to 2003,
due to federal budget cuts in defense-related marine equipment
purchases. Mississippi's strongest employment growth in durable
goods employment is expected to occur in the furniture and fixture
products industry. Nondurable employment is expected to rise most
rapidly in food and kindred products, rubber and miscellaneous
plastic products and printing and publishing. Continued drops
are expected in the textile and apparel industries.
General obligation bonds of the State of Mississippi are currently
rated Aa by Moody's Investors Services, Inc. and AA- by Standard
& Poor's. As of January 1, 1995, Mississippi had approximately
$856,423,000 of outstanding General Obligation Bonds payable from
the General Fund or General Fund revenues and self-supporting
General Obligation Bonds which are also secured by the full faith
and credit of the State. In addition, the State has approximately
$70,470,845 of Revenue Bonds.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition,
Page 5
from time to time proposals are introduced in Congress which,
if enacted into law, would eliminate some or all of the benefits
of Section 936. Although no assessment can be made at this time
of the precise effect of such limitation, it is expected that
the limitation of Section 936 credits would have a negative impact
on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the 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 Mississippi 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 Mississippi Trusts to pay interest on or principal
of the Bonds.
Page 6
Mississippi 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 (National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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 7
North Carolina 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 October 23, 1995 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating
to the validity thereof and to the exclusion of interest thereon
from Federal gross income were rendered by bond counsel to the
respective issuing authorities. Neither the Sponsor, Chapman and
Cutler, nor any of the Special Counsel to the Fund for State tax
matters have made any special review for the Fund of the proceedings
relating to the issuance of the Bonds or of the bases for such
opinions. Gain realized on the sale or redemption of the Bonds
by the Trustee or of a Unit by a Unit holder is, however, includable
in gross income for Federal income tax purposes. (It should be
noted in this connection that such gain does not include any amounts
received in respect of accrued interest or accrued original issue
discount, if any.) It should be noted that under provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes. Tax-exempt interest received by each
of the Trusts on Bonds deposited therein will retain its status
as tax-exempt interest, for Federal income tax purposes, when
distributed to a Unit holder except that the alternative minimum
tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders";
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
received, if any, on Bonds delivered after the date the Unit holders
pay for their Units and, consequently, such Unit holders may have
an increase in taxable gain or reduction in capital loss upon
the disposition of such Units. Gain or loss upon the sale or redemption
of Units is measured by comparing the proceeds of such sale or
redemption with the adjusted basis of the Units. If the Trustee
disposes of Bonds (whether by sale, payment on maturity, redemption
or otherwise), gain or loss is recognized to the Unit holder.
The amount of any such gain or loss is measured by comparing the
Unit holder's pro rata share of the total proceeds from such disposition
with his basis for his fractional interest in the asset disposed
of. In the case of a Unit holder who purchases his Units, such
basis is determined by apportioning the tax basis for the Units
among each of the Trust assets ratably according to value as of
the date of acquisition of the Units. The basis of each Unit and
of each Bond which was issued with original issue discount must
be increased by the amount of accrued original issue discount
and the basis of each Unit and of each Bond which was purchased
by a Trust at a premium must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
appearing in Part One for each Trust for information relating
to Bonds, if any, issued at an original issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 2
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. THE TRUSTS DO NOT INCLUDE
ANY SUCH PRIVATE ACTIVITY BONDS ISSUED ON OR AFTER THAT DATE.
For taxpayers other than corporations, net capital gains are presently
subject to a maximum stated marginal tax rate of 28%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income of
Page 3
corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
At the time of the closing, Booth & Baron, Special Counsel to
Series 1-3 of the 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 1-3
of the Fund is not an association taxable as a corporation and
the income of each such Trust will be treated as the income of
the Unit holder.
