File No. 33-67708
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 199
(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 29, 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
October 24, 1995.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 7 - INTERMEDIATE
2,758 UNITS
PROSPECTUS
Part One
Dated December 20, 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 Florida State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Florida Trust,
Series 7 - Intermediate (the "Trust") is an insured and fixed portfolio of
interest-bearing obligations issued by or on behalf of municipalities and
other governmental authorities within the State of Florida, counties,
municipalities, authorities and political subdivisions thereof, the interest
on which is, in the opinion of recognized bond counsel to the issuing
governmental authorities, exempt from all Federal income taxes and from
Florida State and local income taxes under existing law. At November 16,
1995, each Unit represented a 1/2,758 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, plus Purchased Interest, divided by the
number of Units outstanding, plus a sales charge of 4.40% of the Public
Offering Price (4.603% of the amount invested). At November 16, 1995, the
Public Offering Price per Unit was $985.07 plus net interest accrued to date
of settlement (three business days after such date) of $.11 (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 was 4.15% per annum on November 16,
1995. Estimated Long-Term Return to Unit holders was 3.92% per annum on
November 16, 1995. 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 7 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 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 2,758
Fractional Undivided Interest in the Trust per Unit 1/2,758
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,585,788
Aggregate Value of Bonds per Unit $937.56
Purchased Interest $11,488
Purchased Interest per Unit $4.17
Sales Charge 4.603% (4.40% of Public Offering Price) $43.34
Public Offering Price per Unit $985.07*
Redemption Price and Sponsor's Repurchase Price per Unit
($43.34 less than the Public Offering Price per Unit) $941.73*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $586,000
</TABLE>
Date Trust Established September 29, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $879 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 7 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
PER UNIT INFORMATION
<S> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $42.95
Less: Estimated Annual Expense $2.05
Estimated Net Annual Interest Income $40.90
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $40.90
Divided by 12 $3.41
Estimated Daily Rate of Net Interest Accrual $.1136
Estimated Current Return Based on Public
Offering Price 4.15%
Estimated Long-Term Return Based on Public
Offering Price 3.92%
</TABLE>
Trustee's Annual Fee: $1.11 per Unit.
Computation Dates: Fifteenth day of the month.
Distribution Dates: Last day of the month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 199, The First Trust of Insured Municipal
Bonds - Multi-State, Florida Trust, Series 7 - Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 199, The First
Trust of Insured Municipal Bonds - Multi-State, Florida Trust, Series 7 -
Intermediate as of August 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, September 29, 1993, to August 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 August 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 199, The First Trust of Insured Municipal Bonds - Multi-State, Florida
Trust, Series 7 - Intermediate at August 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, September 29, 1993, to August 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - INTERMEDIATE
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,636,133)
(Note 1) $2,573,434
Accrued interest 46,328
Prepaid expense 48
__________
2,619,810
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Purchased interest 11,492
Cash overdraft 29,179
__________
40,671
__________
Net assets, applicable to 2,759 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,636,133
Net unrealized depreciation (Note 2) (62,699)
Distributable funds 5,705
__________
$2,579,139
==========
Net asset value per unit $934.81
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - INTERMEDIATE
PORTFOLIO - See notes to portfolio.
August 31, 1995
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(d) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Acme Improvement District (Palm Beach County,
Florida), Utility System Revenue Refunding,
Series 1993 (AMBAC Insured) (c) 4.45 % 10/01/2002 AAA $445,000 437,573
School District of Charlotte County, Florida,
General Obligation Refunding, Series 1993
(FGIC Insured) (c) 4.20 3/01/2002 AAA 150,000 144,790
County of Charlotte, Florida, School District
General Obligation, Refunding (FGIC
Insured) (c) 4.40 3/01/2004 2003 @ 102 AAA 150,000 144,038
Florida Municipal Power Agency, Stanton II
Project, Refunding Revenue, Series 1993 4.60 10/01/2004 2003 @ 102 AAA 350,000 340,378
(AMBAC Insured) (c) 4.45 10/01/2003 AAA 150,000 145,736
City of Fort Pierce, Florida, Sales Tax Revenue
Refunding, Series 1993 (AMBAC Insured) (c) 4.20 12/01/2001 AAA 250,000 244,220
Halifax Hospital Medical Center (Daytona Beach,
Florida), Hospital Revenue Refunding, 1993 4.50 10/01/2002 AAA 115,000 112,410
Series A (MBIA Insured) (c) 4.625 10/01/2003 AAA 255,000 249,864
Certificates of Participation (Lee County,
Florida Master Lease Project, Series 1993)
(AMBAC Insured) (c) 4.625 10/01/2003 AAA 500,000 491,565
Manatee County, Florida, Public Utilities Revenue
Refunding, Series 1993 A-1 (MBIA Insured) (c) 4.25 10/01/2001 AAA 70,000 67,528
Miami, Florida, Refunding Revenue, General
Obligation (FGIC Insured) (c) 4.70 7/01/2004 2003 @ 102 AAA 200,000 195,332
______________________
$2,635,000 2,573,434
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - INTERMEDIATE
NOTES TO PORTFOLIO
August 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), except for zero coupon
bonds which are redeemable at prices based on the issue price plus the
amount of original issue discount accreted to the redemption date plus,
if applicable, some premium, the amount of which will decline in
subsequent years. In addition, certain bonds are sometimes redeemable
in whole or in part other than by operation of the stated redemption
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 August 31, 1995.
(c) Insurance has been obtained by the Bond issuer.
(d) The Trust consists of nine obligations of issuers located in Florida.
Three of the Bonds in the Trust, aggregating approximately 19% of the
aggregate principal amount of the Bonds in the Trust, are general
obligations of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Health Care, 1; Utility, 2;
Electric, 1; and Miscellaneous, 2. Approximately 20% of the aggregate
principal amount of the Bonds in the Trust consist of utility 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
69%. The two largest such issues represent approximately 19% each.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $125,479 120,537
Expenses:
Trustee's fees and related expenses (4,287) (3,777)
Evaluator's fees (879) (293)
Supervisory fees (749) (702)
______________________
Investment income - net 119,564 115,765
Net gain (loss) on investments:
Net realized gain (loss) (19,680) (1,159)
Change in unrealized appreciation
or depreciation 98,554 (161,253)
______________________
78,874 (162,412)
______________________
Net increase (decrease) in net assets
resulting from operations $198,438 (46,647)
======================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $119,564 $115,765
Net realized gain (loss) on investments (19,680) (1,159)
Change in unrealized appreciation or
depreciation on investments 98,554 (161,253)
______________________
198,438 (46,647)
Distributions to unit holders:
Investment income - net (119,719) (109,709)
Principal from investment transactions - -
_______________________
(119,719) (109,709)
Unit redemptions (290 and 14 in 1995 and
1994, respectively):
Principal portion (259,923) (12,534)
Net interest accrued (1,534) (26)
_______________________
(261,457) (12,560)
_______________________
Total increase (decrease) in net assets (182,738) (168,916)
Net assets:
At the beginning of the period 2,761,877 2,930,793
________________________
At the end of the period (including
distributable funds applicable to
Trust units of $5,705 and $7,236 at
August 31, 1995 and 1994, respectively) $2,579,139 2,761,877
========================
Trust units outstanding at the end of
the period 2,759 3,049
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - 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, September 29, 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 $1.11 per Unit. 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 $879 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 August 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(62,699)
Unrealized appreciation
________
$(62,699)
========
</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
Purchased Interest as described below plus a sales charge of 3.9% of the
public offering price which is equivalent to approximately 4.058% of the net
amount invested.
Purchased interest -
Purchased interest represents the accrued interest on the underlying bonds as
of the Date of Deposit and the net interest accrued to October 6, 1993, the
first settlement date; such amounts totaled $10,206 and $2,552, respectively,
resulting in purchased interest of $12,758 on the original 3,063 units of the
trust. Purchased interest was included in the original public offering price
paid by unit holders and will not be distributed to unitholders until the
termination of the Trust or until units are redeemed. Purchased interest on
2,759 units at August 31, 1995, totaling $11,492, represents a liability of
the Trust.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly. Such
income distributions per unit, on an accrual basis, totaled $40.90 and $35.02
during the periods ended August 31, 1995 and 1994, respectively. The initial
distribution to unit holders, $1.02 per unit, was paid on October 31, 1993 to
all unit holders of record on October 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $42.97 39.41
Expenses (2.03) (1.56)
______________________
Investment income - net 40.94 37.85
Distributions to unit holders:
Investment income - net (40.90) (35.85)*
Principal from investment transactions - -
Net gain (loss) on investments 28.94 (53.01)
______________________
Total increase (decrease) in net assets 28.98 (51.01)
Net assets:
Beginning of the period 905.83 956.84
______________________
End of the period $934.81 905.83
======================
</TABLE>
[FN]
*Includes $.83 payable to unit holders representing net interest accrued to
October 6, 1993, the first settlement date of the Trust.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 7 - 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
2,862 UNITS
PROSPECTUS
Part One
Dated December 20, 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 20 (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 November 16, 1995, each Unit represented
a 1/2,862 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, plus Purchased Interest, 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 November 16, 1995, the
Public Offering Price per Unit was $966.68 plus net interest accrued to date
of settlement (three business days after such date) of $.13 (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 was 5.16% per annum on November 16,
1995. Estimated Long-Term Return to Unit holders was 4.99% per annum on
November 16, 1995. 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 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 $2,755,000
Number of Units 2,862
Fractional Undivided Interest in the Trust per Unit 1/2,862
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,581,589
Aggregate Value of Bonds per Unit $902.02
Purchased Interest $24,575
Purchased Interest per Unit $8.59
Sales Charge 6.157% (5.8% of Public Offering Price) $56.07
Public Offering Price per Unit $966.68*
Redemption Price and Sponsor's Repurchase Price per Unit
($56.07 less than the Public Offering Price per Unit) $910.61*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $568,000
</TABLE>
Date Trust Established September 29, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $852 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
PER UNIT INFORMATION
<S> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $51.76
Less: Estimated Annual Expense $1.90
Estimated Net Annual Interest Income $49.86
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $49.86
Divided by 12 $4.16
Estimated Daily Rate of Net Interest Accrual $.1385
Estimated Current Return Based on Public
Offering Price 5.16%
Estimated Long-Term Return Based on Public
Offering Price 4.99%
</TABLE>
Trustee's Annual Fee: $.96 per Unit.
Computation Dates: Fifteenth day of the month.
Distribution Dates: Last day of the month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 199, The First Trust of Insured Municipal
Bonds - Multi-State, Missouri Trust, Series 20
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 199, The First
Trust of Insured Municipal Bonds - Multi-State, Missouri Trust, Series 20 as
of August 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, September 29, 1993, to August 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 August 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 199, The First Trust of Insured Municipal Bonds - Multi-State, Missouri
Trust, Series 20 at August 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, September 29, 1993, to August 31, 1994, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,704,558)
(Note 1) $2,535,315
Accrued interest 20,074
Cash 3,278
__________
2,558,667
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Purchased interest 24,575
__________
Net assets, applicable to 2,862 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,704,558
Net unrealized depreciation (Note 2) (169,243)
Distributable funds (deficit) (1,223)
__________
$2,534,092
==========
Net asset value per unit $885.43
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
PORTFOLIO - See notes to portfolio.
August 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>
Mehlville R-9 School District, St. Louis County,
Missouri, General Obligation School Building 2003 @ 102
and Refunding (MBIA Insured) (c) 6.00 % 2/15/2013 2010 @ 100 S.F. AAA $500,000 506,805
Missouri State, Health and Educational Facilities
Authority, Health Facilities Revenue, Health 2002 @ 102
Midwest, Series B (MBIA Insured) (c) 6.25 2/15/2022 2013 @ 100 S.F. AAA 500,000 509,360
SSM Health Care Obligated Group, Health Facilities
Refunding Revenue, Series 1992AA, Health and
Educational Facilities Authority of the State
of Missouri, Health Facilities Refunding
Revenue (SSM Health Care), Series 1992AA 2002 @ 102
(MBIA Insured) (c) 6.25 6/01/2016 2011 @ 100 S.F. AAA 500,000 510,475
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) 9/01/2022 AAA 290,000 60,076
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 550,000 561,798
School District of Washington (Missouri),
Public Building Corporation, Insured
Leasehold Refunding Revenue, Series 1993
(School District of Washington, Missouri
Capital Improvements Project) (FGIC 2001 @ 102
Insured) (c) 5.125 2/15/2012 2009 @ 100 S.F. AAA 415,000 386,801
______________________
$2,755,000 2,535,315
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
NOTES TO PORTFOLIO
August 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 August 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, 1993 at a price of 13.883% of their original
principal amount.
