File No. 33-51811
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST COMBINED
SERIES 209
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of 1001 Warrenville Road
Depositor's Principal Lisle, Illinois 60532
Offices:
D. Name and Complete Address NIKE SECURITIES L.P.
of Agents for Service: Attention: James A. Bowen
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN AND CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title and Amount of Securities An indefinite number
Being Registered: of units pursuant to Rule
24f-2 promulgated under
the Investment Company
Act of 1940, as amended.
F. Proposed Maximum Offering
Price to the Public of the
Securities being Registered: Indefinite.
G. Amount of Filing Fee $500.00*
(as required by Rule 24f-2):
H. Approximate Date of Proposed
Sale to the Public: As soon as practicable
after the effective date
of the Registration
Statement.
:XXX: Check box if it is proposed that this filing will
become effective on January 26, 1994 at 1:30 p.m.
pursuant to Rule 487.
________________________
*Previously paid
THE FIRST TRUST COMBINED
SERIES 209
Cross Reference Sheet
Pursuant to Rule 404(c) of Regulation C Under the Securities Act
of 1933
(Form N-8B-2 Items Required by Instruction 1 as to Prospectus on
Form S-6)
Form N-8B-2 Item Number Form S-6 Heading in Prospectus
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of Trust
(b) Title of securities issued Prospectus Front Cover
Page
2. Name and address of Depositor Summary of Essential
Information;
Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of Trustee Summary of Essential
Information
Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
5. Organization of Trust The First Trust
Combined Series
6. Execution and termination of The First Trust
Trust Agreement Combined Series Other
Information
7. Changes of name *
8. Fiscal year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE
TRUST
10. General information regarding The First Trust
Trust's securities Combined Series Public
Offering; Rights of
Unit Holders;
Information as to
Sponsor, Trustee and
Evaluator; Other
Information
11. Type of securities comprising Prospectus Front Cover
units Page; The First Trust
Combined Series
Portfolio
12. Certain information regarding *
periodic payment certificates
13. (a) Load, fees, expenses, etc. Prospectus Front Cover
Page; Summary of
Essential
Information; The
First Trust Combined
Series; Rights of
Unit Holders
(b) Certain information regard- *
ing periodic payment
certificates
(c) Certain percentages Prospectus Front Cover
Page
Summary of Essential
Information; The
First Trust Combined
Series; Public
Offering
(d) Certain other fees, etc. Rights of Unit Holders
payable by holders
(e) Certain profits receivable Public Offering
by depositor, principal Portfolio
underwriter, trustee or
affiliated persons
(f) Ratio of annual charges to *
income
14. Issuance of Trust's securities Rights of Unit Holders
15. Receipt and handling of payments *
from purchasers
16. Acquisition and disposition of The First Trust
underlying securities Combined Series;
Information as
Sponsor, Trustee and
Evaluator
17. Withdrawal or redemption Public Offering;
Rights of Unit
Holders
18. (a) Receipt and disposition Prospectus Front Cover
of income Page; Rights of Unit
Holders
(b) Reinvestment of Rights of Unit Holders
distributions
(c) Reserves or special funds The First Trust
Combined Series;
Rights of Unit
Holders
(d) Schedule of distributions *
19. Records, accounts and reports Rights of Unit Holders
20. Certain miscellaneous provisions Information as to
of Trust Agreement Sponsor, Trustee and
Evaluator; Other
Information
21. Loans to security holders *
22. Limitations on liability The First Trust
Combined Series;
Information as to
Sponsor, Trustee and
Evaluator
23. Bonding arrangements Contents of
Registration
Statement
24. Other material provisions of *
Trust Agreement.
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF
DEPOSITOR
25. Organization of Depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by Depositor *
27. Business of Depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to offi- *
cials and affiliated persons
of Depositor
29. Voting securities of Depositor *
30. Person controlling Depositor *
31. Payments by Depositor for *
certain services rendered to
Trust
32. Payments by Depositor for *
certain services rendered
to Trust
33. Remuneration of employees of *
Depositor for certain services
rendered to Trust
34. Remuneration of other persons *
for certain services rendered
to Trust
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of Trust's securi- Public Offering
ties by states
36. Suspension of sales of Trust's *
securities
37. Revocation of authority to *
distribute
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
(b) NASD membership of princi- Information as to
pal underwriter Sponsor, Trustee and
Evaluator
40. Certain fees received by *
principal underwriter
41. (a) Business of principal Information as to
underwriter Sponsor, Trustee and
Evaluator
(b) Branch offices of principal *
underwriter
(c) Salesmen of principal *
underwriter
42. Ownership of Trust's securities *
by certain persons
43 Certain brokerage commissions *
received by principal under-
writer
44. (a) Method of valuation Prospectus Front Cover
Summary of Essential Page; The First Trust
Information Combined Series;
Public Offering
(b) Schedule as to offering *
price
(c) Variation in offering Public Offering
price to certain
persons
45. Suspension of redemption rights *
46. (a) Redemption valuation Rights of Unit Holders
(b) Schedule as to redemption *
price
47. Maintenance of position in Public Offering
underlying securities Rights of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as to
Trustee Sponsor, Trustee and
Evaluator
49. Fees and expenses of Trustee The First Trust
Combined Series
50. Trustee's lien The First Trust
Combined Series
VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of Trust's *
securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of Trust agree- Rights of Unit Holders
ment with respect to selec-
tion or elimination of
underlying securities
(b) Transactions involving *
elimination of underlying
securities
(c) Policy regarding substitu- Rights of Unit Holders
tion or elimination of
underlying securities
(d) Fundamental policy not *
otherwise covered
53. Tax status of Trust The First Trust
Combined Series
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during *
last ten years
55.
56. Certain information regarding *
57. periodic payment certificates
58.
59. Financial statements (Instruc- Opinion of Independent
tions 1(c) to Form S-6) Auditors; Statement of
Net Assets of the
Fund
* Inapplicable, answer negative or not required.
The First Trust of Insured Municipal Bonds, Series 225
The First Trust of Insured Municipal Bonds-Multi-State:
Colorado Trust, Series 12-Long Intermediate
The First Trust Advantage: Mississippi Trust, Series 10
IN THE OPINION OF COUNSEL, INTEREST INCOME TO THE TRUSTS AND TO
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 TRUST ARE
LOCATED. CAPITAL GAINS, IF ANY, ARE SUBJECT TO TAX.
THE FIRST TRUST COMBINED SERIES 209 consists of the underlying
separate unit investment trusts set forth above. 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 (including delivery statements relating to contracts
for the purchase of certain such obligations and an irrevocable
letter of credit), 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. 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 weighted average maturity
of the Bonds in the Colorado Insured Trust-Long Intermediate is
12.36 years. The Sponsor has a limited right to substitute other
bonds in each Trust portfolio in the event of a failed contract.
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.
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 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 CORPORATION. SEE "WHY AND HOW ARE THE INSURED
TRUSTS INSURED?" ON PAGE 13. NO REPRESENTATION IS MADE AS TO ANY
INSURER'S ABILITY TO MEET ITS COMMITMENTS.
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.
The date of this Prospectus is January 26, 1994
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. 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
Summary of Essential Information
At the Opening of Business on the Date of Deposit
of the Bonds-January 26, 1994
Sponsor: Nike Securities L.P.
Trustee: United States Trust Company of New York
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
Colorado
Insured
National Trust Mississippi
Insured Series 12- Advantage
Trust Long Trust
Series 225 Intermediate Series 10
__________ ____________ ____________
<S> <C> <C> <C>
General Information
Principal Amount of Bonds in the Trusts $ 10,050,000 $ 2,950,000 $ 2,995,000
Number of Units 10,344 3,126 3,119
Fractional Undivided Interest in the Trust per Unit 1/10,344 1/3,126 1/3,119
Principal Amount (Par Value) of Bonds per Unit (1) $ 971.58 $ 943.70 $ 960.24
Public Offering Price
Aggregate Offering Price Evaluation of Bonds in the Portfolio $ 9,837,153 $ 2,988,465 $ 2,966,178
Aggregate Offering Price Evaluation per Unit $ 951.00 $ 956.00 $ 951.00
Sales Charge (2) $ 49.00 $ 44.00 $ 49.00
Public Offering Price per Unit (3) $ 1,000.00 $ 1,000.00 $ 1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 951.00 $ 956.00 $ 951.00
Redemption Price per Unit (4) $ 946.30 $ 951.28 $ 946.20
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $ 53.70 $ 48.72 $ 53.80
Excess of Sponsor's Initial Repurchase Price per Unit Over
Redemption Price per Unit $ 4.70 $ 4.72 $ 4.80
Discretionary Liquidation Amount (5) $ 2,010,000 $ 590,000 $ 599,000
</TABLE>
First Settlement Date February 2, 1994
Mandatory Termination Date December 31, 2043
Supervisory Fee Maximum of $.25 per Unit annually (6)
Evaluator's Annual Fee $0.30 per $1,000 principal amount of
Bonds at the Date of Deposit
Evaluations for purposes of sale, purchase or redemption
of Units are made as of the close
of trading (4:00 p.m. Eastern time) on the New York Stock Exchange
on each day on which it is open.
_______________________
[FN]
(1) Many unit investment trusts comprised of municipal securities
issue a number of Units such that each Unit represents approximately
$1,000 principal amount of underlying securities. The Sponsor,
on the other hand, in determining the number of Units for each
Trust, other than Discount Trusts, has elected not to follow this
format but rather to provide that number of Units which will establish
as close as possible as of the opening of business on the Date
of Deposit a Public Offering Price per Unit of $1,000.
(2) Sales charges for the Trusts, expressed as a percentage of
the Public Offering Price per Unit and in parenthesis as a percentage
of the Aggregate Offering Price Evaluation per Unit, are as follows:
4.9% (5.152%) for a National Trust and a Mississippi Trust, 5.5%
(5.820%) for other State Trusts and 4.4% (4.603%) for a Long Intermediate
Trust.
(3) Anyone ordering Units for settlement after the First Settlement
Date will pay accrued interest from such date to the date of settlement
(normally five business days after order) less distributions from
the Interest Account subsequent to the First Settlement Date.
For purchases settling on the First Settlement Date, no accrued
interest will be added to the Public Offering Price. After the
initial offering period, the Sponsor's Repurchase Price per Unit
will be determined as described under the caption "Will There
Be a Secondary Market?"
(4) See "How May Units be Redeemed?"
(5) A Trust may be terminated if the value thereof is less than
20% of the original principal amount of Bonds deposited in a Trust.
(6) Payable to an affiliate of the Sponsor.
Page 3
THE FIRST TRUST COMBINED SERIES
What is the First Trust Combined Series?
The First Trust Combined Series 209 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
designated as: The First Trust of Insured Municipal Bonds, Series
225; The First Trust of Insured Municipal Bonds-Multi-State: Colorado
Trust, Series 12-Long Intermediate and The First Trust Advantage:
Mississippi Trust, Series 10 (such Trusts being collectively referred
to herein as the "Fund"). This Series was created under the laws
of the State of New York pursuant to a Trust Agreement (the "Indenture"),
dated the Date of Deposit, with Nike Securities L.P., as Sponsor,
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 the National Insured
Trust are offered for sale to residents of the States of Indiana,
Virginia and Washington. On the 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 an irrevocable letter of credit issued by a financial
institution in the amount 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. The current market value of certain of the obligations
in a Discount Trust are significantly below face value when the
obligations are 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. 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 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.
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.
Page 4
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 noncancellable 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 Corporation
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 Corporation rating of the Bonds was
in no case less than "BBB" in the case of an Insured Trust and
"A-" in the case of an Advantage Trust, 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 and "A" in the case of an Advantage
Trust, 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 Date of Deposit, a Bond may cease to be rated or its rating
may be reduced below the minimum required as of the Date of Deposit.
Neither event requires 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?"