At the time of the closing, Winston & Strawn (previously named
Cole & Deitz), Special Counsel to Series 4-125 of the Fund for
New York tax matters, rendered an opinion under then existing
income tax laws of the State and City of New York, substantially
to the effect that each Trust in Series 4-125 of the Fund is not
an association taxable as a corporation and the income of each
Trust in Series 4-125 of the Fund will be treated as the income
of the Unit holder in the same manner as for Federal income tax
purposes (subject to differences in accounting for discount and
premium to the extent the State and/or City of New York do not
conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special
Counsel to the Fund for New York tax matters for Series 126 and
subsequent Series of the Fund, rendered an opinion under then
existing income tax laws of the State and City of New York, substantially
to the effect that each Trust will not constitute an association
taxable as a corporation under New York law, and accordingly will
not be subject to the New York State franchise tax or the New
York City general corporation tax. Under the income tax laws of
the State and City of New York, the income of each Trust will
be considered the income of the holders of the Units.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
North Carolina Tax Status of Unit Holders
At the time of the closing for each North Carolina Trust, Special
Counsel to the Fund for North Carolina tax matters rendered an
opinion under then existing North Carolina income tax law applicable
to taxpayers whose income is subject to North Carolina income
taxation substantially to the effect that:
A North Carolina Trust is not an "association" taxable as a corporation
under North Carolina law with the result that income of a North
Carolina Trust will be deemed to be income of the Unit holders.
Interest on the Bonds that is exempt from North Carolina income
tax when received by a North Carolina Trust will retain its tax-exempt
status when received by the Unit holders.
Unit holders will realize a taxable event when a North Carolina
Trust disposes of a Bond (whether by sales, exchange, redemption
or payment at maturity) or when a Unit holder redeems or sells
his Units (or any of them), and taxable gains for Federal income
tax purposes may result in gains taxable as ordinary income for
North Carolina income tax purposes. However, when a Bond has been
issued under an act of the North Carolina General Assembly that
provides that all income from such Bond, including any profit
made from the sale thereof, shall be free from all taxation by
the State of North Carolina, any such profit received by a North
Carolina Trust will retain its tax-exempt status in the hands
of the Unit holders.
Unit holders must amortize their proportionate shares of any premium
on a Bond. Amortization for each taxable year is accomplished
by lowering Unit holder's basis (as adjusted) in his Units with
no deduction against gross income for the year.
In order for the Units to be exempt from the North Carolina tax
on intangible personal property: (a) at all times either (i) the
corpus of a North Carolina Trust must be composed entirely of
North Carolina Bonds or, pending distribution, amounts received
on the sale, redemption or maturity of the Bonds, or (ii) (if
Puerto Rico Bonds are included in a North Carolina Trust) at least
80% of the fair market value of the Bonds, excluding amounts received
on the sale, redemption or maturity of the Bonds, must be attributable
to the fair market value of the North Carolina Bonds; and (b)
the Trustee periodically must supply to the North Carolina Department
of Revenue at such times as required by the Department of Revenue
a complete description of a
Page 4
North Carolina Trust and also the name, description and value
of the obligations held in the corpus of a North Carolina Trust.
The opinion of Special Counsel is based, in part, on the opinion
of Chapman and Cutler regarding Federal tax status of the Fund
and upon current interpretations of the North Carolina Department
of Revenue, which are subject to change.
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
See "Portfolio" appearing in Part One for each Trust for a list
of the Debt Obligations included in each North Carolina Trust.
The portions of the following discussion regarding the financial
condition of the State government may not be relevant to general
obligation or revenue bonds issued by political subdivisions of
the State. Those portions and the sections which follow regarding
the economy of the State are included for the purpose of providing
information about general economic conditions that may or may
not affect issuers of the North Carolina Obligations. None of
the information is relevant to any Puerto Rico Obligations which
may be included in the Portfolio of a North Carolina Trust.