(e) The Trust consists of six obligations of issuers located in Missouri.
One of the Bonds in the Trust, representing approximately 18% 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, 3; Electric, 1;
and University and School, 1. Approximately 47% and 20% of the
aggregate principal amount of the Bonds consist of health care revenue
bonds and electric revenue bonds, respectively. Each Bond issue
represents 10% or more of the aggregate principal amount of the Bonds in
the Trust. The largest such issue represents approximately 20%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $148,144 137,542
Expenses:
Trustee's fees and related expenses (4,176) (3,279)
Evaluator's fees (852) (642)
Supervisory fees (718) (664)
________________________
Investment income - net 142,398 132,957
Net gain (loss) on investments:
Net realized gain (loss) - (2,490)
Change in unrealized appreciation or
depreciation 61,691 (230,934)
________________________
61,691 (233,424)
________________________
Net increase (decrease) in net assets
resulting from operations $204,089 (100,467)
========================
</TABLE>
<TABLE>
<FN>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $142,398 $132,957
Net realized gain (loss) on investments - (2,490)
Change in unrealized appreciation or
depreciation on investments 61,691 (230,934)
__________________________
204,089 (100,467)
Distributions to unit holders:
Investment income - net (142,498) (126,189)
Principal from investment transactions - -
__________________________
(142,498) (126,189)
Unit redemptions (10 and 88 in 1995
and 1994, respectively):
Principal portion (8,524) (80,970)
Net interest accrued (85) (816)
__________________________
(8,609) (81,786)
__________________________
Total increase (decrease) in net assets 52,982 (308,442)
Net assets:
At the beginning of the period 2,481,110 2,789,552
__________________________
At the end of the period (including
distributable funds (deficit) applicable
to Trust units of, ($1,223), and $7,486 at
August 31, 1995 and 1994, respectively) $2,534,092 2,481,110
==========================
Trust units outstanding at the end of the
period 2,862 2,872
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
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, September 29, 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 $.96 per unit. 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 $852 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 August 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(169,243)
Unrealized appreciation -
_________
$(169,243)
=========
</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
Purchased Interest as described below, plus a sales charge of 4.9% of the
public offering price which is equivalent to approximately 5.152% of the net
amount invested.
Purchased interest -
Purchased interest represents a portion of the accrued interest on the
underlying bonds as of the Date of Deposit and a portion of the net interest
accrued to October 6, 1993, the first settlement date; such amounts totaled
$28,997 and $2,894, respectively. On October 6, 1993 the trustee distributed
$6,474 to the Sponsor, resulting in Purchased Interest of $25,417 on the
original 2,960 units of the Trust. Purchased interest was included in the
original public offering price paid by unit holders and will not be
distributed to unitholders until the termination of the Trust or until units
are redeemed. Purchased interest on 2,862 units at August 31, 1995, totaling
$24,575, represents a liability of the Trust.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly. Such
income distributions per unit, on an accrual basis, totaled $49.68 and $42.64
during the periods ended August 31, 1995 and 1994, respectively. The initial
distribution to unit holders, $1.24 per unit, was paid on October 31, 1993 to
all unit holders of record on October 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $51.65 47.59
Expenses (2.00) (1.59)
________________________
Investment income - net 49.65 46.00
Distributions to unit holders:
Investment income - net (49.68) (43.62)*
Principal from investment transactions - -
Net gain (loss) on investments 21.56 (80.89)
________________________
Total increase (decrease) in net assets 21.53 (78.51)
Net assets:
Beginning of the period 863.90 942.41
________________________
End of the period $885.43 863.90
========================
</TABLE>
[FN]
*Includes $.98 payable to unit holders representing net interest accrued to
October 6, 1993, the first settlement date of the Trust.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 20
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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
2,647 UNITS
PROSPECTUS
Part One
Dated December 20, 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 New Jersey State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, New Jersey Trust,
Series 9 - Long 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 New Jersey, 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 New
Jersey State and local income taxes under existing law. At November 16, 1995,
each Unit represented a 1/2,647 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, plus Purchased Interest, divided by the
number of Units outstanding, plus a sales charge of 4.70% of the Public
Offering Price (4.932% of the amount invested). At November 16, 1995, the
Public Offering Price per Unit was $982.77 plus net interest accrued to date
of settlement (three business days after such date) of $.11 (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 was 4.16% per annum on November 16,
1995. Estimated Long-Term Return to Unit holders was 3.98% per annum on
November 16, 1995. 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 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 $2,525,000
Number of Units 2,647
Fractional Undivided Interest in the Trust per Unit 1/2,647
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,471,826
Aggregate Value of Bonds per Unit $933.82
Purchased Interest $7,302
Purchased Interest per Unit $2.76
Sales Charge 4.932% (4.70% of Public Offering Price) $46.19
Public Offering Price per Unit $982.77*
Redemption Price and Sponsor's Repurchase Price per Unit
($46.19 less than the Public Offering Price per Unit) $936.58*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $558,000
</TABLE>
Date Trust Established September 29, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $837 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
PER UNIT INFORMATION
<S> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $43.12
Less: Estimated Annual Expense
Excluding Insurance $2.11
Annual Premium on Portfolio Insurance $.14
Estimated Net Annual Interest Income $40.87
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $40.87
Divided by 12 $3.41
Estimated Daily Rate of Net Interest Accrual $.1135
Estimated Current Return Based on Public
Offering Price 4.16%
Estimated Long-Term Return Based on Public
Offering Price 3.98%
</TABLE>
Trustee's Annual Fee: $1.18 per Unit.
Computation Dates: Fifteenth day of the month.
Distribution Dates: Last day of the month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 199, The First Trust of Insured Municipal
Bonds - Multi-State, New Jersey Trust, Series 9 -
Long Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 199, The First
Trust of Insured Municipal Bonds - Multi-State, New Jersey Trust, Series 9 -
Long Intermediate as of August 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, September 29, 1993, to August 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 August 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 199, The First Trust of Insured Municipal Bonds - Multi-State, New
Jersey Trust, Series 9 - Long Intermediate at August 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, September 29, 1993, to August 31,
1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,519,404)
(Notes 1 and 3) $2,439,658
Accrued interest 43,930
__________
2,483,588
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Purchased interest 7,302
Cash overdraft 31,068
__________
38,370
__________
Net assets, applicable to 2,647 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,519,404
Net unrealized depreciation (Note 2) (79,746)
Distributable funds 5,560
__________
$2,445,218
==========
Net asset value per unit $923.77
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
PORTFOLIO - See notes to portfolio.
August 31, 1995
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption and Poor's Principal Market
Name of issuer and title of bond(d) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
The Board of Education of the City of Camden
(in the County of Camden, New Jersey),
Refunding Series 1993 (General Obligation)
(FSA Insured) (c) 4.70 % 10/01/2003 AAA $115,000 113,629
County of Cumberland, New Jersey, General
Improvement (Unlimited Tax) (General
Obligation) (FSA Insured) (c) 4.60 9/15/2004 2001 @ 102 AAA 380,000 369,599
Township of Dover, in the County of Ocean,
New Jersey, General Improvement (Golf Utility),
Series 1993-B (Unlimited Tax) (General
Obligation) (AMBAC Insured) (c) 4.375 9/15/2005 AAA 250,000 235,723
Township of Manchester, in the County of Ocean,
New Jersey, General Obligation Refunding,
Series 1993 (MBIA Insured) (c) 4.65 10/01/2003 2002 @ 102 AAA 55,000 53,272
Township of Montclair in the County of Essex,
New Jersey, General Obligation Refunding 4.30 1/01/2003 AA 375,000 362,400
Old Bridge Municipal Utilities Authority
(Middlesex County, New Jersey), Revenue 4.70 11/01/2004 2003 @ 101 AAA 120,000 117,547
Refunding (1993 Series B) (AMBAC Insured) (c) 4.80 11/01/2005 2003 @ 101 AAA 210,000 204,880
The Borough of Ringwood (County of Passaic),
New Jersey, General Refunding (Series 1993)
(General Obligation) (MBIA Insured) (c) 4.30 1/01/2003 AAA 185,000 178,451
Borough of South Plainfield in the County of
Middlesex (General Obligation), New Jersey
(AMBAC Insured) (c) 4.45 9/01/2004 2003 @ 101 AAA 435,000 418,457
County of Warren, New Jersey, General Improvement
of 1993 (Unlimited Tax) (General Obligation)
(AMBAC Insured) (c) 4.65 9/15/2005 2003 @ 101 AAA 400,000 385,700
______________________
$2,525,000 2,439,658
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
NOTES TO PORTFOLIO
August 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). In addition, certain bonds
are sometimes redeemable in whole or in part other than by operation of
the stated redemption 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 August 31, 1995.
(c) Insurance has been obtained by the Bond issuer.
(d) The Trust consists of nine obligations of issuers located in New Jersey.
Eight of the Bond issues in the Trust, aggregating approximately 87% of
the aggregate principal amount of the Bonds in the Trust, are general
obligations of a governmental entity. The remaining issue is a utility
revenue bond payable from the income of a specific project or authority.
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
76%. The largest such issue represents approximately 17%.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S>
<C> <C>
Interest income $120,432 116,274
Expenses:
Trustee's fees and related expenses (4,426) (3,385)
Insurance expense (375) (344)
Evaluator's fees (837) (143)
Supervisory fees (712) (669)
______________________
Investment income - net 114,082 111,733
Net gain (loss) on investments:
Net realized gain (loss) (27,497) (1,803)
Change in unrealized appreciation
or depreciation 84,587 (164,333)
______________________
57,090 (166,136)
______________________
Net increase (decrease) in net assets
resulting from operations $171,172 (54,403)
======================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $114,082 111,733
Net realized gain (loss) on investments (27,497) (1,803)
Change in unrealized appreciation or
depreciation on investments 84,587 (164,333)
________________________
171,172 (54,403)
Distributions to unit holders:
Investment income - net (114,471) (105,162)
Principal from investment transactions - -
________________________
(114,471) (105,162)
Unit redemptions (250 and 24 in 1995
and 1994, respectively):
Principal portion (214,337) (21,298)
Net interest accrued (684) (26)
________________________
(215,021) (21,324)
________________________
Total increase (decrease) in net assets (158,320) (180,889)
Net assets:
At the beginning of the period 2,603,538 2,784,427
_________________________
At the end of the period (including
distributable funds applicable to
Trust units of $5,560 and $3,443 at
August 31, 1995 and 1994, respectively) $2,445,218 2,603,538
=========================
Trust units outstanding at the end of
the period 2,647 2,897
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG 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, September 29, 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 obtained 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 $1.18 per Unit. 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 $837 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 August 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(79,746)
Unrealized appreciation -
________
$(79,746)
========
</TABLE>
<PAGE>
3. Insurance
The issuers of eight 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 the other bond in its portfolio. While insurance
coverage acquired by an issuer of bonds continues in force so long as the
bonds are outstanding and the insurer remains in business, insurance coverage
acquired by the Trust is effective only while the bonds are owned by the Trust
and, in the event of disposition of such a bond by the Trustee, the insurance
terminates as to such bond on the date of disposition. Pursuant to an
irrevocable commitment of Financial Guaranty Insurance Company, in the event
of a sale of a bond from the portfolio which is covered by the insurance
acquired by the Trust, the Trustee has the right to obtain permanent insurance
for such bond upon the payment of a single predetermined insurance premium
from the proceeds of the sale of such bond. Annual insurance premiums payable
by the Trust in future years, assuming no change in the portfolio, would be
$375.
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
Purchased Interest as described below, plus a sales charge of 4.4% of the
public offering price which is equivalent to approximately 4.603% of the net
amount invested.