Certain of the Bonds in the Trust 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 Status of Unit Holders?" 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
Page 5
discount in which case the accretion of market discount is taxable
as ordinary income. See "What is the Federal Tax Status of Unit
Holders?" The current value of an original issue discount bond
reflects the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the
Bonds approach maturity.
Certain of the original issue discount bonds 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 from the Fund?" and "Other Information:
How May the Indenture be Amended or Terminated?" See "Portfolio"
for each Trust for the earliest scheduled call date and the initial
redemption price for each Bond.
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
Page 6
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.
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
Page 7
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 of Deposit 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 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 purchase, 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 its legality remains untested in most, if not all, states.
Page 8
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.
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
Page 9
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.
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, sinking fund provisions, special or extraordinary
redemption provisions or otherwise. See "Portfolio" for each Trust.
A bond subject to optional call is one which is subject to redemption
or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a bond issue is redeemed, at or
before maturity, by the proceeds of a new bond issue. A bond subject
to sinking fund redemption is one which is subject to partial
call from time to time at par or, in the case of a zero coupon
bond, at the accreted value from a fund accumulated for the scheduled
retirement of a portion of an issue prior to maturity. Special
or extraordinary redemption provisions may provide for redemption
at par (or for original issue discount bonds at issue price plus
the amount of original issue discount accreted to redemption date
plus, if applicable, some premium) of all or a portion of an issue
upon the occurrence of certain circumstances. Generally, events
that may permit the extraordinary optional redemption of Bonds
or may require mandatory redemption of Bonds include, among others:
a final determination that the interest on the Bonds is taxable;
the 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
Page 10
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.
The contracts to purchase Bonds delivered to the Trustee represent
an obligation by issuers or dealers to deliver Bonds to the Sponsor
for deposit in each Trust. Contracts are typically settled and
the Bonds delivered within a few business days subsequent to the
Date of Deposit. The percentage of the aggregate principal amount
of the Bonds of each Trust relating to "when, as and if issued"
Bonds or other Bonds with delivery dates after the date of settlement
for a purchase made on the Date of Deposit, if any, is indicated
in the section for each Trust entitled "Portfolio." Interest on
"when, as and if issued" and delayed delivery Bonds begins accruing
to the benefit of Unit holders on their dates of delivery. Because
"when, as and if issued" Bonds have not yet been issued, as of
the Date of Deposit each Trust is subject to the risk that the
issuers thereof might decide not to proceed with the offering
of such Bonds or that the delivery of such Bonds or the delayed
delivery Bonds may be delayed. If such Bonds, or replacement bonds
described below, are not acquired by a Trust or if their delivery
is delayed, the Estimated Long-Term Return and the Estimated Current
Return (if applicable) shown in the "Special Trust Information"
for that Trust may be reduced.
In the event of a failure to deliver any Bond that has been purchased
for a Trust under a contract, including those Bonds purchased
on a "when, as and if issued" basis ("Failed Bonds"), the Sponsor
is authorized under the Indenture to direct the Trustee to acquire
other specified bonds ("New Bonds") to make up the original corpus
of such Trust. The New Bonds must be purchased within twenty days
after delivery of the notice of the failed contract and the purchase
price (exclusive of accrued interest) may not exceed the amount
of funds reserved for the purchase of the Failed Bonds. The New
Bonds (i) must satisfy the criteria previously described for Bonds
originally included in the Trust, (ii) must have a fixed maturity
date of at least ten years or, in the case of a shorter term Trust,
within the range of maturities of the Bonds initially deposited
in such Trust, but not exceeding the maturity date of the Failed
Bonds, (iii) must be purchased at a price that results in a yield
to maturity and in a current return, in each case as of the Date
of Deposit, at least equal to that of the Failed Bonds, (iv) shall
not be "when, as and if issued" bonds, (v) with respect to an
Insured Trust, when acquired by such Insured Trust must be insured
by Financial Guaranty and/or AMBAC Indemnity under the insurance
policy obtained by such Insured Trust or must be insured under
an insurance policy obtained by the Bond issuer, the underwriters,
the Sponsor or others and (vi) shall have the benefit of exemption
from state taxation on interest to an equal or greater extent
than the Failed Bonds they replace. Whenever a New Bond has been
acquired for a Trust, the Trustee shall, within five days thereafter,
notify all Unit holders of such Trust of the acquisition of the
New Bond and shall, on the next monthly distribution date which
is more than 30 days thereafter, make a pro rata distribution
of the amount, if any, by which the cost to such Trust of the
Failed Bond exceeded the cost of the New Bond plus accrued interest.
Once the original corpus of a Trust is acquired, the Trustee will
have no power to vary the investment of such Trust, i.e., the
Trustee will have no managerial power to take advantage of market
variations to improve a Unit holder's investment.
If the right of limited substitution described in the preceding
paragraph shall not be utilized to acquire New Bonds in the event
of a failed contract, the Sponsor shall refund the sales charge
attributable to such failed
Page 11
contract to all Unit holders of the affected Trust, and the principal
and accrued interest (at the coupon rate of the relevant Bond
to the date the Sponsor is notified of the failure) attributable
to such failed contract shall be distributed not more than thirty
days after the determination of such failure or at such earlier
time as the Trustee in its sole discretion deems to be in the
interest of the Unit holders of the affected Trust. Unit holders
should be aware that at the time of the receipt of such refunded
principal they may not be able to reinvest such principal in other
securities at a yield equal to or in excess of the yield which
such principal would have earned to Unit holders had the Failed
Bond been delivered to the Trust. The portion of such interest
paid to a Unit holder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor
and accordingly will not be treated as tax-exempt income.
To the best knowledge of the Sponsor, there is no litigation pending
as of the Date of Deposit 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 of Deposit, 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 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.
Each Unit initially offered represents that fractional undivided
interest in such Trust as is set forth in the "Summary of Essential
Information" for each Trust. 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 opening of business on the Date of Deposit, the Estimated
Current Return (if applicable) and the Estimated Long-Term Return
are as set forth in "Special Trust Information" for each Trust.
Estimated Current Return is computed by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price.
Any change in either the Estimated Net Annual Interest Income
per Unit or the Public Offering Price will result in a change
in the Estimated Current Return. For each 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
(if applicable) indicated in the "Special Trust Information" 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 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 the "Special Trust Information" 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 as of the
Date of Deposit. 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.
In order to acquire certain of the Bonds contracted for by the
Sponsor for deposit in a Trust, it may be necessary to pay on
the settlement dates for delivery of such Bonds amounts covering
accrued interest on such
Page 12
Bonds which exceed the amounts furnished by the Sponsor. The Trustee
has agreed to pay for any amounts necessary to cover any such
excess and will be reimbursed therefor, without interest, when
funds become available from interest payments on the particular
Bonds with respect to which such payments have been made. Also,
since interest on the Bonds in a Trust does not begin accruing
as tax-exempt interest income to the benefit of Unit holders until
their respective dates of delivery, the Trustee will, in order
to obtain for the Unit holders the estimated net annual interest
income during the first year of each Trust's operations as is
indicated in the "Special Trust Information" for each Trust, reduce
its fee and, to the extent necessary, pay expenses of each Trust
in an amount equal to all or a portion of the amount of interest
that would have so accrued on such Bonds between the settlement
date of units purchased on the Date of Deposit and such dates
of delivery. If none of the Bonds in a portfolio has a delivery
date after the settlement date of Units purchased on the Date
of Deposit, the Trustee will neither reduce its fee nor pay expenses
of a Trust as described above.
Record Dates for distributions of interest are the fifteenth day
of each month. The Distribution Dates for distributions of interest
is the last day of each month in which the related Record Date
occurs. Unit holders will receive such distributions, if any,
from the Principal Account as are made as of the Record Dates
for monthly distributions.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest
on Bonds generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the 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.
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 the Trust and distributed to
Unit holders. Therefore, there will always remain an item of accrued
interest that is added to the value of the Units. If a Unit holder
sells or redeems all or a portion of his Units, he will be entitled
to receive his proportionate share of the accrued interest from
the purchaser of his Units. Since the Trustee has the use of the
funds 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 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 such
Trust (see "Portfolio" for each Insured
Page 13
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, no premiums
for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of
the aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay
to Citibank, N.A., or its successor, as its agent (the "Fiscal
Agent"), that portion of the principal of and interest on the
Bonds covered by the policy which shall become due for payment
but shall be unpaid by reason of nonpayment by the issuer of the
Bonds. The term "due for payment" means, when referring to the
principal of a Bond, its stated maturity date or the date on which
it shall have been called for mandatory sinking fund redemption
and does not refer to any earlier date on which payment is due
by reason of call for redemption (other than by mandatory sinking
fund redemption), acceleration or other advancement of maturity
and means, when referring to interest on a Bond, the stated date
for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation,
"due for payment" also means, when referring to the principal
of such Bond, the date on which such Bond has been called for
mandatory redemption as a result of such determination of taxability,
and when referring to interest on such Bond, the accrued interest
at the rate provided in such documentation to the date on which
such Bond has been called for such mandatory redemption, together
with any applicable redemption premium. The term "due for payment"
will not include, when referring to either the principal of a
Bond or the interest on a Bond, any acceleration of payment unless
such acceleration is at the sole option of Financial Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent
on the date such principal or interest becomes due for payment
or on the business day next following the day on which Financial
Guaranty shall have received notice of nonpayment, whichever is
later. The Fiscal Agent will disburse to the Trustee the face
amount of principal and interest which is then due for payment
but is unpaid by reason of nonpayment by the issuer but only upon
receipt by the Fiscal Agent of (i) evidence of the Trustee's right
to receive payment of the principal or interest due for payment
and (ii) evidence, including any appropriate instruments of assignment,
that all of the rights to payment of such principal or interest
due for payment shall thereupon vest in Financial Guaranty. Upon
such disbursement, Financial Guaranty shall become the owner of
the Bond, appurtenant coupon or right to payment of principal
or interest on such Bond and shall be fully subrogated to all
of the Trustee's rights thereunder, including the right to payment
thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained
by an Insured Trust has the right to obtain permanent insurance
with respect to such Bond (i.e., insurance to maturity of the
Bonds regardless of the identity of the holder thereof) (the "Permanent
Insurance") upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly,
any Bond in an Insured Trust is eligible to be sold on an insured
basis. It is expected that the Trustee will exercise the right
to obtain Permanent Insurance only if upon such exercise the Insured
Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium attributable to the Permanent Insurance) from
such sale in excess of the sale proceeds if such Bonds were sold
on an uninsured basis. The insurance premium with respect to each
Bond eligible for Permanent Insurance is determined
Page 14
based upon the insurability of each Bond as of the Date of Deposit
and will not be increased or decreased for any change in the creditworthiness
of such Bond.
Financial Guaranty is a wholly owned subsidiary of FGIC Corporation
(the "Corporation"), a Delaware holding company. The Corporation
is a wholly owned subsidiary of General Electric Capital Corporation
("GECC"). Neither the Corporation nor GECC is obligated to pay
the debts of or the claims against Financial Guaranty. Financial
Guaranty is domiciled in the State of New York and is subject
to regulation by the State of New York Insurance Department. As
of September 30, 1993, the total capital and surplus of Financial
Guaranty was approximately $744,722,000. 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 (212) 312-3000) or to the New York State Insurance
Department at 160 West Broadway, 18th Floor, New York, New York
10013, Attention: Property Companies Bureau (telephone number
(212) 602-0389).
In addition, Financial Guaranty is currently licensed to write
insurance in all fifty states and the District of Columbia.
The information relating to Financial Guaranty contained above
has been furnished by such corporation. The financial information
contained herein with respect to such corporation is unaudited
but appears in reports or other materials filed with state insurance
regulatory authorities and is subject to audit and review by such
authorities. No representation is made herein as to the accuracy
or adequacy of such information or as to the absence of material
adverse changes in such information subsequent to the date thereof.