General obligations of a city, town or county in North Carolina
are payable from the general revenues of the entity, including
ad valorem tax revenues on property within the jurisdiction. Revenue
bonds issued by North Carolina political subdivisions include
(1) revenue bonds payable exclusively from revenue-producing governmental
enterprises and (2) industrial revenue bonds, college and hospital
revenue bonds and other "private activity bonds" which are essentially
non-governmental debt issues and which are payable exclusively
by private entities such as non-profit organizations and business
concerns of all sizes. State and local governments have no obligation
to provide for payment of such private activity bonds and in many
cases would be legally prohibited from doing so. The value of
such private activity bonds may be affected by a wide variety
of factors relevant to particular localities or industries, including
economic developments outside of North Carolina.
Section 23-48 of the North Carolina General Statutes appears to
permit any city, town, school district, county or other taxing
district to avail itself of the provisions of Chapter 9 of the
United States Bankruptcy Code, but only with the consent of the
Local Government Commission of the State and of the holders of
such percentage or percentages of the indebtedness of the issuer
as may be required by the Bankruptcy Code (if any such consent
is required). Thus, although limitations apply, in certain circumstances
political subdivisions might be able to seek the protection of
the Bankruptcy Code.
State Budget and Revenues. The North Carolina State Constitution
requires that the total expenditures of the State for the fiscal
period covered by each budget not exceed the total of receipts
during the fiscal period and the surplus remaining in the State
Treasury at the beginning of the period. The State's fiscal year
runs from July 1st through June 30th.
In 1990 and 1991 the State had difficulty meeting its budget projections.
The General Assembly responded by enacting a number of new taxes
and fees to generate additional revenue and reduced allowable
departmental operating expenditures and continuation funding.
The spending reductions were based on recommendations from the
Governor, the Government Performance Audit Committee and selected
reductions identified by the General Assembly.
The State, like the nation, has experienced economic recovery
since 1991. Apparently due to both increased tax and fee revenue
and the previously enacted spending reductions, the State had
a budget surplus of approximately $887 million at the end of fiscal
year 1993-94. After review of the 1994-95 continuation budget
adopted in 1993, the General Assembly approved spending expansion
funds, in part to restore certain employee salaries to budgeted
levels, which amounts had been deferred to balance the budgets
in 1989-93, and to authorize funding for new initiatives for economic
development, education, human services and environmental programs.
(The cutback in funding for infrastructure and social development
projects had been cited by agencies rating State obligations,
following the 1991 reductions, as cause
Page 5
for concern about the long-term consequences of those reductions
on the economy of the State and the State's fiscal prospects.)
Based on projected growth in State tax and fee revenues, the General
Fund balance forecast for the end of the 1994-95 fiscal year is
approximately $310 million.
It is unclear what effect these developments at the State level
may have on the value of the Debt Obligations in the North Carolina Trusts.
The State is subject to claims by classes of plaintiffs asserting
a right to a refund of taxes paid under State statutes that allegedly
discriminated against federal retirees and armed services personnel
in a manner that was unconstitutional based on the decision by
the United States Supreme Court in a 1989 Michigan case involving
a similar law, Davis v. Michigan Department of Treasury ("Davis").
At the time of that decision, State income tax law exempted retirement
income paid by North Carolina State and local governments but
did not exempt retirement income paid by the federal government
to its former employees. Also, State tax law at the time provided
a deduction for certain income earned by members of the North
Carolina National Guard, but did not provide a similar deduction
for members of the federal armed services.
Following the Davis decision the North Carolina legislature amended
the tax laws to provide identical retirement income exclusions
for former state and federal employees (effective for 1989), and
repealed the deduction given to members of the State National
Guard. In addition, the amendments authorized a special tax credit
for federal retirees equal to the taxes paid on their nonexcluded
federal pensions in 1988 (to be taken over a three year period
beginning with returns for 1990).