Purchased Interest -
Purchased interest represents the accrued interest on the underlying bonds as
of the Date of Deposit and the net interest accrued to October 6, 1993, the
first settlement date; such amounts totaled $5,692 and $2,366, respectively,
resulting in Purchased interest of $8,058 on the original 2,921 units of the
Trust. Purchased interest was included in the original public offering price
paid by unit holders and will not be distributed to unitholders until the
termination of the Trust or until units are redeemed. Purchased interest on
2,647 units at August 31, 1995, totaling $7,302, represents a liability of the
Trust.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly. Such
income distributions per unit, on an accrual basis, totaled $41.10 and $35.22
during the periods ended August 31, 1995 and 1994, respectively. The initial
distribution to unit holders, $1.02 per unit, was paid on October 31, 1993 to
all unit holders of record on October 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $43.46 39.88
Expenses (2.29) (1.56)
______________________
Investment income - net 41.17 38.32
Distributions to unit holders:
Investment income - net (41.10) (36.02)*
Principal from investment transactions - -
Net gain (loss) on investments 25.00 (56.84)
______________________
Total increase (decrease) in net assets 25.07 (54.54)
Net assets:
Beginning of the period 898.70 953.24
______________________
End of the period $923.77 898.70
======================
</TABLE>
[FN]
*Includes $.81 payable to unit holders representing net interest accrued to
October 6, 1993, the first settlement date of the Trust.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW JERSEY TRUST, SERIES 9 - LONG 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
3,021 UNITS
PROSPECTUS
Part One
Dated December 20, 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 50 (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 November 16, 1995, each Unit
represented a 1/3,021 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, plus Purchased Interest, 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 November 16, 1995, the
Public Offering Price per Unit was $959.16 plus net interest accrued to date
of settlement (three business days after such date) of $.13 (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 was 5.09% per annum on November 16,
1995. Estimated Long-Term Return to Unit holders was 5.21% per annum on
November 16, 1995. 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 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 $2,940,000
Number of Units 3,021
Fractional Undivided Interest in the Trust per Unit 1/3,021
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,705,626
Aggregate Value of Bonds per Unit $895.61
Purchased Interest $23,916
Purchased Interest per Unit $7.92
Sales Charge 6.157% (5.8% of Public Offering Price) $55.63
Public Offering Price per Unit $959.16*
Redemption Price and Sponsor's Repurchase Price per Unit
($55.63 less than the Public Offering Price per Unit) $903.53*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $597,000
</TABLE>
Date Trust Established September 29, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $896 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 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
PER UNIT INFORMATION
<S> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $50.77
Less: Estimated Annual Expense Excluding Insurance $1.93
Estimated Net Annual Interest Income $48.84
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $48.84
Divided by 12 $4.07
Estimated Daily Rate of Net Interest Accrual $.1357
Estimated Current Return Based on Public
Offering Price 5.09%
Estimated Long-Term Return Based on Public
Offering Price 5.21%
</TABLE>
Trustee's Annual Fee: $.99 per Unit.
Computation Dates: Fifteenth day of the month.
Distribution Dates: Last day of the month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 199, The First Trust of Insured Municipal
Bonds - Multi-State, Pennsylvania Trust, Series 50
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 199, The First
Trust of Insured Municipal Bonds - Multi-State, Pennsylvania Trust, Series 50
as of August 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, September 29, 1993, to August 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 August 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 199, The First Trust of Insured Municipal Bonds - Multi-State,
Pennsylvania Trust, Series 50 at August 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, September 29, 1993, to August 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,843,847)
(Note 1) $2,607,373
Accrued interest 55,288
__________
2,662,661
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Purchased interest 23,916
Cash overdraft 23,889
__________
47,805
__________
Net assets, applicable to 3,021 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $2,843,847
Net unrealized depreciation (Note 2) (236,474)
Distributable funds 7,483
_________
$2,614,856
==========
Net asset value per unit $865.56
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
PORTFOLIO - See notes to portfolio.
August 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>
Allegheny County Hospital Development Authority
(Pennsylvania), Health Center Revenue Refunding,
Series 1992B (Presbyterian University Health 2002 @ 102
System, Inc. Project) (MBIA Insured) (c) (e) 6.00 % 11/01/2023 2013 @ 100 S.F. AAA $250,000 245,642
Beaver County Industrial Development Authority,
Pollution Control Revenue Refunding, 1993
Series A (Ohio Edison Company Mansfield Project)
(AMBAC Insured) (c) 5.45 9/15/2033 2003 @ 102 AAA 500,000 452,815
Berks County Municipal Authority, Berks County,
Pennsylvania, College Revenue, Series of 1993 2003 @ 100
(Albright College) (Capital Guaranty Insured) (c) 5.30 10/01/2018 2014 @ 100 S.F. AAA 475,000 430,982
Derry Area School District (Westmoreland County,
Pennsylvania), General Obligation, Refunding 2003 @ 100
Series of 1993 (MBIA Insured) (c) 5.50 2/01/2021 2015 @ 100 S.F. AAA 500,000 466,350
Lawrence County Industrial Development Authority,
Pollution Control Revenue Refunding, 1993
Series A (Pennsylvania Power Company New Castle
Project) (FSA Insured) (c) 5.40 9/15/2017 2003 @ 102 AAA 400,000 369,496
Montgomery County Higher Education and Health
Authority (Pennsylvania), Hospital Revenue,
Series A of 1993 (Abington Memorial Hospital) 2003 @ 102
(AMBAC Insured) (c) 6.00 6/01/2022 2017 @ 100 S.F. AAA 230,000 223,127
Montour School District (Allegheny County,
Pennsylvania), General Obligation, Series B
of 1993 (MBIA Insured) (c) -(d) 1/01/2023 AAA 175,000 31,810
Westmoreland County Airport Authority,
Westmoreland County, Pennsylvania, Guaranteed 2003 @ 102
Revenue, Series of 1993 (AMBAC Insured) (c) 5.625 9/01/2023 2013 @ 100 S.F. AAA 410,000 387,151
______________________
$2,940,000 2,607,373
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
NOTES TO PORTFOLIO
August 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 August 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) These Bonds were issued at an original issue discount on November 1,
1992 at a price of 94.636% of their original principal amount.
(f) The Trust consists of eight obligations of issuers located in
Pennsylvania. Two of the Bonds in the Trust, aggregating 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 & School, 1;
Electric, 2; Health Care, 2; and Transportation, 1. Approximately 31%
of the aggregate principal amount of the Bonds consist of electric
revenue bonds. Each of five Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust or a total of
approximately 78%. The two largest such issues represent approximately
17% each.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $154,957 143,786
Expenses:
Trustee's fees and related expenses (4,467) (3,532)
Evaluator's fees (896) (712)
Supervisory fees (766) (702)
_____________________
Investment income - net 148,828 138,840
Net gain (loss) on investments:
Net realized gain (loss) (4,962) -
Change in unrealized appreciation
or depreciation 97,967 (334,441)
_____________________
93,005 (334,441)
_____________________
Net increase (decrease) in net assets
resulting from operations $241,833 (195,601)
=====================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Net increase (decrease) in net assets resulting
from operations:
Investment income - net $148,828 138,840
Net realized gain (loss) on investments (4,962) -
Change in unrealized appreciation
or depreciation on investments 97,967 (334,441)
________________________
241,833 (195,601)
Distributions to unit holders:
Investment income - net (149,060) (131,757)
Principal from investment transactions (3,137) -
________________________
(152,197) (131,757)
Unit redemptions (41 and 2 in 1995
and 1994, respectively):
Principal portion (35,189) (1,663)
Net interest accrued (181) (7)
________________________
(35,370) (1,670)
________________________
Total increase (decrease) in net assets 54,266 (329,028)
Net assets:
At the beginning of the period 2,560,590 2,889,618
________________________
At the end of the period (including
distributable funds applicable to
Trust units of $7,483 and $5,413
at August 31, 1995 and 1994,
respectively) $2,614,856 2,560,590
========================
Trust units outstanding at the end of the period 3,021 3,062
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
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, September 29, 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 $.99 per Unit. 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 $896 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 August 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(236,474)
Unrealized appreciation -
_________
$(236,474)
=========
</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
Purchased Interest as described below, plus a sales charge of 4.9% of the
public offering price which is equivalent to approximately 5.152% of the net
amount invested.
Purchased Interest -
Purchased interest represents the accrued interest on the underlying bonds as
of the Date of Deposit and the net interest accrued to October 6, 1993, the
first settlement date; such amounts totaled $21,224 and $3,032, respectively,
resulting in purchased interest of $24,256 on the original 3,064 units of the
Trust. Purchased interest was included in the original public offering price
paid by unit holders and will not be distributed to unit holders until the
termination of the Trust or until units are redeemed. Purchased interest on
3,021 units at August 31, 1995, totaling $23,916, represents a liability of
the Trust.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly. Such
income distributions per unit, on an accrual basis, totaled $48.92 and $42.02
during the periods ended August 31, 1995 and 1994, respectively. The initial
distribution to unit holders, $1.22 per unit, was paid on October 31, 1993 to
all unit holders of record on October 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $50.93 $46.94
Expenses (2.01) (1.61)
_______________________
Investment income - net 48.92 45.33
Distributions to unit holders:
Investment income - net (48.92) (43.01)*
Principal from investment transactions (1.03) -
Net gain (loss) on investments 30.34 (109.16)
_______________________
Total increase (decrease) in net assets 29.31 (106.84)
Net assets:
Beginning of the period 836.25 943.09
_______________________
End of the period $865.56 836.25
=======================
</TABLE>
[FN]
*Includes $.99 payable to unit holders representing net interest accrued to
October 6, 1993, the first settlement date of the Trust.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
PENNSYLVANIA TRUST, SERIES 50
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 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
1,945 UNITS
PROSPECTUS
Part One
Dated December 20, 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 South Carolina State and local
income taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, South Carolina Trust, Series 1 - 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 South Carolina, 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 South Carolina State and local income taxes under
existing law. At November 16, 1995, each Unit represented a 1/1,945 undivided
interest in the principal and net income of the Trust (see "The Fund" in Part
Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust, plus Purchased Interest, divided by the
number of Units outstanding, plus a sales charge of 4.5% of the Public
Offering Price (4.712% of the amount invested). At November 16, 1995, the
Public Offering Price per Unit was $837.91 plus net interest accrued to date
of settlement (three business days after such date) of $.11 (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 was 4.87% per annum on November 16,
1995. Estimated Long-Term Return to Unit holders was 3.83% per annum on
November 16, 1995. 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 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 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 $1,850,000
Number of Units 1,945
Fractional Undivided Interest in the Trust per Unit 1/1,945
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,548,912
Aggregate Value of Bonds per Unit $796.36
Purchased Interest $7,460
Purchased Interest per Unit $3.84
Sales Charge 4.712% (4.5% of Public Offering Price) $37.71
Public Offering Price per Unit $837.91*
Redemption Price and Sponsor's Repurchase Price per Unit
($37.71 less than the Public Offering Price per Unit) $800.20*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $561,000
</TABLE>
Date Trust Established September 29, 1993
Mandatory Termination Date December 31, 2042
Evaluator's Fee: $842 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 Maximum of $.25
affiliate 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 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
SUMMARY OF ESSENTIAL INFORMATION AS OF NOVEMBER 16, 1995
Sponsor: Nike Securities, L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank (National Association)
<TABLE>
<CAPTION>
PER UNIT INFORMATION
<S> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $42.87
Less: Estimated Annual Expense $2.07
Estimated Net Annual Interest Income $40.80
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $40.80
Divided by 12 $3.40
Estimated Daily Rate of Net Interest Accrual $.1133
Estimated Current Return Based on Public
Offering Price 4.87%
Estimated Long-Term Return Based on Public
Offering Price 3.83%
</TABLE>
Trustee's Annual Fee: $1.13 per Unit.
Computation Dates: Fifteenth day of the month.
Distribution Dates: Last day of the month.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 199, The First Trust Advantage,
South Carolina Trust, Series 1 - Intermediate
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 199, The First
Trust Advantage, South Carolina Trust, Series 1 - Intermediate as of August
31, 1995, and the related statements of operations and changes in net assets
for the period from the Date of Deposit, September 29, 1993, to August 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 August 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 199, The First Trust Advantage, South Carolina Trust, Series 1 -
Intermediate at August 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, September 29, 1993, to August 31, 1994, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 10, 1995
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,918,102)
(Note 1) $1,867,516
Accrued interest 24,011
__________
1,891,527
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Cash overdraft 11,269
Purchased interest 7,721
Accrued liabilities 208
__________
19,198
__________
Net assets, applicable to 2,013 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,918,102
Net unrealized depreciation (Note 2) (50,586)
Distributable funds 4,813
__________
$1,872,329
==========
Net asset value per unit $930.12
==========
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
PORTFOLIO - See notes to portfolio.