AMBAC 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
Page 15
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 corporation
regulated by the Office of the Commissioner of Insurance of the
State of Wisconsin and licensed to do business in fifty states,
the District of Columbia and the Commonwealth of Puerto Rico,
with admitted assets of approximately $1,936,000,000 (unaudited)
and statutory capital of approximately $1,096,000,000 (unaudited)
as of September 30, 1993. Statutory capital consists of AMBAC
Indemnity's policyholders' surplus and statutory contingency reserve.
AMBAC Indemnity is a wholly owned subsidiary of AMBAC Inc., a
100% publicly-held company. Moody's Investors Service, Inc. and
Standard & Poor's Corporation have both assigned a triple-A claims-paying
ability rating to AMBAC Indemnity.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York,
New York 10004 and (212) 668-0340.
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 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
Page 16
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 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, 1992, MBIA had admitted assets of $2.6 billion
(audited), total liabilities of $1.7 billion (audited), and total
capital and surplus of $896 million (audited) determined in accordance
with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of September 30, 1993, MBIA
had admitted assets of $3.0 billion (unaudited), total liabilities
of $2.0 billion (unaudited), and total capital and surplus of
$951 million (unaudited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authority. Copies of MBIA's financial statements prepared in accordance
with statutory accounting practices are available from MBIA .
The address of MBIA is 113 King Street, Armonk, New York 10504.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors
Group, Inc. On January 5, 1990, MBIA acquired all of the outstanding
stock of Bond Investors Group, Inc., the parent of Bond Investors
Guaranty Insurance Company (BIG), now known as MBIA Insurance
Corp. of Illinois. Through a reinsurance agreement, BIG has ceded
all of its net insured risks, as well as its unearned premium
and contingency reserves, to MBIA and MBIA has reinsured BIG's
net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA
"Aaa" and short-term loans "MIG 1," both designated to be of the
highest quality. Standard & Poor's Corporation rates all new issues
insured by MBIA "AAA."
Capital Guaranty Insurance Company. Capital Guaranty Insurance
Company ("Capital Guaranty") was incorporated in Maryland on June
25, 1986, and is a wholly-owned subsidiary of Capital Guaranty
Corporation, a Maryland insurance holding company.
Capital Guaranty Corporation is owned by the following investors:
Constellation Investments, Inc., an affiliate of Baltimore Gas
and Electric; Fleet/Norstar Financial Group, Inc.; Safeco Corporation;
Sibag Finance Corporation, an affiliate of Siemens A.G.; and United
States Fidelity and Guaranty Company and management.
Capital Guaranty, headquartered in San Francisco, is a monoline
financial guaranty insurer engaged in the underwriting and development
of financial guaranty insurance. Capital Guaranty insures general
obligation, tax supported and revenue bonds structured as tax-exempt
and taxable securities as well as selectively insures taxable
corporate/asset backed securities. Standard & Poor's Corporation
rates the claims paying ability of Capital Guaranty "AAA."
Capital Guaranty's insured portfolio currently includes over $9
billion in total principal and interest insured. As of September
30, 1992, the total policyholders' surplus of Capital Guaranty
was approximately $113,000,000 (unaudited), and the total admitted
assets were approximately $220,000,000 (unaudited) as reported
to the Insurance Department of the State of Maryland. Financial
statements for Capital Guaranty Insurance Company, that have been
prepared in accordance with statutory insurance accounting standards,
Page 17
are available upon request. 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 Corporation
("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").
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
Page 18
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 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 the 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
Page 19
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.
Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written by Financial Security or 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 Corporation,
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.
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 Corporation has assigned to units of
each Insured Trust its "AAA" investment rating. This is the highest
rating assigned to securities by Standard & Poor's Corporation.
See "Description of Bond Ratings." The obtaining of this rating
by each Insured Trust should not be construed as an approval of
the offering of the Units by Standard & Poor's Corporation or
as a guarantee of the market value of each Insured Trust or the
Units of such Trust. Standard & Poor's Corporation has indicated
that this rating is not a recommendation to buy, hold or sell
Units nor does it take into account the extent to which expenses
of 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 Corporation "AAA" and/or Moody's Investors
Service, Inc. "Aaa" rating(s) and at the same time to have the
protection of insurance of scheduled payment of interest and principal
on the Bonds. There is, of course, no certainty that this result
will be achieved. Bonds in a Trust for which insurance has been
obtained by the Bond issuer, the underwriters, the Sponsor or
others (all of which were rated "AAA" by Standard & Poor's Corporation
and/or "Aaa" by Moody's Investors Service, Inc.) may or may not
have a higher yield than uninsured bonds rated "AAA" by Standard
& Poor's Corporation or "Aaa" by Moody's Investors Service,
Page 20
Inc. In selecting Bonds for the portfolio of each Insured Trust,
the Sponsor has applied the criteria herein before described.
Chapman and Cutler, Counsel for the Sponsor, has given an opinion
(if applicable) 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. See "What is the Federal Tax Status
of Unit Holders?"
What is the 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 provision of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subjects 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.
In the opinion of Chapman and Cutler, Counsel for the Sponsor,
under existing law:
(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 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
Page 21
must be reduced by the annual amortization of Bond premium. The
tax cost reduction requirements of said Code relating to amortization
of bond premium may, under some circumstances, result in the Unit
holder realizing a taxable gain when his Units are sold or redeemed
for an amount equal to or less than his original cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
for information relating to Bonds, if any, issued at an original
issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued). Under the Tax Act,
accretion of market discount is taxable as ordinary income; under
prior law the accretion had been treated as capital gain. Market
discount that accretes while a Trust holds a Bond would be recognized
as ordinary income by the Unit holders when principal payments
are received on the Bond, upon sale or at redemption (including
early redemption) or upon the sale or redemption of the Units,
unless a Unit holder elects to include market discount in taxable
income as it accrues. The market discount rules are complex and
Unit holders should consult their tax advisers regarding these
rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, 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.
Page 22
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 percent. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Fund for New York tax matters, under the existing income tax
laws of the State and City of New York, 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.
For information with respect to exemption from state or other
local taxes, see the sections in the Prospectus pertaining to
each Trust.
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.
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,
Page 23
legal and accounting expenses, expenses of the Trustee and other
out-of-pocket expenses. The Sponsor will not receive any fees
in connection with its activities relating to the Trust. However,
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 under "Summary of Essential Information," 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
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 after the initial public
offering period, the Evaluator will receive a fee as indicated
in the "Summary of Essential Information." The Trustee pays certain
expenses of the Trusts for which it is reimbursed by the Trust
or Trusts. After the first year the Trustee will receive for its
ordinary recurring services to a Trust a fee as indicated in the
"Special Trust Information" for each Trust. During the first year
the Trustee has agreed to lower its fee and, to the extent necessary,
pay expenses of the Trust in the amount, if any, stated under
"Special Trust Information" for each Trust. 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." Bankers Trust Company issued the
irrevocable letter of credit for the Fund and provides a line
of credit which the Sponsor may utilize to acquire securities
(which may include certain of the Bonds deposited in the Fund).
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 aggregate cost of the portfolio insurance obtained by an Insured
Trust is indicated in Note 1 of "Notes to Portfolios." 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. The Trustee will advance the initial
premium for the portfolio insurance obtained by an Insured Trust
and will recover its advancement without interest or other costs
to such Trust from interest received on Bonds in 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 in an Insured Trust 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. If the Trustee
had exercised on the Date of Deposit the right to obtain Permanent
Insurance with respect to all Bonds to which such right applies
in the Colorado Insured Trust-Long Intermediate, the aggregate
premium payable for such Permanent Insurance would have been approximately
$10,712. 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 by or in connection with its responsibilities
under the Indenture, except in the event of negligence, bad faith
or willful misconduct on its part; the expenses and costs of any
action undertaken by the Trustee to protect the Trust and the
rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee
Page 24
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 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 shall 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?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is determined by adding
to the Evaluator's determination of the aggregate offering price
of the Bonds in each Trust, an amount as indicated in the following
table. During the initial offering period, the Sponsor's Repurchase
Price is equal to the Evaluator's determination of the aggregate
offering price of the Bonds in a Trust. A National Trust consists
of The First Trust of Insured Municipal Bonds. A State Trust consists
of The First Trust of Insured Municipal Bonds-Multi-State and/or
The First Trust Advantage other than an Intermediate, Long Intermediate,
Short Intermediate or Discount Trust. An Intermediate, Long Intermediate,
Short Intermediate or Discount Trust consists of trusts so designated.
<TABLE>
<CAPTION>
Initial Offering Period (1)
Sales Charge
_____________________________
Percentage Percentage
of Public of Net
Offering Amount
Series of the Fund Price Invested
_________________ __________ _________
<S> <C> <C>
National Trust and a
Mississippi Trust 4.9% 5.152%
Other State Trusts 5.5 5.820
Long Intermediate Trust 4.4 4.603
</TABLE>
[FN]
(1) The Public Offering Price includes a proportionate share
of interest accrued but unpaid on the Bonds after the First Settlement
Date to the date of settlement. See "The First Trust Combined
Series-How is Accrued Interest Treated?"
The applicable sales charge is reduced by a discount as indicated
below for volume purchases:
<TABLE>
<CAPTION>
Discount per Unit
_______________________________________________________________________
Dollar Amount Intermediate,
of Transaction Long Intermediate Discount Trusts
at Public and Short National and (% of Public
Offering Price Intermediate Trusts State Trusts Offering Price)
____________________ __________________ ____________ ______________
<S> <C> <C> <C>
$250,000 to $499,999 $ 2.50 - -
$500,000 to $999,999 $ 5.00 $ 7.50 .75%
$1,000,000 or more $10.00 $15.00 1.50%
</TABLE>
The Public Offering Price of Units of a Trust for secondary market
purchases will be determined by adding to the Evaluator's determination
of the aggregate bid price of the Bonds in a Trust, the appropriate
sales
Page 25
charge determined in accordance with the schedule set forth below,
based upon the number of years remaining to the maturity of each
Bond in the portfolio of the Trust, adjusting the total to reflect
the amount of any cash held in or advanced to the principal account
of the Trust and dividing the result by the number of Units of
such trust then outstanding. The minimum sales charge on Units
will be 3% of the Public Offering Price (equivalent to 3.093%
of the net amount invested). For purposes of computation, Bonds
will be deemed to mature on their expressed maturity dates unless:
(a) the Bonds have been called for redemption or funds or securities
have been placed in escrow to redeem them on an earlier call date,
in which case such call date will be deemed to be the date upon
which they mature; or (b) such Bonds are subject to a "mandatory
tender," in which case such mandatory tender will be deemed to
be the date upon which they mature.
The 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 Trust 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
for secondary market transactions. 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 initial and secondary offering periods.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer except that with respect to purchases
of Units of $500,000 or more, the Sponsor will reimburse the selling
Underwriter or dealer in an amount equal to $2.50 per Unit (in
the case of a Discount Trust, .25% of the Public Offering Price).
The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any
one Underwriter or dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from such
Underwriter or dealer of units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser 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.
Page 26
On the Date of Deposit, the Public Offering Price is as indicated
in the "Summary of Essential Information" for each Trust. In addition
to fluctuations in the amount of interest accrued but unpaid on
Bonds in each Trust of the Fund, the Public Offering Price at
any time during the initial offering period will vary from the
Public Offering Price stated herein in accordance with fluctuations
in the prices of the underlying Bonds.
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 the 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.
No value has been attributed to insurance obtained by an Insured
Trust as of the date of this Prospectus. However, the Evaluator
is 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.
During the initial public offering period, a determination of
the aggregate price of the Bonds in a Trust is made by the Evaluator
on an offering 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 made subsequent to the last preceding determination.
For purposes of such determinations, the close of trading on the
New York Stock Exchange is 4:00 p.m. Eastern time. For secondary
market purposes, the Evaluator will be requested to make such
a determination, 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 Public Offering Price of the Units during the initial offering
period is equal to the offering price per Unit of the Bonds in
a Trust plus the applicable sales charge. After the completion
of the initial offering period, the secondary market Public Offering
Price will be equal to the bid price per Unit of the Bonds in
the Trust plus the applicable sales charge. The offering price
of Bonds in the Trust may be expected to be greater than the bid
price of such Bonds by approximately 1-2% of the aggregate principal
amount of such Bonds.