Subsequent to Davis, the North Carolina plaintiffs brought an
action in federal court against the North Carolina Department
of Revenue and certain officials of the State alleging that the
collection of the taxes under the prior North Carolina tax statutes
was prohibited by the state and federal constitutions and also
violated civil rights protections under 42 U.S.C. # 1983, a federal
statute prohibiting discriminatory taxation of the compensation
of certain federal employees (4 U.S.C. # 111), and the principle
of intergovernmental tax immunity. The plaintiffs sought injunctive
relief requiring the State to provide refunds of the illegally
collected taxes paid on federal retirement or military pay for
the years 1985-88 (covering the asserted three year limitations
period), plus interest. Swanson, et al. v. Powers, et al. (United
States District Court for the Eastern District of North Carolina,
No. 89-282-CIV-5-H) ("Swanson Federal"). The individual plaintiffs
in Swanson Federal also brought an action in North Carolina State
court seeking refunds of the illegal taxes. Swanson, et al. v.
State of North Carolina, et al. (Wake County, North Carolina Superior
Court, No. 90 CVS 3127) ("Swanson State").
The amounts claimed by federal retirees in the Swanson actions
have not been precisely calculated. Plaintiffs have asserted that
the plaintiff class contains about 100,000 taxpayers; the State
estimated that as of June 30, 1994, the claims (including interest)
would then aggregate approximately $280 million.
In 1991, the North Carolina Supreme Court in Swanson State affirmed
a decision in favor of the State, holding that the United States
Supreme Court decision in Davis was not to have retroactive effect.
Review was granted by the United States Supreme Court and the
case subsequently was remanded to the North Carolina Supreme Court
for reconsideration in light of the United States Supreme Court's
1993 holding in Harper v. Virginia Dept. of Taxation ("Harper").
In Harper, which also involved the disparate income tax treatment
of retired state and federal employees and the question of retroactive
application of Davis, the United States Supreme Court held that
the Commonwealth of Virginia must provide "meaningful backward-looking
relief" to the plaintiffs if the Commonwealth did not have a predeprivation
process adequate to satisfy due process requirements. Harper was
remanded to the Supreme Court of Virginia to determine whether
a remedy was required and, if so, what form it would take.
Similarly, Swanson State was remanded for reconsideration of whether
the North Carolina tax laws satisfied the due process requirements
of the federal constitution and, if not, what remedy was to be
provided by the State.
On remand, the North Carolina Supreme Court held in early 1994
that the plaintiffs in Swanson State were procedurally barred
from recovering refunds because they did not comply with the State's
statutory postpayment
Page 6
refund demand procedure. The plaintiffs contended unsuccessfully
that the postpayment demand requirement did not meet the requirements
of the federal constitution, in light of the Harper decision,
for "meaningful backward-looking relief." Plaintiffs in Swanson
State have petitioned the United States Supreme Court for review
of the most recent North Carolina Supreme Court decision.
Following Harper, the plaintiffs in Swanson Federal again requested
an injunction requiring refunds. (Although the federal and state
cases are independent, the refund claims apparently would lead
to only a single recovery of taxes deemed unlawfully collected.)
In May 1994, the United States District Court granted the State's
motion to dismiss all but one claim made by the plaintiffs, declaring
that those claims were precluded by the 1994 North Carolina Supreme
Court decision in Swanson State. Plaintiffs in Swanson Federal
asserted that relief should have been granted because of the effect
of the federal District Court's 1990 opinion in Swanson Federal
denying the defendants' motion that the federal Tax Injunction
Act precluded the plaintiffs' claims, in which the court found
that the statutory postpayment remedy for refund of unlawful taxes
was not "plain, speedy and efficient," as required by that law,
Swanson Federal, 1990 WL 545, 761 (E.D.N.C.), rev'd, 937 F.2d
965 (1991), cert. denied, U.S., 112 S. Ct. 871 (1992). In its
May 1994 decision, the federal court rejected that assertion and
held that its finding regarding the federal Tax Injunction Act
was jurisdictional only and was not a determination that the statutory
remedy violated the due process clause.