August 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>
City of Charleston, South Carolina, City of
Charleston Public Facilities Corporation,
Certificates of Participation (Public
Improvements Project), Series 1993 (AMBAC
Insured) 4.60% 9/01/2003 AAA $190,000 187,130
Horry County, South Carolina, General Obligation
Refunding, Series 1993B (Unlimited Tax) (MBIA
Insured) 4.55 12/01/2004 AAA 405,000 392,206
City of Newberry, South Carolina, Combined Public
Utility System Refunding Revenue, Series 1993A
(AMBAC Insured) 4.30 10/01/2004 2003 @ 101 AAA 235,000 222,624
Richland County, South Carolina, Hospital Revenue
(Richland Memorial Hospital), Series 1993B
(MBIA Insured) 4.75 6/01/2002 AAA 290,000 291,139
South Carolina Public Service Authority, Revenue,
1993 Refunding Series C (AMBAC Insured) 4.50 1/01/2003 AAA 390,000 380,944
York County, South Carolina, General Obligation
of 1993 (Unlimited Tax) 4.40 6/01/2002 2001 @ 102 A- 405,000 393,473
______________________
$1,915,000 1,867,516
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
NOTES TO PORTFOLIO
August 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). In addition, certain bonds
are sometimes redeemable in whole or in part other than by operation of
the stated redemption 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 August 31, 1995.
(c) The Trust consists of six obligations of issuers located in South
Carolina. Two of the Bonds in the Trust, aggregating approximately 42%
of the aggregate principal amount of the Bonds in the Trust, are general
obligations of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Utility 1; Health Care, 1; and
Miscellaneous, 2. 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 90%. The two largest such issues represent approximately
21% each.
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $95,307 116,592
Expenses:
Trustee's fees and related expenses (3,363) (3,020)
Evaluator's fees (842) (37)
Supervisory fees (595) (674)
_________________________
Investment income - net 90,507 112,861
Net gain (loss) on investments:
Net realized gain (loss) (38,742) (40,751)
Change in unrealized appreciation or
depreciation 77,020 (127,606)
_________________________
38,278 (168,357)
_________________________
Net increase (decrease) in net assets
resulting from operations $128,785 (55,496)
=========================
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - INTERMEDIATE
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Net increase (decrease) in net assets
resulting from operations:
Investment income - net $90,507 112,861
Net realized gain (loss) on investments (38,742) (40,751)
Change in unrealized appreciation or
depreciation on investments 77,020 (127,606)
_________________________
128,785 (55,496)
Distributions to unit holders:
Investment income - net (91,035) (106,160)
Principal from investment transactions (2,371) -
- -
_________________________
(93,406) (106,160)
Unit redemptions (365 and 559
in 1995 and 1994, respectively):
Principal portion (318,818) (490,502)
Net interest accrued (1,697) (1,579)
_________________________
(320,515) (492,081)
_________________________
Total increase (decrease) in net assets (285,136) (653,737)
Net assets:
At the beginning of the period 2,157,465 2,811,202
_________________________
At the end of the period (including
distributable funds applicable to
Trust units of $4,813 and $5,076
at August 31, 1995 and 1994,
respectively) $1,872,329 2,157,465
=========================
Trust units outstanding at the end of
the period 2,013 2,378
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - 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, September 29, 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 $1.13 per Unit. 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 $842 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 August 31, 1995 follows:
<TABLE>
<S> <C>
Unrealized depreciation $(50,586)
Unrealized appreciation -
________
$(50,586)
========
</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
Purchased Interest as described below, plus a sales charge of 3.9% of the
public offering price which is equivalent to approximately 4.058% of the net
amount invested.
Purchased Interest -
Purchased interest represents the accrued interest on the underlying bonds as
of the Date of Deposit and the net interest accrued to October 6, 1993, the
first settlement date; such amounts totaled $8,867 and $2,398, respectively,
resulting in purchased interest of $11,265 on the original 2,937 units of the
trust. Purchased interest was included in the original public offering price
paid by unit holders and will not be distributed to unit holders until the
termination of the Trust or until units are redeemed. Purchased interest on
2,013 units at August 31, 1995, totaling $7,721, represents a liability of the
Trust.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly. Such
income distributions per unit, on an accrual basis, totaled $41.15 and $35.33
during the periods ended August 31, 1995 and 1994, respectively. The initial
distribution to unit holders, $1.03 per unit, was paid on October 31, 1993 to
all unit holders of record on October 15, 1993.
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each period -
<TABLE>
<CAPTION>
Period from
the Date
of Deposit,
Sept. 29,
Year ended 1993 to
Aug. 31, Aug. 31,
1995 1994
<S> <C> <C>
Interest income $43.31 $40.26
Expenses (2.18) (1.29)
_______________________
Investment income - net 41.13 38.97
Distributions to unit holders:
Investment income - net (41.15) (36.15)*
Principal from investment transactions (1.11) -
Net gain (loss) on investments 23.99 (52.73)
_______________________
Total increase (decrease) in net assets 22.86 (49.91)
Net assets:
Beginning of the period 907.26 957.17
_______________________
End of the period $930.12 907.26
=======================
</TABLE>
[FN]
*Includes $.82 payable to unit holders representing net interest accrued to
October 6, 1993, the first settlement date of the Trust.
<PAGE>
THE FIRST TRUST COMBINED SERIES 199
THE FIRST TRUST ADVANTAGE
SOUTH CAROLINA TRUST, SERIES 1 - 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
Florida Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated 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 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.
Florida Tax Status of Unit Holders
The Bonds were accompanied by opinions of Bond Counsel to the
respective issuers thereof to the effect that the Bonds were exempt
from the Florida intangibles tax. Neither the Sponsor nor its
counsel have independently reviewed such opinions or examined
the Bonds to be deposited in and held by a Florida Trust and have
assumed the correctness as of the date of deposit of the opinions
of Bond Counsel.
At the time of the closing for each Florida Trust, Chapman and
Cutler, Special Counsel to the Fund for Florida tax matters, rendered
an opinion under then existing Florida income tax law applicable
to taxpayers whose income is subject to Florida income taxation
substantially to the effect that:
Neither the Florida Trust nor Non-Corporate Unit holders will
be subject to the Florida income tax imposed by Chapter 220, Florida
Statutes. Any amounts paid to a Florida Trust or Non-Corporate
Unit Holders under an insurance policy issued to a Florida Trust,
the issuers, the underwriters, or the Sponsor thereof, or others,
which represent maturing interest on defaulted obligations held
by the Trustee will not be subject to the Florida income tax imposed
by Chapter 220, Florida Statutes provided that such amounts paid
are not subject to federal income tax.
Corporate Unit holders will be subject to Florida income or franchise
taxation under Chapter 220, Florida Statutes (a) on interest received
by a Trust, (b) on payments of interest pursuant to any insurance
policy, (c) on gain realized when Bonds are sold, redeemed or
paid at maturity or when insurance payments with respect to principal
are received by a Trust and (d) on gain on the sale or redemption
of Units, to the extent allocable to Florida as "adjusted federal
income." Corporate Unit holders that have a commercial domicile
in Florida will also be subject to Florida income or franchise
taxation on 100 percent of the items of income described in clauses
(a) through (d) of the immediately preceding sentence to the extent
that such income constitutes "nonbusiness income."
Page 4
Even if interest on indebtedness incurred or continued by a Unit
holder to purchase Units in a Trust is not deductible for Federal
income tax purposes, it will reduce interest income on the Bonds
which is reportable by Corporate Unit holders for Florida income
tax purposes.
Trust Units held by a Florida resident will be includible in the
resident's estate for Florida estate tax purposes, but if such
estate is not subject to the Federal estate tax, the estate will
not be subject to the Florida estate tax. The Florida estate tax
is limited to the amount of the credit for state death taxes provided
for in section 2011 of the Code, less estate taxes paid to states
other than Florida.
Neither the Bonds nor the Units will be subject to the Florida
ad valorem tax, the Florida intangible personal property tax or
Florida sales or use 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
Population. In 1980, Florida was the seventh most populous state
in the United States. The State has grown dramatically since then
and as of April 1, 1993 ranks fourth with an estimated population
of 13.4 million. Florida's attraction, as both a growth and retirement
state, has kept net migration fairly steady with an average of
292,988 new residents a year from 1983 through 1993. The U.S.
average population increase since 1982 is about 1% annually, while
Florida's average annual rate of increase is about 2.5%. Florida
continues to be the fastest growing of the ten largest states.
This strong population growth is one reason the State's economy
is performing better than the nation as a whole. In addition to
attracting senior citizens to Florida as a place for retirement,
the State is also recognized as attracting a significant number
of working age individuals. Since 1983, the prime working age
population (18-44) has grown at an average annual rate of 2.6%.
The share of Florida's total working age population (18-59) to
total State population is approximately 54%. This share is not
expected to change appreciably into the twenty-first century.
Income. The State's personal income has been growing strongly
the last several years and has generally outperformed both the
United States as a whole and the southeast in particular, according
to the U.S. Department of Commerce and the Florida Consensus Economic
Estimating Conference. This is due to the fact that Florida's
population has been growing at a very strong pace and, since the
early 1970s, the State's economy has diversified so as to provide
greater insulation from national economic downturns. As a result,
Florida's real per capita personal income has tracked closely
with the national average and has tracked above the southeast.
From 1984 through 1993, the State's real per capita personal income
rose at an average of 5.4% per year, while the national real per
capita income increased at an average of 5.5% per year.
Because Florida has a proportionately greater retirement age population,
property income (dividends, interest and rent) and transfer payments
(Social Security and pension benefits, among other sources of
income) are relatively more important sources of income. For example,
Florida's total wages and salaries and other labor income in 1993
was 62% of total personal income, while a similar figure for the
nation for 1990 was 72%. Transfer payments are typically less
sensitive to the business cycle than employment income and, therefore,
act as stabilizing forces in weak economic periods.
The State's per capita personal income in 1992 of $19,711 was
slightly below the national average of $20,105 and significantly
ahead of that for the southeast United States, which was $17,296.
Real personal income in the State is estimated to have increased
5.5% in 1993-94 and 4.7% in 1994-95. By the end of 1994-95, real
personal income per capita in the State is expected to average
6.7% higher than its 1992-93 level.
Employment. Since 1980, the State's job creation rate is almost
twice the rate for the nation as a whole, and its growth rate
in new non-agricultural jobs is the fastest of the 11 most populous
states, second only to California in the absolute number of new
jobs created. Contributing to the State's rapid rate of growth
in employment and income is international trade. Since 1980, the
State's unemployment rate has generally been below that of the
United States. In recent years, however, as the State's economic
growth has slowed from its previous highs, the State's unemployment
rate has tracked above the national average. The average
Page 5
rate in Florida since 1980 has been 6.5% while the national average
is 7.1%. According to the U.S. Department of Commerce, the Florida
Department of Labor and Employment Security and the Florida Consensus
Economic Estimating Conference (together, the "Organization"),
the State's unemployment rate was 8.2% during 1992. As of January
1994, the Organization estimates that the unemployment rate will
be 6.7% for 1993-94 and 6.1% for 1994-95.
The rate of job creation in Florida's manufacturing sector has
exceeded that of the United States. From the beginning of 1980
through 1993, the State added over 50,000 new manufacturing jobs,
an 11.7% increase. During the same period, national manufacturing
employment declined ten out of the fourteen years, for a loss
of 2,977,000 jobs.
Total non-farm employment in Florida is expected to increase 2.7%
in 1993-94 and rise 3.8% in 1994-95. Trade and services, the two
largest sources of employment in the State, account for more than
half of the total non-farm employment. Employment in the service
sector should experience an increase of 3.9% in 1993-94, while
growing 4.9% in 1994-95. Trade is expected to expand 2.2% in 1994
and 3.4% in 1995. The service sector is now the State's largest
employment category.
Construction. The State's economy has in the past been highly
dependent on the construction industry and construction-related
manufacturing. This dependency has declined in recent years and
continues to do so as a result of continued diversification of
the State's economy. For example, in 1980, total contract construction
employment as a share of total non-farm employment was just over
7.0%, and in 1993 the share had edged downward to 5.0%. This trend
is expected to continue as the State's economy continues to diversify.