Although payment is normally made five business days following
the order for purchase, payment may be made prior thereto. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, 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.
Page 27
How are Units Distributed?
Until the primary distribution of the Units offered by this Prospectus
is completed, Units will be offered to the public at the Public
Offering Price, computed as described above, by the Underwriters,
including the Sponsor (see "Underwriting") and through dealers
and others. Upon completion of the initial offering, Units repurchased
in the secondary market (see "Will There be a Secondary Market?")
may be offered by this Prospectus at the secondary market public
offering price determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Fund
for sale in a number of states. Sales initially will be made to
dealers and others at prices which represent a concession or agency
commission of $32 per Unit for a National Trust and a Mississippi
Trust, $33 per Unit for other State Trusts, $30 per Unit for a
Long Intermediate Trust, and, for secondary market sales, 4.0%
of the Public Offering Price per Unit for each State or National
Trust. However, resales of Units of a Trust by such dealers and
others to the public will be made at the Public Offering Price
described in the Prospectus. 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 fourth 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. Any broker/dealer or bank will receive additional
concessions for purchases made from the Sponsor on the Date of
Deposit resulting in total concessions as contained in the following
table:
<TABLE>
<CAPTION>
Total Concession per Unit(1)
__________________________________________
250-499 500-999 1,000
Units Units Units
Series of the Fund Purchased Purchased Purchased
________________ ________ ________ ________
<S> <C> <C> <C>
National Trust and a Mississippi Trust $35.00 $37.00 $38.00
Other State Trusts $35.00 $37.00 $38.00
Long Intermediate Trust $31.00 $33.00 $33.00
</TABLE>
[FN]
(1) The applicable concession will be allotted to broker/dealers
or banks who purchase Units from the Sponsor only on the Date
of Deposit of a given Trust.
What are the Sponsor's Profits?
The Underwriters of each Trust, including the Sponsor, will receive
a gross sales commission equal to 4.9% of the Public Offering
Price of the Units for a National Trust and a Mississippi Trust
(equivalent to 5.152% of the net amount invested), 5.5% of the
Public Offering Price of the Units for other State Trusts (equivalent
to 5.820% of the net amount invested), and 4.4% of the Public
Offering Price of the Units for a Long Intermediate Trust (equivalent
to 4.603% 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?" See "Underwriting" for
information regarding the receipt of the excess gross sales commissions
by the Sponsor from the other Underwriters and additional concessions
available to Underwriters, dealers and others. In addition, the
Sponsor and the other Underwriters of each Trust may be considered
to have realized a profit or the Sponsor may be considered to
have sustained a loss, as the case may be for each Trust, in the
amount of any difference between the cost of the Bonds to each
Trust (which is based on the Evaluator's determination of the
aggregate offering price of the underlying Bonds of such Trust
on the Date of Deposit) and the cost of such Bonds of such Trust
to the Sponsor (including the cost of insurance obtained by the
Sponsor prior to the Date of Deposit for individual Bonds). See
"Underwriting" and Note 1 of "Notes to Portfolios." Such profits
or losses may be realized or sustained by the Sponsor and the
other Underwriters with respect to Bonds which were acquired by
the Sponsor from underwriting syndicates of which it and the other
Page 28
Underwriters were members. During the initial offering period,
the Underwriters also may realize profits or sustain losses from
the sale of Units to other Underwriters or as a result of fluctuations
after the Date of Deposit in the offering prices of the Bonds
and hence in the Public Offering Price received by the Underwriters.
The Sponsor has not participated as sole underwriter or manager
or member of underwriting syndicates from which any of the Bonds
in the Fund were acquired. An underwriter or underwriting syndicate
purchases bonds from the issuer on a negotiated or competitive
bid basis as principal with the motive of marketing such bonds
to investors at a profit.
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 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.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated
to do so, the Sponsor intends to maintain a market for the Units
and continuously to offer to purchase Units at prices, subject
to change at any time, based upon the aggregate bid price of the
Bonds in the portfolio of each Trust plus interest accrued to
the date of settlement. All expenses incurred in maintaining a
secondary market, other than the fees of the Evaluator, the other
expenses of the Trust and the costs of the Trustee in transferring
and recording the ownership of Units, will be borne by the Sponsor.
If the supply of Units exceeds demand, or for some other business
reason, the Sponsor may discontinue purchases of Units at such
prices. If a Unit holder wishes to dispose of his Units, he should
inquire of the Sponsor as to current market prices prior to making
a tender for redemption to the Trustee. Prospectuses relating
to certain other bond funds indicate an intention, subject to
change, on the part of the respective sponsors of such funds to
repurchase units of those funds on the basis of a price higher
than the bid prices of the securities in the funds. Consequently,
depending upon the prices actually paid, the repurchase price
of other sponsors for units of their funds may be computed on
a somewhat more favorable basis than the repurchase price offered
by the Sponsor for Units of a Trust in secondary market transactions.
As in this Fund, the purchase price per unit of such bond funds
will depend primarily on the value of the securities in the portfolio
of the fund.
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 signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Page 29
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 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 after deduction of amounts sufficient
to reimburse the Trustee, without interest, for any amounts advanced
and paid to Financial Guaranty and/or AMBAC Indemnity or to the
Sponsor as the Unit holder of record as of the First Settlement
Date will be distributed on or shortly after the last day of each
month on a pro rata basis to Unit holders of record as of the
preceding Record Date. 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 or shortly after the last day of each month. Proceeds
from the disposition of any of the Bonds of such Trust (less any
premiums due with respect to Bonds for which the Trustee has exercised
the right to obtain Permanent Insurance) received after such Record
Date and prior to the following Distribution Date will be held
in the Principal Account of such Trust and not distributed until
the next Distribution Date. The Trustee is not required to make
a distribution from the Principal Account of a Trust unless the
amount available for distribution shall equal at least $1.00 per
Unit.
The Trustee will credit to the Interest Account of each Trust
all interest received by such Trust, including that part of the
proceeds (including insurance proceeds if any, paid to an Insured
Trust) of any disposition of Bonds which represents accrued interest.
Other receipts will be credited to the Principal Account of such
Trust. The distribution to the Unit holders of a Trust as of each
Record Date will be made on the following Distribution Date or
shortly thereafter and shall consist of an amount substantially
equal to such portion of the holder's pro rata share of the estimated
annual income of such Trust after deducting estimated expenses.
Except through an advancement of its own funds, the Trustee has
no cash for distribution to Unit holders until it receives interest
payments on the Bonds in a Trust. The Trustee shall be reimbursed,
without interest, for any 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. The Trustee is not required to pay interest
on funds held in the Principal or Interest Account of a Trust
(but may itself earn interest thereon and therefore benefit from
the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct
from the Interest Account of each Trust and, to the extent funds
are not sufficient therein, from the Principal Account of each
Trust, amounts necessary to pay the expenses of such Trust. The
Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental
charges payable out of the Trust. Amounts so withdrawn shall not
be considered a part of the Trust's assets until such time as
the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from
the Interest Account and the Principal Account of a Trust such
amounts as may be necessary to cover redemption of Units of such
Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income, capital gains or principal on the participant's
Units to, among other investment vehicles, a Unit holder's checking,
bank savings, money market, insurance, reinvestment or any other
account. All such distributions, of course, are subject to the
minimum investment and sales charges, if any, of the particular
investment vehicle
Page 30
to which distributions are directed. The Trustee will notify the
participant of each distribution pursuant to the Universal Distribution
Option. The Trustee will distribute directly to the Unit holder
any distributions which are not accepted by the specified investment
vehicle. A participant may at any time, by so notifying the Trustee
in writing, elect to terminate his participation in the Universal
Distribution Option and receive directly future distributions
on his Units.
Distribution Reinvestment Option. The Sponsor has entered into
an arrangement with Oppenheimer Management Corporation which permits
any Unit holder of a Trust to elect to have each distribution
of interest income or principal, including capital gains, on his
Units automatically reinvested in shares of either the Oppenheimer
Intermediate Tax-Exempt Bond Fund (the "Intermediate Series")
or the Oppenheimer Insured Tax-Exempt Bond Fund (the "Insured
Series"). Oppenheimer Management Corporation is the investment
adviser of each Series which are open-end, diversified management
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 Series 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, including capital
gains, on the participant's Units will automatically be applied
by the Trustee to purchase shares (or fractions thereof) of a
Series without a sales charge and with no minimum investment requirements.
The shareholder service agent for each Series will mail to each
participant in the Distribution Reinvestment Option confirmations
of all transactions undertaken for such participant in connection
with the receipt of distributions from 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
Page 31
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.
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.
Accrued interest to the settlement date paid on redemption shall
be withdrawn from the Interest Account of the Trust or, if the
balance therein is insufficient, from the Principal Account of
such Trust. All other amounts paid on redemption shall be withdrawn
from the Principal Account of the Trust.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Bonds in the Trust, while the Public Offering
Price of Units during the initial offering period will be determined
on the basis of the offering price of the Bonds of such Trust,
as of the close of trading on the New York Stock Exchange on the
date any such determination is made. On the Date of Deposit the
Public Offering Price per Unit (which is based on the offering
prices of the Bonds in the Trust and includes the sales charge)
exceeded the Unit value at which Units could have been redeemed
(based upon the current bid prices of the Bonds in such Trust)
by the amount shown under "Summary of Essential Information" for
each Trust. 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) 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 the 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
Page 32
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. At the opening of business on the Date of
Deposit, the aggregate current offering price of such Bonds per
Unit exceeded the Redemption Price per Unit (based upon current
bid prices of such Bonds) by the amount indicated in the "Summary
of Essential Information."
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 may
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, 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.
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 "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.
Page 33
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 $7.5 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 August 31, 1993, the total partners' capital of Nike Securities
L.P. was $14,270,063 (unaudited). (This paragraph relates only
to the Sponsor and not to the Trust or to any series thereof or
to any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is 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.
Page 34
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
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.
Page 35
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 December
31, 2043. 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. Carter, Ledyard & Milburn, 2 Wall Street, New York,
New York 10005, will act as counsel for the Trustee and as special
counsel for the Fund for New York tax matters. For information
with respect to state and local tax matters, including the State
Trust special counsel for such matters, see the section of the
Prospectus describing each Trust appearing herein.
Experts
The statements of net assets, including the portfolios, of the
Trusts on the Date of Deposit appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young, independent
auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in
reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
Page 36
UNDERWRITING
The Underwriters named below, including the Sponsor, have severally
purchased Units in the following respective amounts:
<TABLE>
<CAPTION>
National Insured Trust, Series 225
Number of
Name Address Units
________ ________ ________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 5,794
Underwriters
McLaughlin, Piven, Vogel 30 Wall Street, Fifth Floor, New York, NY 10005 2,000
Securities, Inc.
B.C. Christopher Division 4717 Grand Ave., Suite 700, Kansas City, MO 64112 250
of Fahnestock Inc.