The plaintiffs' claim that was not dismissed with prejudice in
the recent District Court order asserts that the State continued
an unlawful discrimination, contrary to the requirements of 4
U.S.C. # 111 and the doctrine of intergovernmental tax immunity,
by increasing benefits to State retirees (in order to offset the
effect of the deletion of the preferential State retirement income
exemption) as part of the bill that equalized the income exclusion
of State and federal retirement payments. The claim is based on
a holding of similar effect in Sheehy v. Public Employees Retirement
Div., 864 P. 2d 762 (Mont. 1993). In its May 1994 order, the District
Court allowed the plaintiffs to dismiss the Sheehy claim without
prejudice. Therefore, plaintiffs could assert those claims in
another action; apparently, the relief would require providing
federal retirees with tax refunds or other payments equal to the
allegedly discriminatory payments made to State retirees since
1989. The court noted that those claims will be subject to the
statutory postdeprivation procedural requirements, and that a
challenge to the legality of the remedial statute would be precluded
under the scope of the court's order dismissing the other claims.
However, the court granted plaintiffs' motion to dismiss the Sheehy
claims without prejudice because the record did not show whether
the plaintiffs had complied with statutory requirements. The plaintiffs
in Swanson State have appealed the District Court decision to
the United States Court of Appeals.
Several states involved in similar suits have reached settlements.
Expressions of interest in settlement of the claims in Swanson
by both the plaintiffs and State officials have been reported
in the press, but no prediction can be made of the likelihood
or amount of settlement. Although the recent improvements in the
economy and fiscal condition of the State might better enable
the State to satisfy an adverse decision without significant consequences
to the State's fiscal condition or governmental functions, because
the amount of the potential liability has not been fixed and because
of the potential that adverse fiscal or economic developments
could cause a more negative result on the State if a large amount
must be paid, no assurance can be given that the impact of the
Swanson cases, if the plaintiffs ultimately succeed, will not
have an adverse impact on the Debt Obligations.
State and local government retirees also filed a class action
suit in 1990 as a result of the repeal of the income tax exemptions
for state and local government retirement benefits. The original
suit was dismissed after the North Carolina Supreme Court ruled
in 1991 that the plaintiffs had failed to comply with state law
requirements for challenging unconstitutional taxes and the United
States Supreme Court denied review. In 1992, many of the same
plaintiffs filed a new lawsuit alleging essentially the same claims,
including breach of contract, unconstitutional impairment of contract
rights by the State in taxing benefits that were allegedly promised
to be tax-exempt and violation of several state constitutional
provisions. The North Carolina Attorney General's office estimates
that the amount in controversy is approximately $40-$45 million
annually for the tax years 1989 through 1992. The case is now
pending in state court.
Page 7
Other litigation against the State include the following. None
of the cases, in the reported opinion of the Department of the
Treasurer, would have a material adverse affect on the State's
ability to meet its obligations.
Leandro, et al. v. State of North Carolina and State Board of
Education-In May 1994 students and boards of education in five
counties in the State filed suit in state court requesting a declaration
that the public education system of North Carolina, including
its system of funding, violates the State constitution by failing
to provide adequate or substantially equal educational opportunities
and denying due process of law and violates various statutes relating
to public education. The suit is similar to a number of suits
in other states, some of which resulted in holdings that the respective
systems of public education funding were unconstitutional under
the applicable state law. The defendants in such suit have filed
a motion to dismiss, but no answer to the complaint and no pretrial
discovery has taken place.
Francisco Case-In August 1994 a class action lawsuit was filed
in state court against the Superintendent of Public Instruction
and the State Board of Education on behalf of a class of parents
and their children who are characterized as limited English proficient.
The complaint alleges that the State has failed to provide funding
for the education of these students and has failed to supervise
local school systems in administering programs for them. The complaint
does not allege an amount in controversy, but asks the Court to
order the defendants to fund a comprehensive program to ensure
equal educational opportunities for children with limited English
proficiency.