Florida, nevertheless, has a dynamic construction industry, with
single and multi-family housing starts accounting for 8.5% of
total U.S. housing starts in 1993 while the State's population
is 5.3% of the U.S. total population. Florida's housing starts
since 1980 have represented an average of 11.0% of the United
States' total annual starts, and since 1980 total housing starts
have averaged 156,450 a year.
A driving force behind the State's construction industry has been
the State's rapid rate of population growth. Although the State
currently is the fourth most populous state, its annual population
growth is now projected to decline as the number of people moving
into the State is expected to hover near the mid-250,000 range
annually throughout the 1990s. This population trend should provide
fuel for business and home builders to keep construction activity
lively in Florida for some time to come. However, other factors
do influence the level of construction in the State. For example,
federal tax reform in 1986 and other changes to the federal income
tax code have eliminated tax deductions for owners of more than
two residential real estate properties and have lengthened depreciation
schedules on investment and commercial properties. Economic growth
and existing supplies of homes also contribute to the level of
construction activity in the State.
Hurricane Andrew left some parts of south Florida devastated.
Post-Hurricane Andrew clean up and rebuilding have changed the
outlook for the State's economy. Single and multi-family housing
starts in 1993-94 are projected to reach a combined level of 118,000,
and to increase to 134,300 next year. Lingering recessionary effects
on consumers and tight credit are some of the reasons for relatively
slow core construction activity, as well as lingering effects
from the 1986 tax reform legislation discussed above. However,
construction is one of the sectors most severely affected by Hurricane
Andrew. Low interest rates and pent up demand combined with improved
consumer confidence should lead to improved housing starts. The
construction figures above include additional housing starts as
a result of destruction by Hurricane Andrew. Total construction
expenditures are forecasted to increase 15.6% this year and increase
13.3% next year.
The State has continuously been dependent on the highly cyclical
construction and construction- related manufacturing industries.
While that dependency has decreased, the State is still somewhat
at the mercy of the construction and construction-related manufacturing
industries. The construction industry is driven to a great extent
by the State's rapid growth in population. There can be no assurance
that population growth will continue throughout the 1990s in which
case there could be an adverse impact on the State's economy through
the loss of construction and construction-related manufacturing
jobs. Also, while interest
Page 6
rates remain low currently, an increase in interest rates could
significantly adversely impact the financing of new construction
within the State, thereby adversely impacting unemployment and
other economic factors within the State. In addition, available
commercial office space has tended to remain high over the past
few years. So long as this glut of commercial rental space continues,
construction of this type of space will likely continue to remain
slow.
Tourism. Tourism is one of Florida's most important industries.
Approximately 41.1 million tourists visited the State in 1993,
as reported by the Florida Department of Commerce. In terms of
business activities and state tax revenues, tourists in Florida
in 1993 represented an estimated 4.5 million additional residents.
Visitors to the State tend to arrive both by air and car. The
State's tourism industry over the years has become more sophisticated,
attracting visitors year-round and, to a degree, reducing its
seasonality. The dollar's depreciation has enhanced the State's
tourism industry. Tourist arrivals are expected to decline by
almost 2% this year, but are expected to recover next year with
5.0% growth. Tourist arrivals to Florida by air and car are expected
to diverge from each other, air decreasing 5.6% and auto increasing
1.6%. By the end of the State's current fiscal year, 41.0 million
domestic and international tourists are expected to have visited
the State. In 1994-95, tourist arrivals should approximate 43.0
million.
Revenues and Expenses. Estimated fiscal year 1993-94 General Revenue
plus Working Capital funds available to the State total $13,582.7
million, an 8.4% increase over 1992-93. This reflects a transfer
of $190 million, out of an estimated $220.0 million in non-recurring
revenue due to Hurricane Andrew, to a hurricane relief trust fund.
Of the total General Revenue plus Working Capital funds available
to the State, $12,943.5 million of that is Estimated Revenues
(excluding the Hurricane Andrew impact), which represents an increase
of 7.3% over the previous year's Estimated Revenues. With effective
General Revenues plus Working Capital Fund appropriations at $13,276.9
million, unencumbered reserves at the end of 1993-94 are estimated
at $302.8 million. Estimated fiscal year 1994-95 General Revenue
plus Working Capital and Budget Stabilization funds available
total $14,573.7 million, a 7.3% increase over 1993-94. This amount
reflects a transfer of $159.0 million in non-recurring revenue
due to Hurricane Andrew to a hurricane relief fund. The $13,860.8
million in Estimated Revenues (excluding Hurricane Andrew impact)
represent an increase of 7.1% over the previous year's Estimated
Revenues. The massive effort to rebuild and replace destroyed
or damaged property in the wake of Hurricane Andrew is responsible
for the substantial positive revenue impacts shown here. Most
of the impact is in the increase in the State's sales tax.
In fiscal year 1992-93, approximately 62% of the State's total
direct revenue to its three operating funds was derived from State
taxes, with Federal grants and other special revenue accounting
for the balance. State sales and use tax, corporate income tax,
intangible personal property tax and beverage tax amounted to
68%, 7%, 4% and 4%, respectively, of total General Revenue Funds
available during fiscal 1992-93. In that same year, expenditures
for education, health and welfare and public safety amounted to
approximately 49%, 30% and 11%, respectively, of total expenditures
from the General Revenue Fund.
The State's sales and use tax (6%) currently accounts for the
State's single largest source of tax receipts. Slightly less than
10% of the State's sales and use tax is designated for local governments
and is distributed to the respective counties in which collected
for use by the counties, and the municipalities therein. In addition
to this distribution, local governments may assess (by referendum)
a 0.5% or a 1.0% discretionary sales surtax within their county.
Proceeds from this local option sales tax are earmarked for funding
local infrastructure programs and acquiring land for public recreation
or conservation or protection of natural resources as provided
under applicable Florida law. Certain charter counties have other
additional taxing powers, and non-consolidated counties with a
population in excess of 800,000 may levy a local option sales
tax to fund indigent health care. It alone cannot exceed 0.5%
and when combined with the infrastructure surtax cannot exceed
1.0%. For the fiscal year ended June 30, 1993 sales and use tax
receipts (exclusive of the tax on gasoline and special fuels)
totalled $9,426.0 million, an increase of 12.5% over fiscal year
1991-92.
Page 7
The second largest source of State tax receipts is the tax on
motor fuels. However, these revenues are almost entirely dedicated
trust funds for specific purposes and are not included in the
State's General Revenue Fund.
The State imposes an alcoholic beverage wholesale tax (excise
tax) on beer, wine and liquor. This tax is one of the State's
major tax sources, with revenues totalling $442.2 million in fiscal
year ending June 30, 1993. Alcoholic beverage tax receipts increased
1.6% from the previous year's total. The revenues collected from
this tax are deposited into the State's General Revenue Fund.
The State imposes a corporate income tax. All receipts of the
corporate income tax are credited to the General Revenue Fund.
For the fiscal year ended June 30, 1993 receipts from this source
were $846.6 million, an increase of 5.6% from fiscal year 1991-92.
The State imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of indebtedness,
promissory notes, wage assignments and retail charge accounts.
The documentary stamp tax collections totalled $639.0 million
during fiscal year 1992-93, a 27.0% increase from the previous
fiscal year. Beginning in fiscal year 1992-93, 71.29% of these
taxes is to be deposited to the General Revenue Fund.
The State imposes a gross receipts tax on electric, natural gas
and telecommunications services. All gross receipt utilities tax
collections are credited to the State's Public Education Capital
Outlay and Debt Service Trust Fund. In fiscal year 1992-93, this
amounted to $447.9 million.
The State imposes an intangible personal property tax on stocks,
bonds, including bonds secured by liens in Florida real property,
notes, governmental leaseholds and certain other intangibles not
secured by a lien on Florida real property. The annual rate of
tax is 2 mils. The State also imposes a non-recurring 2 mil tax
on mortgages and other obligations secured by liens on Florida
real property. In fiscal year 1992-93, total intangible personal
property tax collections were $783.4 million, a 33% increase over
the prior year. Of the tax proceeds, 66.5% is distributed to the
General Revenue Fund.
The State's severance tax taxes oil, gas and sulphur production,
as well as the severance of phosphate rock and other solid minerals.
Total collections from severance taxes total $64.5 million during
fiscal year 1992-93, down 4.0% from the previous year. Currently,
60.0% of this amount was transferred to the General Revenue Fund.
The State began its own lottery in 1988. State law requires that
lottery revenues be distributed 50.0% to the public in prizes,
38.0% for use in enhancing education, and the balance, 12.0%,
for costs of administering the lottery. Fiscal year 1992-93 lottery
ticket sales totalled $2.13 billion, providing education with
approximately $810.4 million.
Debt-Balanced Budget Requirement. At the end of fiscal 1993, approximately
$5.61 billion in principal amount of debt secured by the full
faith and credit of the State was outstanding. In addition, since
July 1,1993, the State issued about $1.13 billion in principal
amount of full faith and credit bonds.
The State Constitution and statutes mandate that the State budget,
as a whole, and each separate fund within the State budget, be
kept in balance from currently available revenues each fiscal
year. If the Governor or Comptroller believe a deficit will occur
in any State fund, by statute, he must certify his opinion to
the Administrative Commission, which then is authorized to reduce
all State agency budgets and releases by a sufficient amount to
prevent a deficit in any fund. Additionally, the State Constitution
prohibits issuance of State obligations to fund State operations.
Litigation. Currently under litigation are several issues relating
to State actions or State taxes that put at risk substantial amounts
of General Revenue Fund monies. Accordingly, there is no assurance
that any of such matters, individually or in the aggregate, will
not have a material adverse affect on the State's financial position.
Florida law provides preferential tax treatment to insurers who
maintain a home office in the State. Certain insurers challenged
the constitutionality of this tax preference and sought a refund
of taxes paid. Recently, the Florida Supreme Court ruled in favor
of the State. This case and others, along with pending refund
claims, total about $150 million.
Page 8
The State imposes a $295 fee on the issuance of certificates of
title for motor vehicles previously titled outside the State.
The State has been sued by plaintiffs alleging that this fee violates
the Commerce Clause of the U.S. Constitution. The Circuit Court
in which the case was filed has granted summary judgment for the
plaintiffs and has enjoined further collection of the impact fee
and has ordered refunds to all those who have paid the fee since
the collection of the fee went into effect. The State has appealed
the lower Court's decision and an automatic stay has been granted
to the State allowing it to continue to collect the fee. The potential
refund exposure to the State if it should lose the case may be
in excess of $100 million.
The State maintains a bond rating of Aa and AA from Moody's Investors
Service and Standard & Poor's, respectively, on the majority of
its general obligation bonds, although the rating of a particular
series of revenue bonds relates primarily to the project, facility
or other revenue source from which such series derives funds for
repayment. While these ratings and some of the information presented
above indicate that the State is in satisfactory economic health,
there can be no assurance that there will not be a decline in
economic conditions or that particular Florida Bonds purchased
by the fund will not be adversely affected by any such changes.
The sources for the information presented above include official
statements and financial statements of the State of Florida. While
the Sponsor has not independently verified this information, it
has no reason to believe that the information is not correct in
all material respects.
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
Page 9
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 Florida Trusts are subject. Additionally, many factors including
national economic, social and environmental policies and conditions,
which are not within the control of the issuers of the Bonds,
could affect or could have an adverse impact on the financial
condition of the issuers. The Sponsor is unable to predict whether
or to what extent such factors or other factors may affect the
issuers of the Bonds, the market value or marketability of the
Bonds or the ability of the respective issuers of the Bonds acquired
by the Florida Trusts to pay interest on or principal of the Bonds.
Page 10
Florida Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
(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
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
New Jersey Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated 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 Winston & Strawn (previously named Cole & Deitz) has served
as Special Counsel to Series 10 and 11 of The First Trust of Insured
Municipal Bonds-Multi-State for New York tax matters. In the opinion
of such Special Counsels, under the existing income tax laws of
the State and City of New York, each Trust is not an association
taxable as a corporation and the income of each such Trust will
be treated as the income of the Unit holder.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
New Jersey Tax Status of Unit Holders
The assets of each New Jersey Trust will consist of interest-bearing
obligations issued by or on behalf of the State of New Jersey
and counties, municipalities, authorities and other political
subdivisions thereof, and certain territories of the United States,
including Puerto Rico, Guam, the Virgin Islands and the Northern
Mariana Islands (the "New Jersey Bonds").