Dain Bosworth Incorporated Dain Bosworth Plaza, 60 S. 6th Street, 14th Floor, 250
Minneapolis, MN 55402-4422
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, 250
Chicago, IL 60601
McDonald & Company Securities, Inc. 800 Superior Street, Suite 2100, Cleveland, OH 44114 250
Stifel, Nicolaus 500 North Broadway, 16th Floor, St. Louis, MO 63102 250
& Company, Incorporated
Advest, Inc. One Commercial Plaza, 280 Trumbull Street, 18th Floor, 100
Hartford, CT 06103
Gruntal & Co., Incorporated 14 Wall Street, 14th Floor, New York, NY 10005 100
William R. Hough & Co. 100 Second Avenue South, Suite 800,
St. Petersburg, FL 33701 100
Huntleigh Securities Corporation 222 South Central, Suite 300, St. Louis, MO 63105 100
John G. Kinnard 1700 Northstar West, Minneapolis, MN 55402-9963 100
& Co., Incorporated
Morgan Keegan & Morgan Keegan Tower, 50 Front Street, Memphis, 100
Company, Incorporated TN 38103
Offerman & Co., Inc. 621 North Lilac Drive, Minneapolis, MN 55422 100
The Ohio Company 155 East Broad Street, Columbus, OH 43215 100
Oppenheimer & Co., Inc. Oppenheimer Tower, One World Financial Center, 100
New York, NY 10281
Rauscher Pierce Refsnes, Inc. Plaza of the Americas, 2200 Rauscher Pierce 100
Refsnes Tower, Dallas, TX 75201
Roney & Co. One Griswold Street, Detroit, MI 48226 100
Roosevelt & Cross Incorporated 20 Exchange Place, 47th Floor, New York, NY 10005 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, TX 75270 100
______
10,344
======
</TABLE>
<TABLE>
<CAPTION>
Colorado Insured Trust, Series 12-Long Intermediate
Number of
Name Address Units
________ ________ ________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 1,776
Underwriters
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, 750
Chicago, IL 60601
Dain Bosworth Incorporated Dain Bosworth Plaza, 60 S. 6th Street, 14th Floor, 250
Minneapolis, MN 55402-4422
Kirkpatrick Pettis 10250 Regency Circle, Suite 200, Omaha, NE 68114 250
Piper Jaffray, Inc. 222 South Ninth Street, Minneapolis, MN 55440 100
______
3,126
======
</TABLE>
Page 37
<TABLE>
<CAPTION>
Mississippi Advantage Trust, Series 10
Number of
Name Address Units
________ ________ ________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 2,469
Underwriters
Morgan Keegan & Morgan Keegan Tower, 50 Front Street, Memphis, 250
Company, Incorporated TN 38103
J.C. Bradford & Co. 330 Commerce Street, Nashville, TN 37201-1809 100
Gruntal & Co., Incorporated 14 Wall Street, 14th Floor, New York, NY 10005 100
J.J.B. Hillard, W.L. Lyons, Inc. 501 South Fourth, P.O. Box 32760, Louisville, KY 40232 100
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, FL 33710 100
_____
3,119
=====
</TABLE>
On the Date of Deposit, the Underwriters of each Trust became
the owners of the Units of such Trust and entitled to the benefits
thereof, as well as the risks inherent therein.
The Agreement Among Underwriters provides that a public offering
of the Units of each Trust will be made at the Public Offering
Price described in the Prospectus. Units may also be sold to or
through dealers and others during the initial offering period
and in the secondary market at prices representing a concession
or agency commission as described in "Public Offering-How are
Units Distributed?" on page 28.
The Sponsor will receive from the Underwriters the excess over
the gross sales commission contained in the following table:
<TABLE>
<CAPTION>
Underwriting Concession per Unit
_____________________________________________________________
100-249 250-499 500-999 1,000 or More
Units Units Units Units
Series of the Fund Underwritten Underwritten Underwritten Underwritten
__________________ ________ ________ ________ ________
<S> <C> <C> <C> <C>
National Trust and a
Mississippi Trust $35.00 $37.00 $38.00 $39.00
Other State Trusts $36.00 $38.00 $39.00 $41.00
Long Intermediate Trust $31.00 $33.00 $34.00 $34.00
</TABLE>
Underwriters, dealers, and others who, in a single month, purchase
from the Sponsor Units of any Series of The First Trust GNMA,
The First Trust of Insured Municipal Bonds, The First Trust Combined
Series or any other unit investment trust of which Nike Securities
L.P. is the Sponsor (the "UIT Units"), which sales of UIT Units
are in the following aggregate dollar amounts, will receive additional
concessions as indicated in the following table:
<TABLE>
<CAPTION>
Aggregate Monthly
Dollar Amount of
UIT Units Sold at Additional Concession
Public Offering Price (per $1,000 sold)
____________________ ___________________
<S> <C>
$ 1,000,000 - $2,499,999 $ .50
$ 2,500,000 - $4,999,999 $1.00
$ 5,000,000 - $7,499,999 $1.50
$ 7,500,000 - $9,999,999 $2.00
$ 10,000,000 - or more $2.50
</TABLE>
Aggregate Monthly Dollar Amount of UIT Units Sold at Public Offering
Price is based on settled trades for a month (excluding trades
without a sales charge at net asset value and including sales
of Units to the Sponsor in the secondary market which are resold),
net of redemptions.
In addition to any other benefits that the Underwriters may realize
from the sale of the Units of a Trust, the Agreement Among Underwriters
provides that the Sponsor will share with the other Underwriters
50% of the net
Page 38
gain, if any, represented by the difference between the Sponsor's
cost of the Bonds in connection with their acquisition (including
the cost of insurance obtained by the Sponsor prior to the Date
of Deposit for individual Bonds) and the Aggregate Offering Price
thereof on the Date of Deposit, less a charge for acquiring the
Bonds in the portfolio and for the Sponsor maintaining a secondary
market for the Units. Furthermore, any underwriter that sells
a total of 1,000 Units or more of any National Trust will receive
an additional $2.00 per Unit sold. However, such sales will not
qualify for the Aggregate Monthly Sales Program. See "What are
the Sponsor's Profits?" and Note 1 of "Notes to Portfolios."
McLaughlin, Piven, Vogel Securities, Inc. ("MPV") and Nike Securities
L.P. entered into an agreement under which MPV will receive from
Nike Securities L.P. reimbursement for certain costs and further
compensation, in addition to that described above, based on the
number of Units it underwrites or otherwise sells and on the total
Units of Nike Securities L.P. products sold.
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 reallow to any
such Underwriter or dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Sponsor, or
participates in sales programs sponsored by the Sponsor, an amount
not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to
time pursuant to objective criteria established by the Sponsor
pay fees to qualifying Underwriters or dealers for certain services
or activities which are primarily intended to result in sales
of Units of the Trusts. Such payments are made by the Sponsor
out of its own assets, and not out of the assets of the Trusts.
These programs will not change the price Unit holders pay for
their Units or the amount that the Trusts will receive from the
Units sold.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising
and sales materials compare the then current estimated returns
on the Trust and returns over specified periods on other similar
Trusts sponsored by Nike Securities L.P. with returns on taxable
investments such as corporate or U.S. Government bonds, bank CDs
and money market accounts or money market funds, each of which
has investment characteristics that may differ from those of the
Trust. U.S. Government bonds, for example, are backed by the full
faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability
of principal, but pay interest at rates that vary with the condition
of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
THE SEPARATE TRUSTS
Specific information such as the Estimated Long-Term Return, the
Estimated Current Return (if applicable), distributions and tax
status for each of the Trusts commences on the pages immediately
following.
Page 39
National Insured Trust, Series 225
<TABLE>
<CAPTION>
Special Trust Information
Monthly
<S> <C>
Calculation of Estimated Net Annual Unit Income (1)
Estimated Annual Interest Income per Unit $ 52.54
Less: Estimated Annual Expense per Unit $ 2.35
Estimated Net Annual Interest Income per Unit $ 50.19
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 50.19
Divided by 12 $ 4.18
Estimated Daily Rate of Net Interest Accrual per Unit $ .139428
Estimated Current Return Based on Public Offering Price (2) 5.02%
Estimated Long-Term Return Based on Public Offering Price (2) 5.01%
CUSIP 33734D 352
</TABLE>
Trustee's Annual Fee $1.40 per Unit, exclusive of expenses of
the Trust commencing January 26, 1995.
Distributions
First distribution of $1.81 per Unit will be paid on February
28, 1994 to Unit holders of record on February 15, 1994.
Regular distributions of $4.18 per Unit will begin on March 31,
1994 to Unit holders of record on March 15, 1994.
Computation Dates Fifteenth day of the month.
Distribution Dates Last day of the month
commencing February 28, 1994.
[FN]
(1) During the first year only, the Trustee has agreed to reduce
its fee and pay expenses of the Trust in an amount (approximately
$.05) equal to the interest that would have accrued prior to the
expected delivery dates of Bonds included in the Portfolio that
were purchased on a "when, as and if issued" or delayed delivery
basis. During the first year, Estimated Annual Interest Income
per Unit would be $52.49. Estimated Net Annual Interest Income
per Unit, Estimated Current Return Based on Public Offering Price
and Estimated Long-Term Return Based on Public Offering Price
would be as indicated above. See "What is The First Trust Combined
Series?" and "What are the Expenses and Charges?"
(2) The Estimated Current Return is calculated by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price. The Estimated Net Annual Interest Income per Unit will
vary with changes in fees and expenses of the Trustee, the Portfolio
Supervisor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Bonds while the Public
Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the
present Estimated Current Return indicated above will be realized
in the future. The Estimated Long-Term Return is calculated using
a formula which (1) takes into consideration, and determines and
factors in the relative weightings of the market values, yields
(which take into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the
Bonds in the Trust; (2) takes into account the expenses and sales
charge associated with each Unit of the Trust; and (3) takes into
effect the tax-adjusted yield from potential capital gains at
the Date of Deposit. Since the market values and estimated retirements
of the Bonds and the expenses of the Trust will change, there
is no assurance that the present Estimated 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. 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. 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. The estimated cash flows for this Trust are set forth under
"Estimated Cash Flows to Unit Holders."
Page 40
National Insured Trust Summary
The National Insured Trust, Series 225 consists of twelve obligations
of issuers located in eight states. Two Bond issues aggregating
approximately 25% of the aggregate principal amount of the Bonds
in the Trust are obligations of issuers located in Illinois. The
Bond issues in the Trust are either general obligations of governmental
entities or are revenue bonds payable from the income of a specific
project or authority. The Bonds in the Trust are divided by purpose
of issue and represent the percentage of aggregate principal amount
of the Bonds as indicated by the following table:
<TABLE>
<CAPTION>
Number of Purpose of Portfolio
Issues Issue Percentage
________ ________ ________
<C> <S> <C>
2 General Obligation 14.18%
3 Health Care 29.85%
3 Electric 17.16%
2 Multi-family Housing 16.92%
1 Transportation 14.93%
1 Miscellaneous 6.96%
</TABLE>
One of the Bond issues in the National Insured Trust is insured
by Connie Lee Insurance Company ("Connie Lee"), 2445 M Street,
N.W., Washington D.C. 20037. Connie Lee is a stock insurance company
incorporated in Wisconsin and is a wholly-owned subsidiary of
College Construction Loan Insurance Association ("CCLIA"), a District
of Columbia insurance holding company. As of September 30, 1993,
the total policyholders' surplus of Connie Lee was approximately
$104,000,000 (unaudited) and total admitted assets were approximately
$173,000,000 (unaudited), as reported to the Commissioner of Insurance
of the State of Wisconsin.
Each of two Bond issues represent approximately 15% of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
30%. None of the Bonds in the Trust are subject to call within
five years of the Date of Deposit, although certain Bonds may
be subject to an extraordinary call.
Approximately 66% of the aggregate principal amount (approximately
69% of the aggregate offering price) of the Bonds in the Trust
were purchased at a premium over par value. Certain of these Bonds
are subject to redemption pursuant to call provisions in approximately
8-10 years after the Date of Deposit. See "What Is the First Trust
Combined Series?", "National Insured Trust, Series 225-Portfolio"
and "Description of Bond Ratings."
Tax-Exempt vs. Taxable Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
published Federal tax rates scheduled to be in effect in 1994.
The table incorporates increased tax rates for higher-income taxpayers
that were included in the Revenue Reconciliation Act of 1993.
The table illustrates what you would have to earn on taxable investments
to equal the tax-exempt yield for your income tax bracket. The
taxable equivalent yields may be somewhat higher than the equivalent
yields indicated in the following table for those individuals
who have adjusted gross incomes in excess of $111,800. The table
does not reflect the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed
to phase out certain benefits of these deductions for higher income
taxpayers. These limitations, in effect, raise the maximum marginal
Federal tax rate to approximately 44% for taxpayers filing a joint
return and entitled to four personal exemptions and to approximately
41% for taxpayers filing a single return entitled to only one
personal exemption. These limitations are subject to certain maximums,
which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to
lose more than 80% of his allowable itemized deductions, with
certain exceptions.