Faulkenburg v. Teachers' and State Employees' Retirement System,
Peele v. Teachers' and State Employees' Retirement System and
Woodward v. Local Governmental Employees' Retirement System-Plaintiffs
are disability retirees who brought class actions in state court
challenging changes in the formula for payment of disability retirement
benefits and claiming impairment of contract rights, breach of
fiduciary duty, violation of other federal constitutional rights
and violation of state constitutional and statutory rights. The
State estimates that the cost in damages and higher prospective
benefit payments to plaintiffs and class members would probably
amount to $50 million or more in Faulkenburg, $50 million or more
in Peele and $15 million or more in Woodward, all ultimately payable,
at least initially, from the retirement system funds. Upon review
in Faulkenburg, the North Carolina Court of Appeals and Supreme
Court have held that claims made in Faulkenburg substantially
similar to those in Peele and Woodward, for breach of fiduciary
duty and violation of federal constitutional rights brought under
the federal Civil Rights Act either do not state a cause of action
or are otherwise barred by the statute of limitations. In 1994
plaintiffs took voluntary dismissals of their claims for impairment
of contract rights in violation of the United States Constitution
and filed new actions in federal court asserting the same claims
along with claims for violation of constitutional rights in the
taxation of retirement benefits. The remaining state court claims
in all cases are scheduled to be heard in North Carolina in October 1994.
Fulton Case-The State's intangible personal property tax levied
on certain shares of stock has been challenged by the plaintiff
on grounds that it violates the Commerce Clause of the United
States Constitution by discriminating against stock issued by
corporations that do all or part of their business outside the
State. The plaintiff in the action is a North Carolina corporation
that does all or part of its business outside the State. The plaintiff
seeks to invalidate the tax in its entirety and to recover tax
paid on the value of its shares in other corporations. The North
Carolina Court of Appeals invalidated the taxable percentage deduction
and excised it from the statute beginning with the 1994 tax year.
The effect of this ruling is to increase collections by rendering
all stock taxable on 100% of its value. The State and the plaintiff
have sought further appellate review and the case is pending before
the North Carolina Supreme Court. Net collections from the tax
for the fiscal year ended June 30, 1993 amounted to $120.6 million.
General. The population of the State has increased 13% from 1980,
from 5,880,095 to 6,647,351 as reported by the 1990 federal census
and the State rose from twelfth to tenth in population. The State's
estimate of population as of June 30, 1994 is 7,023,663. Notwithstanding
its rank in population size, North Carolina is primarily a rural
state, having only five municipalities with populations in excess of 100,000.
Page 8
The labor force has undergone significant change during recent
years as the State has moved from an agricultural to a service
and goods producing economy. Those persons displaced by farm mechanization
and farm consolidations have, in large measure, sought and found
employment in other pursuits. Due to the wide dispersion of non-agricultural
employment, the people have been able to maintain, to a large
extent, their rural habitation practices. During the period 1980
to 1993, the State labor force grew about 25% (from 2,855,200
to 3,556,000). Per capita income during the period 1980 to 1993
grew from $7,999 to $18,702, an increase of 133.8%.
The current economic profile of the State consists of a combination
of industry, agriculture and tourism. As of June 1994, the State
was reported to rank tenth among the states in non-agricultural
employment and eighth in manufacturing employment. Employment
indicators have varied somewhat in the annual periods since June
of 1989, but have demonstrated an upward trend since 1991. From
June of 1989 to June of 1993 the civilian labor force has gone
from 3,286,000 to 3,504,000; non-agricultural employment has gone
from 3,088,000 to 3,203,400, with goods producing occupations
(mining, construction and manufacturing) dropping from 1,042,200
to 993,600, service occupations increasing from 2,045,800 to 2,209,800,
wholesale and retail occupations increasing from 713,900 to 723,200,
government employees increasing from 482,200 to 515,400 and miscellaneous
services increasing from 563,900 to 676,900; and agricultural
employment has increased from 54,900 to 88,400.
The seasonally adjusted unemployment rate in June 1994 was estimated
to be 3.7% of the labor force (down from 5.4% in June 1993), as
compared with an unemployment rate of 6% nationwide (down from
7.0% in June 1993).