At the time of closing for each New Jersey Trust, Special Counsel
to the Fund for New Jersey tax matters rendered an opinion under
then existing New Jersey income tax law applicable to taxpayers
whose income is subject to New Jersey income taxation substantially
to the effect that:
Each New Jersey Trust will be recognized as a trust and not an
association taxable as a corporation. A New Jersey Trust will
not be subject to the New Jersey Corporation Business Tax or the
New Jersey Corporation Income Tax.
With respect to the non-corporate Unit holders who are residents
of New Jersey, the income of a New Jersey Trust will be treated
as the income of such Unit holders under the New Jersey Gross
Income Tax. Interest on the underlying New Jersey Bonds which
is exempt from tax under the New Jersey Gross Income Tax Law when
received by a New Jersey Trust will retain its status as tax-exempt
interest when distributed to the Unit holders.
A non-corporate Unit holder will not be subject to the New Jersey
Gross Income Tax on any gain realized either when a New Jersey
Trust disposes of a New Jersey Bond (whether by sale, exchange,
redemption or payment at maturity) or when the Unit holder redeems
or sells his Units. Any loss realized on such disposition may
not be utilized to offset gains realized by such Unit holder on
the disposition of assets the gain on which is subject to the
New Jersey Gross Income Tax.
Page 4
Units of a New Jersey Trust may be taxable on the death of a Unit
holder under the New Jersey Transfer Inheritance Tax Law or the
New Jersey Estate Tax Law.
If a Unit holder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from
the Bonds in a New Jersey Trust which is allocable to such corporation
will be includable in its entire net income for purposes of the
New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax, less any interest expense incurred to carry such investment
to the extent such interest expense has not been deducted in computing
Federal taxable income. Net gains derived by such corporation
on the disposition of the New Jersey Bonds by a New Jersey Trust
or on the disposition of its Units will be included in its entire
net income for purposes of the New Jersey Corporation Business
Tax or New Jersey Corporation Income 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
New Jersey is the ninth largest state in population and the fifth
smallest in land area. With an average of 1,062 people per square
mile, it is the most densely populated of all the states. The
State's economic base is diversified, consisting of a variety
of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. Historically,
New Jersey's average per capita income has been well above the
national average, and in 1993 the State ranked second among the
states in per capita personal income ($26,967).
The New Jersey Economic Policy Council, a statutory arm of the
New Jersey Department of Commerce and Economic Development, has
reported in New Jersey Economic Indicators, a monthly publication
of the New Jersey Department of Labor, Division of Labor Market
and Demographic Research, that in 1988 and 1989 employment in
New Jersey's manufacturing sector failed to benefit from the export
boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost
momentum. In the meantime, the prolonged fast growth in the State
in the mid-1980s resulted in a tight labor market situation, which
has led to relatively high wages and housing prices. This means
that, while the incomes of New Jersey residents are relatively
high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in
July 1990 according to the National Bureau of Economic Research)
caused an acceleration of New Jersey's job losses in construction
and manufacturing. In addition, the national recession caused
an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing.
Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an
estimated 5.8% in March 1995, which is higher than the national
average of 5.5% in March 1995. Economic recovery is likely to
be slow and uneven in New Jersey, with unemployment receding at
a correspondingly slow pace, due to the fact that some sectors
may lag due to continued excess capacity. In addition, employers
even in rebounding sectors can be expected to remain cautious
about hiring until they become convinced that improved business
will be sustained. Also, certain firms will continue to merge
or downsize to increase profitability.
Debt Service. The primary method for State financing of capital
projects is through the sale of the general obligation bonds of
the State. These bonds are backed by the full faith and credit
of the State tax revenues and certain other fees are pledged to
meet the principal and interest payments and if provided, redemption
premium payments, if any, required to repay the bonds. As of June
30, 1993 there was a total authorized bond indebtedness of approximately
$8.98 billion, of which $3.6 billion was issued and outstanding,
$4.0 billion was retired (including bonds for which provision
for payment has been made through the sale and issuance of refunding
bonds) and $1.38 billion was unissued. The appropriation for the
debt service obligation on such outstanding indebtedness is $103.5
million for fiscal year 1995.
New Jersey's Budget and Appropriation System. The State operates
on a fiscal year beginning July 1 and ending June 30. At the end
of fiscal year 1989, there was a surplus in the State's general
fund (the fund into
Page 5
which all State revenues not otherwise restricted by statute are
deposited and from which appropriations are made) of $411.2 million.
At the end of fiscal year 1990, there was a surplus in the general
fund of $1.0 million. At the end of fiscal year 1991, there
was a surplus in the general fund of $1.4 million. New Jersey
closed its fiscal year 1992 with a surplus of $760.8 million.
It is estimated that New Jersey closed its fiscal year 1993 with
a surplus of $937.4 million.
In order to provide additional revenues to balance future budgets,
to redistribute school aid and to contain real property taxes,
on June 27, 1990 and July 12, 1990 Governor Florio signed into
law legislation which was estimated to raise approximately $2.8
billion in additional taxes (consisting of $1.5 billion in sales
and use taxes and $1.3 billion in income taxes), the biggest tax
hike in New Jersey history. There can be no assurance that receipts
and collections of such taxes will meet such estimates.
The first part of the tax hike took effect on July 1, 1990 with
the increase in the State's sales and use tax rate from 6% to
7% and the elimination of exemptions for certain products and
services not previously subject to the tax, such as telephone
calls, paper products (which has since been reinstated), soaps
and detergents, janitorial services, alcoholic beverages and cigarettes.
At the time of enactment, it was projected that these taxes would
raise approximately $1.5 billion in additional revenue. Projections
and estimates of receipts from sales and use taxes, however, have
been subject to variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991
in the form of an increased state income tax on individuals. At
the time of enactment, it was projected that this increase would
raise approximately $1.3 billion in additional income taxes to
fund a new school aid formula, a new homestead rebate program
and state assumption of welfare and social services costs. Projections
and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to
3.5% to a new range of 2% to 7%, with the higher rates applying
to married couples with incomes exceeding $70,000 who file joint
returns, and to individuals filing single returns with incomes
of more than $35,000.
The Florio administration had contended that the income tax package
will help reduce local property tax increases by providing more
state aid to municipalities. Under the income tax legislation
the State will assume approximately $289 million in social services
costs that previously were paid by counties and municipalities
and funded by property taxes. In addition, under the new formula
for funding school aid, an extra $1.1 billion is proposed to be
sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education
programs.
Effective July 1, 1992 the State's sales and use tax rate decreased
from 7% to 6%. Effective January 1, 1994 an across-the-board 5%
reduction in the income tax rates was enacted and effective January
1, 1995 further reductions ranging from 1% up to 10% in income
tax rates took effect.
On June 30, 1994 Governor Whitman signed the New Jersey Legislature's
$15.7 billion budget for fiscal year 1995. The balanced budget,
which includes $455 million in surplus, is $141 million less than
the 1994 budget. Whether the State can achieve a balanced budget
depends on its ability to enact and implement expenditure reductions
and to collect the estimated tax revenues.
Litigation. The State is a party in numerous legal proceedings
pertaining to matters incidental to the performance of routine
governmental operations. Such litigation includes, but is not
limited to, claims asserted against the State arising from alleged
torts, alleged breaches of contracts, condemnation proceedings
and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are cases challenging the
following: the formula relating to State aid to public schools,
the method by which the State shares with its counties maintenance
recoveries and costs for residents in State institutions, unreasonably
low Medicaid payment rates for long-term facilities in New Jersey,
the obligation of counties to maintain Medicaid or Medicare eligible
residents of institutions and facilities for the developmentally
disabled, taxes paid into the Spill Compensation Fund (a fund
established to provide money for use by the State to remediate
hazardous waste sites and to compensate other persons for damages
incurred as a result of hazardous waste discharge) based on Federal
preemption, various provisions, and the constitutionality, of
the Fair Automobile Insurance Reform Act of 1990, the State's
role in a consent order concerning the
Page 6
construction of a resource facility in Passaic County, actions
taken by the New Jersey Bureau of Securities against an individual,
the State's actions regarding alleged chromium contamination of
State-owned property in Hudson County, the issuance of emergency
redirection orders and a draft permit by the Department of Environmental
Protection and Energy, the adequacy of Medicaid reimbursement
for services rendered by doctors and dentists to Medicaid eligible
children, the Commissioner of Health's calculation of the hospital
assessment required by the Health Care Cost Reduction Act of 1991,
refusal of the State to share with Camden County Federal funding
the State recently received for disproportionate share hospital
payments made to county psychiatric facilities, and the constitutionality
of annual A-901 hazardous and solid waste licensure renewal fees
collected by the Department of Environmental Protection and Energy.
Adverse judgments in these and other matters could have the potential
for either a significant loss of revenue or a significant unanticipated
expenditure by the State.
At any given time, there are various numbers of claims and cases
pending against the State, State agencies and employees seeking
recovery of monetary damages that are primarily paid out of the
fund created pursuant to the New Jersey Tort Claims Act. In addition,
at any given time, there are various numbers of contract claims
against the State and State agencies seeking recovery of monetary
damages. The State is unable to estimate its exposure for these
claims.
Debt Ratings. For many years prior to 1991, both Moody's Investors
Service, Inc. and Standard and Poor's had rated New Jersey general
obligation bonds Aaa and "AAA," respectively. On July 3, 1991,
however, Standard and Poor's downgraded New Jersey general obligation
bonds to "AA+." On June 4, 1992, Standard and Poor's placed New
Jersey general obligation bonds on CreditWatch with negative implications,
citing as its principal reason for its caution the unexpected
denial by the Federal Government of New Jersey's request for $450
million in retroactive Medicaid payments for psychiatric hospitals.
These funds were critical to closing a $1 billion gap in the State's
$15 billion budget for fiscal year 1992 which ended on June 30,
1992. Under New Jersey state law, the gap in the current budget
was required to be closed before the new budget year began on
July 1, 1992. Standard and Poor's suggested the State could close
fiscal 1992's budget gap and help fill fiscal 1993's hole by a
reversion of $700 million of pension contributions to its general
fund under a proposal to change the way the State calculates its
pension liability.
On July 6, 1992 Standard and Poor's reaffirmed its "AA+" rating
for New Jersey general obligation bonds and removed the debt from
its CreditWatch list, although it stated that New Jersey's long-term
financial outlook was negative. Standard & Poor's was concerned
that the State was entering fiscal year 1993, that began on July
1, 1992 with only a $26 million surplus and remained concerned
about whether the State economy would recover quickly enough to
meet lawmakers' revenue projections. It also remained concerned
about the recent federal ruling leaving in doubt how much the
State was due in retroactive Medicaid reimbursements and a ruling
by a federal judge, now on appeal, of the State's method for paying
for uninsured hospital patients. However, on July 27, 1994 Standard
and Poor's announced that it was changing the State's outlook
from negative to stable due to a brightening of the State's prospects
as a result of Governor Whitman's effort to trim spending and
cut taxes, coupled with an improving economy. Standard and Poor's
reaffirmed its "AA+" rating at the same time.
On August 24, 1992 Moody's Investors Service, Inc. downgraded
New Jersey general obligation bonds to "Aa1," stating that the
reduction reflected a developing pattern of reliance on nonrecurring
measures to achieve budgetary balance, four years of financial
operations marked by revenue shortfalls and operating deficits,
and the likelihood that serious financial pressures would persist.
On August 5, 1994 Moody's reaffirmed its "Aa1" rating, citing
on the positive side New Jersey's broad-based economy, high income
levels, history of maintaining a positive financial position and
moderate (albeit rising) debt ratios, and on the negative side,
a continued reliance on one-time revenue and a dependence on pension-related
savings to achieve budgetary balance.
There can be no assurance that these ratings will continue.
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
Page 7
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.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact certain issuers of
Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of Bonds held by
the New Jersey Trusts are subject. Additionally, many factors
including national economic, social and environmental policies
and conditions, which are not within the control of the issuers
of the Bonds, could affect or could have an adverse impact on
the financial condition of the issuers. The Sponsor is unable
to predict whether or to what extent such factors or other factors
may affect the issuers of the Bonds, the market value or marketability
of the Bonds or the ability of the respective issuers of the Bonds
acquired by the New Jersey Trusts to pay interest on or principal
of the Bonds.