Page 41
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________________ ______________________________________
Single Joint Tax 4.50% 5.00% 5.50%
Return Return Rate Taxable Equivalent Yield
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 15.0% 5.29 5.88 6.47
22.8 - 55.1 38.0 - 91.9 28.0 6.25 6.94 7.64
55.1 - 115.0 91.9 - 140.0 31.0 6.52 7.25 7.97
115.0 - 250.0 140.0 - 250.0 36.0 7.03 7.81 8.59
Over 250.0 Over 250.0 39.6 7.45 8.28 9.11
</TABLE>
Tax Status
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Page 42
National Insured Trust, Series 225
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Date of Deposit of the Bonds-January 26, 1994
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
________ ________________________________ ________ ________________ ________
<C> <S> <C> <C> <C>
$ 1,000,000 County Commissioners of Charles County, AAA 2003 @ 102 $ 1,025,940
Maryland, Mortgage Revenue Refunding, 2019 @ 100 S.F.
Series 1994A (Holly Station III Townhouses
Project-FHA Insured Mortgage Loan) (MBIA
Insured), 5.875%, Due 7/01/2025 (5)
1,000,000 Charleston County, South Carolina, Hospital AAA 2003 @ 102 1,010,540
Revenue (Bon Secours Health System Project) 2014 @ 100 S.F.
(FSA Insured), 5.625%, Due 8/15/2025 (5)
1,000,000 City of Chicago, Illinois, General Obligation, AAA 2004 @ 102 999,940
Project Series 1993 (FGIC Insured), 2019 @ 100 S.F.
5.50%, Due 1/01/2024 (5)
700,000 Rhode Island Convention Center Authority, AAA 2003 @ 102 719,292
Revenue, 1993 Series A (AMBAC Insured), 2014 @ 100 S.F.
5.75%, Due 5/15/2020 (5)
1,500,000 { The Illinois State Toll Highway Authority, Toll AAA 2003 @ 102 1,531,680
Highway Priority Revenue, 1992 Series A
(FGIC Insured), 5.75%, Due 1/01/2017 (5)
225,000 { Lower Colorado River Authority (Texas), Junior Lien AAA 2002 @ 102 227,972
Refunding Revenue, Fourth Supplemental 2015 @ 100 S.F.
Series (FSA Insured), 5.625%, Due 1/01/2017 (5)
700,000 * The Mayor and Council of Rockville (Maryland), AAA 2004 @ 102 709,023
Mortgage Revenue Refunding, Series 1994A 2019 @ 100 S.F.
(FHA Insured Mortgage Loan-The Summit
Apartments Project) (MBIA Insured),
5.70%, Due 1/01/2026 (5)
1,000,000 Washington Public Power Supply System, AAA 2003 @ 102 1,016,730
Nuclear Project No. 1 Refunding Revenue, 2014 @ 100 S.F.
Series 1993A (MBIA Insured),
5.70%, Due 7/01/2017 (5)
500,000 Washington Public Power Supply System, AAA 2003 @ 102 504,170
Nuclear Project No. 3, Refunding Revenue, 2013 @ 100 S.F.
Series 1993B (MBIA Insured),
5.60%, Due 7/01/2015 (5)
500,000 Weslaco, Texas, Health Facilities Development AAA 2004 @ 102 490,905
Corporation, Hospital Revenue (Knapp Medical 2015 @ 100 S.F.
Center Project), Series 1994B (Connie Lee
Insured), 5.375%, Due 6/01/2023 (5)
425,000 {{West Ottawa Public Schools, County of Ottawa, AAA 101,006
State of Michigan, 1992 Refunding (General
Obligation-Unlimited Tax) (FGIC Insured),
Zero Coupon, Due 5/01/2020 (5)
</TABLE>
Page 43
National Insured Trust, Series 225
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Date of Deposit of the Bonds-January 26, 1994
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
________ ________________________________ ________ ________________ ________
<C> <S> <C> <C> <C>
$ 1,500,000 Wisconsin Health and Educational Facilities AAA 2003 @ 102 $ 1,499,955
Authority, Revenue (Sisters of the Sorrowful Mother- 2014 @ 100 S.F.
Ministry Corporation), Series 1993C (MBIA Insured),
5.50%, Due 8/15/2019 (5)
___________ ___________
$10,050,000 $ 9,837,153
=========== ===========
<FN>
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
{ These Bonds were issued at an original issue discount on the
following dates and at the following percentages of their original
principal amount:
Date %
______ _______
Illinois State Tollway Highway Authority 9/1/92 92.605%
Lower Colorado River Authority 8/1/92 93.104%
* Sponsor's contracts for the purchase of all or a portion of
these Bonds (approximately 7% of the aggregate principal amount
of the Bonds in the Trust) are either on a "when, as and if issued"
basis or are delayed delivery Bonds and are expected to be settled
on or before February 7, 1994.
{{ 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 29, 1992 at
a price of 17.586% of their original principal amount.
For industry concentrations of the Bonds in the Trust, see "National
Insured Trust Summary."
See "Notes to Portfolios" on page 59.
Page 44
Colorado Insured Trust, Series 12-Long Intermediate
</TABLE>
<TABLE>
<CAPTION>
Special Trust Information
Monthly
<S> <C>
Calculation of Estimated Net Annual Unit Income (1)
Estimated Annual Interest Income per Unit $ 45.58
Less: Estimated Annual Expense per Unit $ 2.28
Less: Annual Premium on Portfolio Insurance per Unit $ .18
Estimated Net Annual Interest Income per Unit $ 43.12
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 43.12
Divided by 12 $ 3.59
Estimated Daily Rate of Net Interest Accrual per Unit $ .119791
Estimated Current Return Based on Public Offering Price(2)t 4.31%
Estimated Long-Term Return Based on Public Offering Price (2) 4.22%
CUSIP 33733R 188
</TABLE>
Trustee's Annual Fee $1.34 per Unit, exclusive of expenses of
the Trust commencing January 26, 1995.
Distributions
First distribution of $1.56 per Unit will be paid on February
28, 1994 to Unit holders of record on February 15, 1994.
Regular distributions of $3.59 per Unit will begin on March 31,
1994 to Unit holders of record on March 15, 1994.
Computation Dates Fifteenth day of the month.
Distribution Dates Last day of the month
commencing February 28, 1994.
[FN]
(1) During the first year only, the Trustee has agreed to reduce
its fee and pay expenses of the Trust in an amount (approximately
$.12) equal to the interest that would have accrued prior to the
expected delivery dates of Bonds included in the Portfolio that
were purchased on a "when, as and if issued" or delayed delivery
basis. During the first year, Estimated Annual Interest Income
per Unit would be $45.46. Estimated Net Annual Interest Income
per Unit, Estimated Current Return Based on Public Offering Price
and Estimated Long-Term Return Based on Public Offering Price
would be as indicated above. See "What is The First Trust Combined
Series?" and "What are the Expenses and Charges?
(2) The Estimated Current Return is calculated by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price. The Estimated Net Annual Interest Income per Unit will
vary with changes in fees and expenses of the Trustee, the Portfolio
Supervisor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Bonds while the Public
Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the
present Estimated Current Return indicated above will be realized
in the future. The Estimated Long-Term Return is calculated using
a formula which (1) takes into consideration, and determines and
factors in the relative weightings of the market values, yields
(which take into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the
Bonds in the Trust; (2) takes into account the expenses and sales
charge associated with each Unit of the Trust; and (3) takes into
effect the tax-adjusted yield from potential capital gains at
the Date of Deposit. Since the market values and estimated retirements
of the Bonds and the expenses of the Trust will change, there
is no assurance that the present Estimated 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. 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. 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. The estimated cash flows for this Trust are set forth under
"Estimated Cash Flows to Unit Holders."
Page 45
Colorado Insured Trust-Long Intermediate Summary
The Colorado Insured Trust-Long Intermediate consists of six obligations
of issuers located in Colorado. The Bond issues in the Trust are
either general obligations of governmental entities or are revenue
bonds payable from the income of a specific project or authority.
The Bonds in the Trust are divided by purpose of issue and represent
the percentage of aggregate principal amount of the Bonds as indicated
by the following table:
<TABLE>
<CAPTION>
Number of Purpose of Portfolio
Issues Issue Percentage
-------- --------------------- ----------
<C> <S> <C>
2 Health Care 37.29%
2 University and School 28.81%
1 Sewer 16.95%
1 Miscellaneous 16.95%
</TABLE>
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%. None of the Bonds in the Trust are subject
to call within five years of the Date of Deposit, although certain
Bonds may be subject to an extraordinary call.
All of the Bonds in the Trust were purchased at a premium over
par value. Certain of these Bonds are subject to redemption pursuant
to call provisions in approximately 8-9 years after the Date of
Deposit. See "What Is the First Trust Combined Series?", "Colorado
Insured Trust, Series 12-Long Intermediate-Portfolio" and "Description
of Bond Ratings."
Federal and Colorado State Tax-Free Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
combined Federal and state taxes, using published Federal tax
rates and state tax rates scheduled to be in effect in 1994. The
table incorporates increased tax rates for higher-income taxpayers
that were included in the Revenue Reconciliation Act of 1993.
For cases in which more than one state bracket falls within a
Federal bracket, the higher state bracket is combined with the
Federal bracket. The combined state and Federal tax rates shown
reflect the fact that state tax payments are currently deductible
for Federal tax purposes. The table illustrates what you would
have to earn on taxable investments to equal the tax-exempt yield
for your income tax bracket. The taxable equivalent yields may
be somewhat higher than the equivalent yields indicated in the
following table for those individuals who have adjusted gross
incomes in excess of $111,800. The table does not reflect the
effect of the limitations on itemized deductions and the deduction
for personal exemptions. They were designed to phase out certain
benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the maximum marginal Federal tax
rate to approximately 44% for taxpayers filing a joint return
and entitled to four personal exemptions and to approximately
41% for taxpayers filing a single return entitled to only one
personal exemption. These limitations are subject to certain maximums,
which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to
lose more than 80% of his allowable itemized deductions, with
certain exceptions.
Page 46
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________________ ______________________________________
Single Joint Tax 4.00% 4.50% 5.00%
Return Return Rate Taxable Equivalent Yield
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 19.3% 4.96 5.58 6.20
22.8 - 55.1 38.0 - 91.9 31.6 5.85 6.58 7.31
55.1 - 115.0 91.9 - 140.0 34.5 6.11 6.87 7.63
115.0 - 250.0 140.0 - 250.0 39.2 6.58 7.40 8.22
Over 250.0 Over 250.0 42.6 6.97 7.84 8.71
</TABLE>
Certain Considerations
The State Constitution requires that expenditures for any fiscal
year not exceed revenues for such fiscal year. By statute, the
amount of General Fund revenues available for appropriation is
based upon revenue estimates which, together with other available
resources, must exceed annual appropriations by the amount of
the unappropriated reserve (the "Unappropriated Reserve"). The
Unappropriated Reserve requirement for fiscal years 1991, 1992
and 1993 was set at 3%. For fiscal year 1992 and thereafter, General
Fund appropriations are also limited by statute to an amount equal
to the cost of performing certain required reappraisals of taxable
property plus an amount equal to the lesser of (i) five percent
of Colorado personal income or (ii) 106% of the total General
Fund appropriations for the previous fiscal year. This restriction
does not apply to any General Fund appropriations which are required
as a result of a new federal law, a final state or federal court
order or moneys derived from the increase in the rate or amount
of any tax or fee approved by a majority of the registered electors
of the State voting at any general election. In addition, the
statutory limit on the level of General Fund appropriations may
be exceeded for a given fiscal year upon the declaration of a
State fiscal emergency by the State General Assembly.