As of 1993, the State was tenth in the nation in gross agricultural
income of which nearly the entire amount (approximately $5.3 billion)
was from commodities. According to the State Commissioner of Agriculture,
in 1993, the State ranked first in the nation in the production
of flue-cured tobacco, total tobacco, turkeys and sweet potatoes;
second in the value of poultry and eggs, hog production, trout
and the production of cucumbers for pickles; fourth in commercial
broilers, blueberries and peanuts; sixth in burley tobacco and
net farm income.
The diversity of agriculture in North Carolina and a continuing
push in marketing efforts have protected farm income from some
of the wide variations that have been experienced in other states
where most of the agricultural economy is dependent on a small
number of agricultural commodities. North Carolina is the third
most diversified agricultural state in the nation.
Tobacco production is the leading source of agricultural income
in the State, accounting for 20.0% of gross agricultural income.
Tobacco farming in North Carolina has been and is expected to
continue to be affected by major Federal legislation and regulatory
measures regarding tobacco production and marketing and by international
competition. Measures adverse to tobacco farming could have negative
effects on farm income and the North Carolina economy generally.
The poultry industry provides nearly 34% of gross agricultural
income. The pork industry has been expanding and accounted for
17% of gross agricultural income in 1993.
The number of farms has been decreasing; in 1993 there were approximately
59,000 farms in the State (down from approximately 72,000 in 1987,
a decrease of about 18% in six years). However, a strong agribusiness
sector supports farmers with farm inputs (fertilizer, insecticide,
pesticide and farm machinery) and processing of commodities produced
by farmers (vegetable canning and cigarette manufacturing).
The State Department of Commerce, Travel and Tourism Division
reports that in 1993 approximately $8 billion was spent on tourism
in the State. The Department estimates that two-thirds of total
expenditures came from out-of-state travelers and that approximately
250,000 people were employed in tourism-related jobs.
Bond Ratings. Currently, Moody's rates North Carolina general
obligation bonds as Aaa and Standard & Poor's rates such bonds
as AAA. Standard & Poor's also reaffirmed its stable outlook for
the State in January 1994. Standard & Poor's reports that North
Carolina's rating reflects the State's strong economic characteristics,
sound financial performance and low debt levels.
Page 9
The Sponsor believes the information summarized above describes
some of the more significant events relating to a North Carolina
Trust. The sources of this information are the official statements
of issuers located in North Carolina, State agencies, publicly
available documents, publications of rating agencies and statements
by, or news reports of statements by State officials and employees
and by rating agencies. The Sponsor and its counsel have not independently
verified any of the information contained in the official statements
and other sources and counsel have not expressed any opinion regarding
the completeness or materiality of any matters contained in this
Prospectus other than the tax opinions set forth above under "North
Carolina Tax Status of Unit Holders."
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
Page 10
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 North Carolina 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 North Carolina Trusts to pay interest on or principal
of the Bonds.
Page 11
North Carolina 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 (National Association)
770 Broadway
New York, New York 10003
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young 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
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 195, certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on December 1, 1995.
THE FIRST TRUST COMBINED SERIES 195
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Sole Director of )
Nike Securities )
Corporation, ) December 1, 1995
the General Partner )
of Nike Securities L.P. )
)
) Carlos E. Nardo
) Attorney-in-Fact**
*The title of the person named herein represents his capacity in
and relationship to Nike Securities L.P., Depositor.