Page 8
New Jersey Trust Series
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
(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
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
South 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 December 22, 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. If the interest on a Bond should be determined to be
taxable, the Bond would generally have to be sold at a substantial
discount. In addition, investors could be required to pay income
tax on interest received prior to the date on which interest is
determined to be taxable. Gain realized on the sale or redemption
of the Bonds by the Trustee or of a Unit by a Unit holder is,
however, includable in gross income for Federal income tax purposes
and may be includable in gross income for State tax purposes.
(It should be noted in this connection that such gain does not
include any amounts received in respect of accrued interest or
accrued original issue discount, if any.)
At the time of the closing for each Trust, Chapman and Cutler,
Counsel for the Sponsor, rendered an opinion under then existing
law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original
issue discount on Bonds which is excludable from gross income
under the Internal Revenue Code will retain its status for Federal
income tax purposes, when received by the Trusts and when distributed
to a Unit holder; however, such interest may be taken into account
in computing the alternative minimum tax, an additional tax on
branches of foreign corporations and the environmental tax (the
"Superfund Tax"). See "Certain Tax Matters Applicable to Corporate
Unit Holders";
(2) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells his Units.
Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the Trust, 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
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
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 (before adjustment for earned original issue
discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the
date of acquisition of the Units. The tax basis reduction requirements
of 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
(3) 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 compound interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have previously accrued based on its issue price (its
"adjusted issue price") to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Unit holders should consult their tax advisers
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds,
if any, issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "Tax Act") subjects
tax-exempt bonds to the market discount rules of the Code effective
for bonds purchased after April 30, 1993. In general, market discount
is the amount (if any) by which the stated redemption price at
maturity exceeds an investor's purchase price (except to the extent
that such difference, if any, is attributable to original issue
discount not yet accrued), subject to a statutory de minimis rule.
Market discount can arise based on the price a Trust pays for
Bonds or the price a Unit holder pays for his or her Units. Under
the Tax Act, accretion of market discount is taxable as ordinary
income; under prior law the accretion had been treated as capital
gain. Market discount that accretes while a Trust holds a Bond
would be recognized as ordinary income by the Unit holders when
principal payments are received on the Bond, upon sale or at redemption
(including early redemption) or upon the sale or redemption of
the Units, unless a Unit holder elects to include market discount
in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisers regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
to ownership of Units. On December 7, 1995, the U.S. Treasury
Department released proposed legislation that, if adopted, would
generally extend the financial institution rules to all corporations,
effective for obligations acquired after the date of announcement.
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 Bonds received by
a "substantial user" of the facilities being financed with the
proceeds of these Bonds, or persons related thereto, for periods
while such Bonds are held by such a user or related person, will
not be excludable from Federal gross income, although interest
on such Bonds received by others would be excludable
Page 2
from Federal gross income. "Substantial user" and "related person"
are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his tax adviser.
In general, Section 86 of the Code provides that 50% of Social
Security benefits are includible in gross income to the extent
that the sum of "modified adjusted gross income" plus 50% of the
Social Security benefits received exceeds the "base amount." The
base amount is $25,000 for unmarried taxpayers, $32,000 for married
taxpayers filing a joint return and zero for married taxpayers
who do not live apart at all times during the taxable year and
who file separate returns. Modified adjusted gross income is adjusted
gross income determined without regard to certain otherwise allowable
deductions and exclusions from gross income and by including tax-exempt
interest. To the extent that Social Security benefits are includible
in gross income, they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
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.
See, however, "Certain Tax Matters Applicable to Corporate Unit
Holders" below.
In the case of corporations, the alternative tax rate applicable
to long-term capital gains is 35%, effective for long-term capital
gains realized in taxable years beginning on or after January
1, 1993. For taxpayers other than corporations, net capital gains
are subject to a maximum stated marginal stated tax rate of 28%.
However, it should be noted that legislative proposals are introduced
from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
Under the Code, taxpayers must disclose to the Internal Revenue
Service the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the
case of certain corporations, the alternative minimum tax and
the Superfund Tax for taxable years beginning after December 31,
1986 depend upon the corporation's alternative minimum taxable
income ("AMTI"), which is the corporation's taxable income with
certain adjustments. One of the adjustment items used in computing
AMTI and the Superfund Tax of a corporation (other than an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). "Adjusted current earnings" includes all tax-exempt
interest, including interest on all Bonds in the Trusts. Under
the provisions of Section 884 of the Code, a branch profits tax
is levied on the "effectively connected earnings and profits"
of certain foreign corporations which include tax-exempt interest
such as interest on the Bonds in the Trust.
Unit holders should consult their tax advisers with respect to
the particular tax consequences to them, including the corporate
alternative minimum tax, the Superfund Tax and the branch profits
tax imposed by Section 884 of the Code.
Page 3
Ownership of the Units may result in collateral federal income
tax consequences to certain taxpayers, including, without limitation,
corporations subject to either the environmental tax or the branch
profits tax, financial institutions, certain insurance companies,
certain S corporations, individual recipients of Social Security
or Railroad Retirement benefits and taxpayers who may be deemed
to have incurred (or continued) indebtedness to purchase or carry
tax-exempt obligations. Prospective investors should consult their
tax advisers as to the applicability of any such collateral consequences.
At the time of the closing, 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.
South Carolina Tax Status of Unit Holders
At the time of closing for each South Carolina Trust, Special
Counsel to the Fund for South Carolina tax matters rendered an
opinion under then existing South Carolina income tax law applicable
to taxpayers whose income is subject to South Carolina income
taxation substantially to the effect that:
(1) By the provision of paragraph (j) of Section 3 of Article
10 of the South Carolina Constitution (revised 1977) intangible
personal property is specifically exempted from any and all ad
valorem taxation.
(2) Pursuant to the provisions of Section 12-1-60 the interest
of all bonds, notes or certificates of indebtedness issued by
or on behalf of the State of South Carolina and any authority,
agency, department or institution of the State and all counties,
school districts, municipalities, divisions and subdivisions of
the State and all agencies thereof are exempt from income taxes
and that the exemption so granted extends to all recipients of
interest paid thereon through a Trust. (This opinion does not
extend to so-called 63-20 obligations.)
(3) The income of a Trust would be treated as income to each
Unit holder of such Trust in the proportion that the number of
Units of such Trust held by the Unit holder bears to the total
number of Units of the Trust outstanding. For this reason, interest
derived by a Trust that would not be includable in income for
South Carolina income tax purposes when paid directly to a South
Carolina Unit holder will be exempt from South Carolina income
taxation when received by a Trust and attributed to such South
Carolina Unit holder.
(4) Each Unit holder will recognize gain or loss for South Carolina
state 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 his Unit.
(5) A Trust would be regarded, under South Carolina law, as a
common trust fund and therefore not subject to taxation under
any income tax law of South Carolina.
The above described opinion of Special Counsel has been concurred
in by an informal ruling of the South Carolina Tax Commission
pursuant to Section 12-3-170 of the South Carolina Code.
For information with respect to Federal income tax status and
other tax matters see "What Is the Federal Tax Status of Unit Holders?"
Certain Considerations
South Carolina is primarily a manufacturing state. In 1994, nearly
one-quarter of all jobs in the State were in the manufacturing
industry, compared to fifteen percent nationally. While the textile
industry is still the major industrial employer in the State,
since 1950 the State's economy has undergone a gradual transition.
The economic base of the State has diversified as the trade and
service sectors developed and with the added development of the
durable goods manufacturing industries, South Carolina's economy
now resembles more closely that of the United States.
Page 4
Personal income in South Carolina grew five and four-tenths percent
(5.4%) during the third quarter of 1994 compared to income growth
of six and three-tenths percent (6.3%) nationwide. During all
of 1993 personal income grew at an average annual rate of five
and one-tenths percent (5.1%) in South Carolina. During the same
period the nation's income grew four and four-tenths percent (4.4%)
and personal income in the Southeast region grew five and seven-tenths
percent (5.7%). Over the five year period 1988-1993 personal income
in South Carolina rose at a compounded annual rate of six and
three-tenths percent (6.3%), matching the annual income growth
for the Southeast region, and outpacing the five and seven-tenths
percent (5.7%) growth in the United States in the same period.
Through January, 1995, the State's economy has added 36,100 jobs
compared to the same period in 1994, employment in the State increased
two and four-tenths percent (2.4%) while the rate of employment
growth in the United States was two and six-tenths percent (2.6%).
Monthly unemployment rates in the State have equaled or been above
comparable national rates during 1994. The unemployment rate for
January, 1995, was the same as the nation's rate at five and seven-tenths
percent (5.7%).
The State Constitution requires the General Assembly to provide
a balanced budget and requires that if there be a deficit, such
deficit shall be provided for in the succeeding fiscal year. The
State Constitution also provides that the State Budget and Control
Board may, if a deficit appears likely, effect such reductions
in appropriations as may be necessary to prevent a deficit. At
the November 6, 1984 general election there was approved a constitutional
amendment providing that annual increases in State appropriations
may not exceed the average growth rate of the economy of the State
and that the annual increase in the number of State employees
may not exceed the average growth of population of the State.
The State Constitution also establishes a General Reserve Fund
to be maintained in an amount equal to 4% of General Fund revenue
for the latest fiscal year. Despite the efforts of the State Budget
and Control Board, deficits were experienced in each of the fiscal
years ended June 30, 1981, June 30, 1982, June 30, 1985 and June
30, 1986. All deficits have been funded out of the General Reserve
Fund. For the fiscal years ending June 30, 1983 and 1984, the
State had cash surpluses. As of June 30, 1985 the balance in the
General Reserve Fund was $89,100,000.
In 1993 the General Assembly provided that beginning with appropriations
for fiscal year 1994-1995, appropriations in the annual general
appropriations act may not exceed the base revenue estimate. The
base revenue estimate is defined as the lesser of (i) the total
of recurring general fund revenues collected in the latest completed
fiscal year before the General Assembly first considers the annual
general appropriations bill plus an increase of seventy-five percent
of the difference between the general fund revenue estimate of
the Board of Economic Advisors for the upcoming fiscal year and
the actual revenue collections from the latest completed fiscal
year; or (ii) the Board of Economic Advisors general fund revenue
estimate for the upcoming fiscal year.
At its July, 1985 meeting the State Budget and Control Board,
acting upon advice that a shortfall in General Fund revenues for
the fiscal year ending June 30, 1985 might develop, froze all
supplemental appropriations pending the final accounting of the
General Fund for fiscal year 1985. On August 8, 1985, the Office
of the Comptroller General advised the State Budget and Control
Board that General Fund expenditures for the fiscal year ended
June 30, 1985 did exceed General Fund revenues by $11,936,636.
Obedient to the constitutional mandate that a casual deficit shall
be provided for in the succeeding fiscal year, the State Budget
and Control Board delayed certain hiring and capital improvements
scheduled to be made in fiscal year 1986 in an amount sufficient
to meet the fiscal year 1985 budget shortfall. In January of the
fiscal year ended June 30, 1986 the State Budget and Control board
was advised of a possible shortfall of $46,346,968. The Board
immediately reduced State agency appropriations by the amount
of the anticipated shortfall. Notwithstanding this action, at
the end of fiscal year 1986, it became apparent that a shortfall
would result. In August of 1986, the State Budget and Control
Board voted to fund the deficit by transferring $37,353,272 from
the General Reserve Fund to the General Fund, bringing the balance
in the General Reserve Fund to $51.8 million.
At the November 5, 1986 meeting of the Budget and Control Board,
the Board of Economic Advisors advised that it had reduced its
revenue estimate for the current fiscal year by $87,434,452. As
required by the
Page 5
provisions of the Capital Expenditure Fund, the Board applied
$27,714,661 budgeted for this fund to the anticipated shortfall.
This action left a remaining shortfall of $59,719,791 which the
Budget and Control Board funded by imposing a 2.6% cut in expenditures.
In a February, 1987 meeting of the Board, a further cut in expenditures
of 0.8% was ordered.