The 1991 fiscal year end fund balance was $16.3 million, which
was $62.8 million below the 3% Unappropriated Reserve requirement.
As the end of the 1992 fiscal year, the fund balance was $133.3
million, which was $49.1 million over the 3% Unappropriated Reserve
Requirement. Based on June 20, 1993 estimates, the 1993 fiscal
year ending fund balance is expected to be $281.8 million, or
$189.7 million over the 3% required Unappropriated Reserve.
On November 3, 1992, voters in Colorado approved a constitutional
amendment (the "Amendment") which, in general, became effective
December 31, 1992, and could restrict the ability of the State
and local governments to increase revenues and impose taxes. The
Amendment applies to the State and all local governments, including
home rule entities ("Districts"). Enterprises, defined as government-owned
businesses authorized to issue revenue bonds and receiving under
10% of annual revenue in grants from all Colorado state and local
governments combined, are excluded from the provision of the Amendment.
The provisions of the Amendment are unclear and will probably
require judicial interpretation. Among other provisions, beginning
November 4, 1992, the Amendment requires voter approval prior
to tax increases, creation of debt, or mill levy or valuation
for assessment ratio increases. The Amendment also limits increases
in government spending and property tax revenues to specified
percentages. The Amendment requires that District property tax
revenues yield no more than the prior year's revenues adjusted
for inflation, voter approved changes and (except with regard
to school districts) local growth in property values according
to a formula set forth in the Amendment. School districts are
allowed to adjust tax levies for changes in student enrollment.
Pursuant to the Amendment, local government spending is to be
limited by the same formula as the limitation for property tax
revenues. The Amendment limits increases in expenditures from
the State general fund and program revenues (cash funds) to the
growth in inflation plus the percentage change in State population
in the prior calendar year. The basis for initial spending and
revenue limits are fiscal year 1992 spending and 1991 property
taxes collected in 1992. The basis for spending and revenue limits
for fiscal year 1994 and later years will be the prior fiscal
year's spending and property taxes collected
Page 47
in the prior calendar year. Debt service charges, reduction and
voter-approved revenue changes are excluded from the calculation
bases. The Amendment also prohibits new or increased real property
transfer tax rates, new State real property taxes and local District
income taxes.
According to the Colorado Economic Perspective, Fourth Quarter,
FY 1992-93, June 20, 1993 (the "Economic Report"), inflation for
1992 was 3.7% and population grew at the rate of 2.7% in Colorado.
Accordingly, under the Amendment, increases in State expenditures
during the 1994 fiscal year will be limited to 6.4% over expenditures
during the 1993 fiscal year. The 1993 fiscal year is the base
year for calculating the limitation for the 1994 fiscal year.
For the 1993 fiscal year, the Office of State Planning and Budgeting
estimates that general fund revenues will total $3,341.7 million
and that program revenues (cash funds) will total $1,753.4 million,
or total estimated base revenues of $5,095.1 million. Expenditures
for the 1994 fiscal year therefore, cannot exceed $5,421.2 million.
However, the 1994 fiscal year general fund and program revenues
(cash funds) are projected to be only $5,220.4 million, or $200.8
million less than expenditures allowed under the spending limitation.
There is also a statutory restriction on the amount of annual
increases in taxes that the various taxing jurisdictions in Colorado
can levy without electoral approval. This restriction does not
apply to taxes levied to pay general obligation debt.
As the State experienced revenue shortfalls in the mid-1980s,
it adopted various measures, including impoundment of funds by
the Governor, reduction of appropriations by the General Assembly,
a temporary increase in the sales tax, and deferral of certain
tax reduction and inter-fund borrowings. On a GAAP basis, the
State had unrestricted General Fund balances at June 30 of approximately
$100.3 million in fiscal year 1988, $134.4 million in fiscal year
1989, $116.6 million in fiscal year 1990, $16.3 million in fiscal
year 1991, and $133.3 million in fiscal year 1992. The fiscal
year 1993 unrestricted general fund is currently estimated to
be $281.8 million.
For fiscal year 1992, the following tax categories generated the
following respective revenue percentages of the State's $2,995.8
million total gross receipts: individual income tax rates represented
53.7% of gross fiscal year 1992 receipts; excise taxes represented
33.4% of gross fiscal year 1992 receipts; and corporate income
taxes represented 3.7% of gross fiscal year 1992 receipts. The
final budget for fiscal year 1993 projects general fund revenues
of approximately $3,341.7 million and appropriations of approximately
$3,046.7 million. The percentages of general fund revenue generated
by type of tax for fiscal year 1993 are not expected to be significantly
different from fiscal year 1992 percentages.
Under its constitution, the State of Colorado is not permitted
to issue general obligation bonds secured by the full faith and
credit of the State. However, certain agencies and instrumentalities
of the State are authorized to issue bonds secured by revenues
from specific projects and activities. The State enters into certain
lease transactions which are subject to annual renewal at the
option of the State. In addition, the State is authorized to issue
short-term revenue anticipation notes. Local government units
in the State are also authorized to incur indebtedness. The major
source of financing for such local government indebtedness is
an ad valorem property tax. In addition, in order to finance public
projects, local governments in the State can issue revenue bonds
payable from the revenues of a utility or enterprise or from the
proceeds of an excise tax, or assessment bonds payable from special
assessments. Colorado local governments can also finance public
projects through leases which are subject to annual appropriation
at the option of the local government. Local governments in Colorado
also issue tax anticipation notes. The Amendment requires prior
voter approval for the creation of any multiple fiscal year debt
or other financial obligation whatsoever, except for refundings
at a lower rate or obligations of an enterprise.
Based on data published by the State of Colorado, Office of State
Planning and Budgeting as presented in the Economic Report, over
50% of non-agricultural employment in Colorado in 1992 was concentrated
in the retail and wholesale trade and service sectors, reflecting
the importance of tourism to the State's economy and of Denver
as a regional economic and transportation hub. The government
and manufacturing sectors followed as the fourth and fifth largest
employment sectors in the State, representing approximately 18.3%
and 11.5%, respectively, of non-agricultural employment in the
State in 1992.
Page 48
According to the Economic Report, during the first quarter of
1993, 45,900 net new jobs were generated in the Colorado economy,
an increase of 24.4% over the first quarter of 1992. However,
the unemployment rate rose from an average of 5.5% during the
first quarter of 1992 to 5.8% during the first quarter of 1993.
Total retail sales increased by 9.8% during the first quarter
of 1993 as compared to the same period in 1992.
Personal income rose 6.6% in Colorado during 1992 and 5.5% in
1991. In 1992, Colorado was the twelfth fastest growing state
in terms of personal income growth. However, because of heavy
migration into the state and a large increase in low-paying retail
sector jobs, per capita personal income in Colorado increased
by only 3.8% in 1992, 0.1% below the increase in per capita personal
income for the nation as a whole.
Economic conditions in the State may have continuing effects on
other governmental units within the State (including issuers of
the Bonds in the Colorado Trust), which, to varying degrees, have
also experienced reduced revenues as a result of recessionary
conditions and other factors.
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers in the Colorado
Trust are subject. Additionally, many factors including national
economic, social and environmental policies and conditions, which
are not within the control of the issuers of Bonds, could have
an adverse impact on the financial condition of the State and
various agencies and political subdivisions located in the State.
The Sponsor is unable to predict whether or to what extent such
factors or other factors may affect the issuers of Bonds, the
market value or marketability of the Bonds or the ability of the
respective issuers of the Bonds acquired by the Colorado Trust
to pay interest on or principal of the Bonds.
Colorado Tax Status
Neither the Sponsor nor its counsel have independently examined
the Bonds to be deposited and held in the Trust. However, although
Chapman and Cutler expresses no opinion with respect to the issuance
of the Bonds, in rendering its opinion expressed herein, it has
assumed that: (i) the Bonds were validly issued, (ii) the interest
thereon is excludable from gross income for Federal income tax
purposes, and (iii) interest on the Bonds, if received directly
by a Unit holder, would be exempt from the income tax imposed
by the State that is applicable to individuals and corporations
(the "State Income Tax"). This opinion does not address the taxation
of persons other than full time residents of Colorado.
In the opinion of Chapman and Cutler, Special Counsel to the Fund
for Colorado tax matters, under existing law:
Because Colorado income tax law is based upon the Federal law,
the Colorado Trust is not an association taxable as a corporation
for purposes of Colorado income taxation.
With respect to Colorado Unit holders, in view of the relationship
between Federal and Colorado tax computation described above:
Each Colorado Unit holder will be treated as owning a pro rata
share of each asset of the Colorado Trust for Colorado income
tax purposes in the proportion that the number of Units of such
Trust held by the Unit holder bears to the total number of outstanding
Units of the Colorado Trust, and the income of the Colorado Trust
will therefore be treated as the income of each Colorado Unit
holder under Colorado law in the proportion described;
Interest on Bonds that would not be includable in income for Colorado
income tax purposes when paid directly to Colorado Unit holder
will be exempt from Colorado income taxation when received by
the Colorado Trust and attributed to such Colorado Unit holder
and when distributed to such Colorado Unit holder;
Any proceeds paid under an insurance policy or policies, if any,
issued to a Colorado Insured Trust with respect to the Bonds in
the Colorado Trust which represent maturing interest on defaulted
obligations held by the Trustee will be excludable from Colorado
adjusted gross income if, and to the same extent as, such interest
would have been so excludable if paid in the normal course by
the issuer of the defaulted obligations;
Page 49
Any proceeds paid under individual policies obtained by the Bond
issuer, the underwriters, the Sponsor or others which represent
maturing interest on defaulted obligations held by the Trustee
will not be includable in income for Colorado income tax purposes
if, and to the same extent as, such interest would not have been
so includable if paid in the normal course by the issuer of the
defaulted obligations;
Each Colorado Unit holder will realize taxable gain or loss when
the Colorado Trust disposes of a Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Colorado Unit
holder redeems or sells Units at a price that differs from original
cost as adjusted for amortization of bond discount or premium
and other basis adjustments (including any basis reduction that
may be required to reflect a Colorado Unit holder's share of interest,
if any, accruing on Bonds during the interval between the Colorado
Unit holder's settlement date and the date such Bonds are delivered
to the Colorado Trust, if later);
Tax cost reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Colorado Unit
holders realizing taxable gain when their Units are sold or redeemed
for an amount equal to or less than their original cost; and
If interest on indebtedness incurred or continued by a Colorado
Unit holder to purchase Units in the Colorado Trust is not deductible
for federal income tax purposes, it also will be non-deductible
for Colorado income tax purposes.
Unit holders should be aware that all tax-exempt interest, including
their share of interest on the Bonds paid to the Colorado Trust,
is taken into account for purposes of determining eligibility
for the Colorado Property Tax/Rent/Heat Rebate.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Page 50
Colorado Insured Trust, Series 12-Long Intermediate
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Date of Deposit of the Bonds-January 26, 1994
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
________ ________________________________ ________ ________________ ________
<C> <S> <C> <C> <C>
$ 500,000 Board of Trustees of the Colorado School of AAA 2003 @ 100 $ 504,830
Mines, Auxiliary Facilities, Refunding and 2005 @ 100 S.F.
Improvement Revenue, Series 1993 (MBIA
Insured), 4.875%, Due 12/01/2007 (5)
350,000 * City of Colorado Springs, Colorado, Revenue A+(8) 352,828
(The Colorado College Project), Series 1994,
4.70%, Due 6/01/2004
500,000 Denver Metropolitan Major League Baseball AAA 2002 @ 100 501,735
Stadium District, Sales Tax Refunding Revenue
(Baseball Stadium Project), Series 1994 (FGIC
Insured), 4.70%, Due 10/01/2006 (5)
600,000 Mesa County, Colorado, Revenue, Series 1994 AAA 2003 @ 102 616,242
(Sisters of Charity of Leavenworth Health
Services Corporation) (MBIA Insured),
4.90%, Due 12/01/2005 (5)
500,000 Metro Wastewater Reclamation District, AAA 2003 @ 100 509,000
Colorado, Sewer Refunding, Series 1993B (MBIA
Insured), 4.75%, Due 4/01/2004 (5)
500,000 The Poudre Valley Hospital District, Larimer AAA 2003 @ 101 503,830
County, Colorado, Hospital Revenue Refunding, 2007 @ 100 S.F.