**An executed copy of the related power of attorney was filed wi
th the Securities and Exchange Commission in connection with
the Amendment No. 1 to Form S-6 of The First Trust Special
Situations Trust, Series 18 (File No. 33-42683) and the same
is hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated September 29, 1995
in this Post-Effective Amendment to the Registration Statement
and related Prospectus of The First Trust Combined Series dated
October 20, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
October 19, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 027
<NAME> MICHIGAN INTERMEDIATE TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,485,031
<INVESTMENTS-AT-VALUE> 2,443,763
<RECEIVABLES> 29,929
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,473,692
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,753
<TOTAL-LIABILITIES> 4,753
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,485,031
<SHARES-COMMON-STOCK> 2,591
<SHARES-COMMON-PRIOR> 3,048
<ACCUMULATED-NII-CURRENT> 25,176
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (41,268)
<NET-ASSETS> 2,468,939
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 126,278
<OTHER-INCOME> 0
<EXPENSES-NET> 6,671
<NET-INVESTMENT-INCOME> 119,607
<REALIZED-GAINS-CURRENT> (42,187)
<APPREC-INCREASE-CURRENT> 76,848
<NET-CHANGE-FROM-OPS> 154,268
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 119,454
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 457
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (369,234)
<ACCUMULATED-NII-PRIOR> 28,748
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 019
<NAME> MISSOURI TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,934,798
<INVESTMENTS-AT-VALUE> 2,788,594
<RECEIVABLES> 38,991
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,827,585
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,227
<TOTAL-LIABILITIES> 8,227
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,934,798
<SHARES-COMMON-STOCK> 3,086
<SHARES-COMMON-PRIOR> 3,086
<ACCUMULATED-NII-CURRENT> 30,764
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (146,204)
<NET-ASSETS> 2,819,358
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 164,063
<OTHER-INCOME> 0
<EXPENSES-NET> 5,461
<NET-INVESTMENT-INCOME> 158,602
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 46,260
<NET-CHANGE-FROM-OPS> 204,862
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 158,993
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 45,869
<ACCUMULATED-NII-PRIOR> 31,155
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 049
<NAME> PENNSYLVANIA TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,872,029
<INVESTMENTS-AT-VALUE> 2,685,424
<RECEIVABLES> 52,729
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,738,153
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,311
<TOTAL-LIABILITIES> 23,311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,872,029
<SHARES-COMMON-STOCK> 3,018
<SHARES-COMMON-PRIOR> 3,020
<ACCUMULATED-NII-CURRENT> 29,418
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (186,605)
<NET-ASSETS> 2,714,842
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 160,531
<OTHER-INCOME> 0
<EXPENSES-NET> 5,454
<NET-INVESTMENT-INCOME> 155,077
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 45,600
<NET-CHANGE-FROM-OPS> 200,677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 155,438
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 43,410
<ACCUMULATED-NII-PRIOR> 31,608
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 009
<NAME> MISSISSIPPI INTERMEDIATE TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,881,054
<INVESTMENTS-AT-VALUE> 2,754,684
<RECEIVABLES> 50,843
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,805,527
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,244
<TOTAL-LIABILITIES> 19,244
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,881,054
<SHARES-COMMON-STOCK> 3,032
<SHARES-COMMON-PRIOR> 3,071
<ACCUMULATED-NII-CURRENT> 31,599
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (126,370)
<NET-ASSETS> 2,786,283
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 163,077
<OTHER-INCOME> 0
<EXPENSES-NET> 5,487
<NET-INVESTMENT-INCOME> 157,590
<REALIZED-GAINS-CURRENT> (6,614)
<APPREC-INCREASE-CURRENT> 59,317
<NET-CHANGE-FROM-OPS> 210,293
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 157,187
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 39
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 19,352
<ACCUMULATED-NII-PRIOR> 25,428
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Post
Effective Amendment to form S-6 and is qualified in its entirety by reference to
such Post Effective Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> NORTH CAROLINA INTERMEDIATE TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 2,833,569
<INVESTMENTS-AT-VALUE> 2,799,596
<RECEIVABLES> 25,444
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,825,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,151
<TOTAL-LIABILITIES> 5,151
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,833,569
<SHARES-COMMON-STOCK> 2,943
<SHARES-COMMON-PRIOR> 3,038
<ACCUMULATED-NII-CURRENT> 20,293
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (33,973)
<NET-ASSETS> 2,819,889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 138,890
<OTHER-INCOME> 0
<EXPENSES-NET> 5,358
<NET-INVESTMENT-INCOME> 133,532
<REALIZED-GAINS-CURRENT> (6,585)
<APPREC-INCREASE-CURRENT> 79,050
<NET-CHANGE-FROM-OPS> 205,997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133,185
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 95
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (12,956)
<ACCUMULATED-NII-PRIOR> 26,163
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