After net downward revisions of $122 million in estimated revenues
during the year, the actual revenue collections exceeded the final
estimate of $37 million, resulting in a surplus for the fiscal
year ending June 30, 1987, of $20.5 million. The General Reserve
Fund received $6.6 million during the year in accordance with
the Appropriation Act, and $17 million of the year-end surplus
was transferred to the General Reserve Fund, bringing the balance
in the General Reserve Fund to $75.4 million at June 30, 1987.
On August 5, 1988, it was announced that for the fiscal year ending
June 30, 1988, the Budgetary General Fund had a surplus of $107.5
million. The surplus resulted from a $117.3 million excess of
revenues over expenditures. The State will use $52.6 million of
the surplus to fund supplemental appropriations, $28.3 million
to fund the Capital Reserve, and $20.5 million for an early buy-out
of a school bus lease agreement. The General Assembly will decide
how the State will spend the remaining $6.1 million.
The General Reserve Fund received $25.1 million during the 1987-88
fiscal year in accordance with the Appropriation Act. During the
year, the General Assembly reduced the required funding of the
General Reserve Fund from 4% to 3% of the latest completed fiscal
year's actual revenue. The General Assembly used $14.4 million
of the resulting excess to fund the 1987-88 Supplemental Appropriation
Act, leaving $86.1 million in the General Reserve Fund at June
30, 1988. The full-funding amount at that date, however, was only
$80.8 million. In accordance with the 1988-1989 Appropriation
Act, the excess of $5.3 million will help fund 1988-1989 appropriations.
At the November 8, 1988 general election there was approved a
constitutional amendment reducing from 4% to 3% the amount of
General Fund revenue which must be kept in the General Reserve
Fund, and removing the provisions requiring a special vote to
adjust this percentage. The amendment also created a Capital Reserve
Fund equal to 2% of General Fund revenue. Before March 1 of each
year, the Capital Reserve Fund must be used to offset mid-year
budget reductions before mandating cuts in operating appropriations,
and after March 1, the Capital Reserve Fund may be appropriated
by a special vote in separate legislation by the General Assembly
to finance in cash previously authorized capital improvement bond
projects, retire bond principal or interest on bonds previously
issued, and for capital improvements or other nonrecurring purposes
which must be ranked in order of priority of expenditure. Monies
in the Capital Reserve Fund not appropriated or any appropriation
for a particular project or item which has been reduced due to
application of the monies to year-end deficit, must go back to
the General Fund.
For the fiscal year ended June 30, 1989, the State had a surplus
of $129,788,135. At June 30, 1989, the balance in the General
Reserve Fund was $87,999,428.
Because of anticipated revenue shortfalls for the fiscal year
1989-1990, the State Budget and Control Board committed $4.2 million
of the $58.7 million Capital Reserve Fund in April, 1990. Lack
of sufficient funding at year end resulted in an additional use
of $4.5 million from the Capital Reserve Fund. After the above
reductions, the State had a fiscal year 1989-1990 surplus of $13,159,892
which was used to fund supplemental appropriations of $1,325,000
and the Capital Reserve Fund at $11,834,892. At June 30, 1990,
the balance in the General Reserve Fund was $94,114,351.
During 1990-91 fiscal year, the State Budget and Control Board
has approved mid-year budget changes in November of 1990 and again
in February of 1991, to offset lower revenue estimates. Those
changes included committing the Capital Reserve Fund appropriation
($62,742,901) and reducing agency appropriations in an additional
amount necessary to offset (together with automatic expenditure
reductions that are tied to revenue levels) what would otherwise
be a projected deficit of approximately $132.6 million. On May
14 and May 21, 1991, the Budget and Control Board, responding
to April revenue figures and unofficial estimates indicating an
additional shortfall of $30 to $50 million, ordered an immediate
freeze on all personnel activities, from hiring to promotions;
a freeze on purchasing, with limited exceptions; and an indefinite
Page 6
halt to new contracts and contract renewals. The Board also asked
the General Assembly for the power to furlough government workers
periodically during the next fiscal year.
In the past, the State's budgetary accounting principles allowed
revenue to be recorded only when the State received the related
cash. On July 30, 1991, the Budget and Control Board approved
a change in this principle for sales tax revenue beginning with
the fiscal year ended June 30, 1991. The Board's resolution requires
that sales taxes collected by merchants in June and received by
the State in July be reported as revenue in June rather than in
July. This change resulted in $5.2 million decrease in reported
1990-91 sales tax revenue and a one-time $83.1 million addition
to fund balance. The one-time adjustment increases the fund balance
to the level it would be if the new principle had been in effect
in years before 1990-91. Following such action, the year-end balance
in the General Reserve Fund was $33.4 million.
As its July 30, 1991 meeting, the Budget and Control Board also
took action with respect to the 1991-92 fiscal year. On July 26,
1991, the Board of Economic Advisors advised the Budget and Control
Board that it projected a revenue shortfall of $148 million for
the fiscal year 1991 - 92 budget of $3.581 billion. In response,
the Budget and Control Board eliminated the two percent (2%) Capital
Reserve Fund appropriation of $65.9 million and reduced other
expenditures across the board by three percent (3%). On February
10, 1992, the Board of Economic Advisers advised the Budget and
Control Board that it had revised its estimate of revenues for
the current fiscal year downward by an additional $55 million.
At its February 1, 1992 meeting the Budget and Control Board responded
by imposing an additional one percent (1%) across the board reduction
of expenditures (except with respect to approximately $10 million
for certain agencies). At its February 13, 1992 meeting, the Budget
and Control Board restored a portion of the one percent (1%) reduction
to four (4) education-related agencies totalling approximately
$5.7 million. These expenditure reduction measures, when coupled
with revenue increases projected by the Budget and Control Board,
resulted in an estimated balance of approximately $1.4 million
in the General Fund for the fiscal year 1991-92. Despite such
actions, expenditures exceeded revenues by $38.2 million and,
as required by the South Carolina Constitution, such amount was
withdrawn from the General Reserve Fund to cover the shortfall.
Responding to these recurrent operating deficits, Standard & Poor's
has placed the State's AAA-rated general obligation debt on its
CreditWatch, and on January 29, 1993, this rating was reduced to AA+.
On August 22, 1992, the Budget and Control Board adopted a plan
to reduce appropriations under the 1992 Appropriations Act because
of revenue shortfall projections of approximately $200 million
for the 1992-93 fiscal year. These reductions were based on the
rate of growth in each agency's budget over the past year. On
September 15, 1992, the Supreme Court of South Carolina enjoined
the Budget and Control Board from implementing its proposed plan
for budget reductions on the grounds that the Board had authority
to make budget reductions only across the board based on total
appropriations. In response to this decision, the Board instituted
a 4% across the board reduction. On November 10, 1992, the Budget
and Control Board permanently reduced the $88.1 million in appropriations
which were set aside on September 15, 1992. This action along
with improved actual revenue collection created a budgetary surplus
of approximately $101 million.
For the Fiscal Year ended June 30, 1994, the State had a budgetary
surplus of $273.48 million.
Prospective investors should study with care the portfolio of
Bonds in a South Carolina Trust and should consult with their
investment advisers as to the merits of particular issues in a portfolio.
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
Page 7
are performed in Puerto Rico. Since World War II the economic
importance of agriculture for Puerto Rico, particularly in the
dominance of sugar production, has declined. Nevertheless, the
Commonwealth-controlled sugar monopoly remains an important economic
factor and is largely dependent upon Federal maintenance of sugar
prices, the discontinuation of which could severely affect Puerto
Rico sugar production. The level of tourism is affected by various
factors including the strength of the U.S. dollar. During periods
when the dollar is strong, tourism in foreign countries becomes
relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the 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 South 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 South Carolina Trusts to pay interest on or principal
of the Bonds.
Page 8
South 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 9
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 199, 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 29, 1995.
THE FIRST TRUST COMBINED SERIES 199
(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 29, 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 November 10, 1995 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Combined Series dated
December 20, 1995.
ERNST & YOUNG LLP
Chicago, Illinois
December 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> 007
<NAME> FLORIDA INTERMEDIATE TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 2,636,133
<INVESTMENTS-AT-VALUE> 2,573,434
<RECEIVABLES> 46,328
<ASSETS-OTHER> 48
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,619,810
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,671
<TOTAL-LIABILITIES> 40,671
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,636,133
<SHARES-COMMON-STOCK> 2,759
<SHARES-COMMON-PRIOR> 3,049
<ACCUMULATED-NII-CURRENT> 5,705
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (62,699)
<NET-ASSETS> 2,579,139
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 125,479
<OTHER-INCOME> 0
<EXPENSES-NET> 5,915
<NET-INVESTMENT-INCOME> 119,564
<REALIZED-GAINS-CURRENT> (19,680)
<APPREC-INCREASE-CURRENT> 98,554
<NET-CHANGE-FROM-OPS> 198,438
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 119,719
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 290
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (182,738)
<ACCUMULATED-NII-PRIOR> 7,236
<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> 020
<NAME> MISSOURI TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 2,704,558
<INVESTMENTS-AT-VALUE> 2,535,315
<RECEIVABLES> 20,074
<ASSETS-OTHER> 3,278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,558,667
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,575
<TOTAL-LIABILITIES> 24,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,704,558
<SHARES-COMMON-STOCK> 2,862
<SHARES-COMMON-PRIOR> 2,872
<ACCUMULATED-NII-CURRENT> (1,223)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (169,243)
<NET-ASSETS> 2,534,092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 148,144
<OTHER-INCOME> 0
<EXPENSES-NET> 5,746
<NET-INVESTMENT-INCOME> 142,398
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 61,691
<NET-CHANGE-FROM-OPS> 204,089
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 142,498
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 10
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 52,982
<ACCUMULATED-NII-PRIOR> 7,486
<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> NEW JERSEY LONG-INTER TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 2,519,404
<INVESTMENTS-AT-VALUE> 2,439,658
<RECEIVABLES> 43,930
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,483,588
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,370
<TOTAL-LIABILITIES> 38,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,519,404
<SHARES-COMMON-STOCK> 2,647
<SHARES-COMMON-PRIOR> 2,897
<ACCUMULATED-NII-CURRENT> 5,560
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (79,746)
<NET-ASSETS> 2,445,218
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 120,432
<OTHER-INCOME> 0
<EXPENSES-NET> 6,350
<NET-INVESTMENT-INCOME> 114,082
<REALIZED-GAINS-CURRENT> (27,497)
<APPREC-INCREASE-CURRENT> 84,587
<NET-CHANGE-FROM-OPS> 171,172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 114,471
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 250
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (158,320)
<ACCUMULATED-NII-PRIOR> 3,443
<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> 050
<NAME> PENNSYLVANIA TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 2,843,847
<INVESTMENTS-AT-VALUE> 2,607,373
<RECEIVABLES> 55,288
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,662,661
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,805
<TOTAL-LIABILITIES> 47,805
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,843,847
<SHARES-COMMON-STOCK> 3,021
<SHARES-COMMON-PRIOR> 3,062
<ACCUMULATED-NII-CURRENT> 7,483
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (236,474)
<NET-ASSETS> 2,614,856
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 154,957
<OTHER-INCOME> 0
<EXPENSES-NET> 6,129
<NET-INVESTMENT-INCOME> 148,828
<REALIZED-GAINS-CURRENT> (4,962)
<APPREC-INCREASE-CURRENT> 97,967
<NET-CHANGE-FROM-OPS> 241,833
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 149,060
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 3,137
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 41
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54,266
<ACCUMULATED-NII-PRIOR> 5,413
<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> 001
<NAME> SOUTH CAROLINA ADVANTAGE TRUST
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 1,918,102
<INVESTMENTS-AT-VALUE> 1,867,516
<RECEIVABLES> 24,011
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,891,527
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,198
<TOTAL-LIABILITIES> 19,198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,918,102
<SHARES-COMMON-STOCK> 2,013
<SHARES-COMMON-PRIOR> 2,378
<ACCUMULATED-NII-CURRENT> 4,813
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (50,586)
<NET-ASSETS> 1,872,329
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 95,307
<OTHER-INCOME> 0
<EXPENSES-NET> 4,800
<NET-INVESTMENT-INCOME> 90,507
<REALIZED-GAINS-CURRENT> (38,742)
<APPREC-INCREASE-CURRENT> 77,020
<NET-CHANGE-FROM-OPS> 128,785
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 91,035
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 2,371
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 365
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (285,136)
<ACCUMULATED-NII-PRIOR> 5,076
<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>