Series 1993 (AMBAC Insured),
5.00%, Due 12/01/2008 (5)
___________ ___________
$2,950,000 $2,988,465
=========== ===========
</TABLE>
[FN]
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
* Sponsor's contracts for the purchase of all or a portion of
these Bonds (approximately 12% of the aggregate principal amount
of the Bonds in the Trust) are either on a "when, as and if issued"
basis or are delayed delivery Bonds and are expected to be settled
on or before February 10, 1994.
For industry concentrations of the Bonds in the Trust, see "Colorado
Insured Trust-Long Intermediate Summary."
See "Notes to Portfolios" on page 59.
Page 51
Mississippi Advantage Trust, Series 10
<TABLE>
<CAPTION>
Special Trust Information
Monthly
<S> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 51.31
Less: Estimated Annual Expense per Unit $ 2.33
Estimated Net Annual Interest Income per Unit $ 48.98
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 48.98
Divided by 12 $ 4.08
Estimated Daily Rate of Net Interest Accrual per Unit $ .136062
Estimated Current Return Based on Public Offering Price (1) 4.90%
Estimated Long-Term Return Based on Public Offering Price (1) 4.87%
CUSIP 33732C 869
</TABLE>
Trustee's Annual Fee $1.39 per Unit, exclusive of expenses of
the Trust commencing January 26, 1994.
Distributions
First distribution of $1.77 per Unit will be paid on February
28, 1994 to Unit holders of record on February 15, 1994.
Regular distributions of $4.08 per Unit will begin on March 31,
1994 to Unit holders of record on March 15, 1994.
Computation Dates Fifteenth day of the month.
Distribution Dates Last day of the month
commencing February 28, 1994.
[FN]
(1) The Estimated Current Return is calculated by dividing the
Estimated Net Annual Interest Income per Unit by the Public Offering
Price. The Estimated Net Annual Interest Income per Unit will
vary with changes in fees and expenses of the Trustee, the Portfolio
Supervisor and the Evaluator and with the principal prepayment,
redemption, maturity, exchange or sale of Bonds while the Public
Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the
present Estimated Current Return indicated above will be realized
in the future. The Estimated Long-Term Return is calculated using
a formula which (1) takes into consideration, and determines and
factors in the relative weightings of the market values, yields
(which take into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the
Bonds in the Trust; (2) takes into account the expenses and sales
charge associated with each Unit of the Trust; and (3) takes into
effect the tax-adjusted yield from potential capital gains at
the Date of Deposit. Since the market values and estimated retirements
of the Bonds and the expenses of the Trust will change, there
is no assurance that the present Estimated 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. 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. 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. The estimated cash flows for this Trust are set forth under
"Estimated Cash Flows to Unit Holders."
Page 52
Mississippi Advantage Trust Summary
The Mississippi Advantage Trust consists of seven obligations
of issuers located in Mississippi. The Bond issues in the Trust
are either general obligations of governmental entities or are
revenue bonds payable from the income of a specific project or
authority. The Bonds in the Trust are divided by purpose of issue
and represent the percentage of aggregate principal amount of
the Bonds as indicated by the following table:
<TABLE>
<CAPTION>
Number of Purpose of Portfolio
Issues Issue Percentage
________ ________ ________
<C> <S> <C>
3 General Obligation 42.07%
2 Health Care 32.89%
1 Electric 16.69%
1 Sewer 8.35%
</TABLE>
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
88%. The largest such issue represents approximately 19%. Approximately
17% of the aggregate principal amount of the Bonds in the Trust
are subject to call within five years of the Date of Deposit,
and certain Bonds may be subject to an extraordinary call.
Approximately 62% of the aggregate principal amount (approximately
63% of the aggregate offering price) of the Bonds in the Trust
were purchased at a premium over par value. Certain of these Bonds
are subject to redemption pursuant to call provisions in approximately
4-10 years after the Date of Deposit. See "What Is the First Trust
Combined Series?", "Mississippi Advantage Trust, Series 10-Portfolio"
and "Description of Bond Ratings."
Federal and Mississippi State Tax-Free Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
combined Federal and state taxes, using published Federal tax
rates and state tax rates scheduled to be in effect in 1994. The
table incorporates increased tax rates for higher-income taxpayers
that were included in the Revenue Reconciliation Act of 1993.
For cases in which more than one state bracket falls within a
Federal bracket, the higher state bracket is combined with the
Federal bracket. The combined state and Federal tax rates shown
reflect the fact that state tax payments are currently deductible
for Federal tax purposes. The table illustrates what you would
have to earn on taxable investments to equal the tax-exempt yield
for your income tax bracket. The taxable equivalent yields may
be somewhat higher than the equivalent yields indicated in the
following table for those individuals who have adjusted gross
incomes in excess of $111,800. The table does not reflect the
effect of the limitations on itemized deductions and the deduction
for personal exemptions. They were designed to phase out certain
benefits of these deductions for higher income taxpayers. These
limitations, in effect, raise the maximum marginal Federal tax
rate to approximately 44% for taxpayers filing a joint return
and entitled to four personal exemptions and to approximately
41% for taxpayers filing a single return entitled to only one
personal exemption. These limitations are subject to certain maximums,
which depend on the number of exemptions claimed and the total
amount of the taxpayer's itemized deductions. For example, the
limitation on itemized deductions will not cause a taxpayer to
lose more than 80% of his allowable itemized deductions, with
certain exceptions.
Page 53
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
Single Joint Tax 4.50% 5.00% 5.50%
Return Return Rate Taxable Equivalent Yield
________ ________ _______ _____ _____ _____
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 19.3% 5.58 6.20 6.82
22.8 - 55.1 38.0 - 91.9 31.6 6.58 7.31 8.04
55.1 - 115.0 91.9 - 140.0 34.5 6.87 7.63 8.40
115.0 - 250.0 140.0 - 250.0 39.2 7.40 8.22 9.05
Over 250.0 Over 250.0 42.6 7.84 8.71 9.58
</TABLE>
Certain Considerations
Investors should be aware that the State of Mississippi ranks
50th among the fifty states in per capita total personal income,
largely due to a lack of an educated work force, a smaller percentage
of the population in the work force, and higher unemployment rates
as compared to the national average. Economic conditions in Mississippi
are improving, as evidenced by an increase in per capita total
personal income of 5.8% in 1992 while the per capita total personal
income in the United States increased by 3.9%. However, the gross
State product rose only 4.2% in 1992 compared to a rise in the
United States gross domestic product of 4.8%.
The manufacturing sector, a substantial contributor to Mississippi's
economy, has experienced varied growth in recent years. Manufacturing
employment increased from 238,500 in 1988 to 243,400 in 1989 while
dropping to 241,800 in 1990, resulting in slow growth for the
State's economy. Job openings in the manufacturing sector are
projected to be very limited due to the substitution of more sophisticated
equipment for labor. However, manufacturing jobs increased 0.5%
in 1992, making manufacturing jobs in 1992 22% of Mississippi's
total non-agricultural employment. It is predicted that manufacturing
jobs will decline at an annual average rate of 0.4% through 1996,
with most of the losses occurring in the apparel industry. Employment
in contract construction and wholesale and retail trade was up
in 1992. However, employment in mining, transportation and public
utilities suffered declines. Total employment in Mississippi is
projected to rise 1.2% in 1994. Mississippi's strongest employment
growth is expected to occur in such services as finance, insurance
and real estate.
General obligation bonds of the State of Mississippi are currently
rated Aa by Moody's Investors Services, Inc. and AA- by Standard
& Poor's Corporation. As of January 19, 1994, Mississippi had
approximately $684,554,062 of outstanding General Obligation Bonds
payable from the General Fund or General Fund revenues and self-supporting
General Obligation Bonds which are also secured by the full faith
and credit of the State. In addition, the State has approximately
$91,076,113 of Revenue Bonds.
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete description of
all adverse conditions to which the issuers in the Mississippi
Trust are subject. Additionally, many factors including national
economic, social and environmental policies and conditions, which
are not within the control of the issuers of the Bonds, could
affect or could have an adverse impact on the financial condition
of the State, various agencies and political subdivisions and
private businesses located in the State. The Sponsor is unable
to predict whether or to what extent such factors or other factors
may affect the issuers of Bonds, the market value or marketability
of the Bonds or the ability of the respective issuers of the Bonds
acquired by the Mississippi Trust to pay interest on or principal
of the Bonds.
Mississippi Tax Status
The assets of the Mississippi Trust will consist of interest bearing
obligations issued by, or on behalf of, the State of Mississippi,
and counties, municipalities, authorities and other political
subdivisions thereof and may consist of such bonds issued by the
Commonwealth of Puerto Rico (the "Bonds").
Page 54
In the opinion of Phelps Dunbar, Tupelo, Mississippi, Special
Counsel to the Fund for Mississippi tax matters under existing
Mississippi income tax law applicable to taxpayers whose income
is subject to Mississippi income taxation:
For purposes of Mississippi income taxation, the Mississippi Trust
will be recognized as a trust and not as a corporation or as an
association taxable as a corporation. The Mississippi Trust will
not be subject to Mississippi income tax.
With respect to Unit holders who are residents of Mississippi,
the income of the Mississippi Trust which is allocable to each
such Unit holder will be treated as the income of such Unit holder
under the Mississippi income tax laws. Interest on the Underlying
Bonds which would be exempt from Mississippi income tax if directly
received by such Unit holder will retain its status as tax-exempt
interest when received by the Mississippi Trust and distributed
to such Unit holder.
To the extent that gain or loss is recognized for Federal income
tax purposes, each Unit holder of the Mississippi Trust will recognize
gain or loss for Mississippi income tax purposes if the Trustee
disposes of a Bond (whether by sale, payment on maturity, retirement
or otherwise) or if the Unit holder redeems or sells such Units.
Due to the amortization of Bond premium and other basis adjustments,
a Unit holder, under some circumstances, may realize taxable gain
when his or her Units are sold or redeemed for an amount equal
to their original cost.
The Units are not exempt from Mississippi estate tax and are subject
to assessment for Mississippi ad valorem tax purposes. (However,
it is not the current practice of the State of Mississippi to
assess intangible personal property owned by individuals or corporations,
other than certain financial institutions, for ad valorem tax
purposes.)
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Page 55
Mississippi Advantage Trust, Series 10
Portfolio
At the Opening of Business
On the Date of Deposit of the Bonds-January 26, 1994
<TABLE>
<CAPTION>
Aggregate Issue Represented by Sponsor's Redemption Cost to
Principal Contracts to Purchase Bonds (1) Rating (2) Provisions (3) the Trust
________ ________________________________ ________ ________________ _________
<C> <S> <C> <C> <C>
$ 575,000 General Obligation School, Series 1994 of the AAA 2004 @ 100 $ 537,487
DeSoto County School District, DeSoto County,
Mississippi (MBIA Insured),
4.75%, Due 2/01/2014
500,000 Jackson County, Mississippi, Pollution Control AAA 1998 @ 102 501,340
Revenue Refunding, Series 1993 (Mississippi
Power Company Project) (MBIA Insured),
5.65%, Due 11/01/2023
185,000 Lee County, Mississippi, General Obligation A (4) 2001 @ 100 182,852
Improvement, Series 1993A, 5.10%,
Due 12/01/2011
120,000 []Lee County, Mississippi, General Obligation A (4) 2001 @ 100 117,854
Improvement, Series 1993A, 5.10%,
Due 12/01/2012
160,000 []Lee County, Mississippi, General Obligation A (4) 2001 @ 100 158,142
Public Facility, Series 1993B, 5.10%,
Due 12/01/2011
100,000 []Lee County, Mississippi, General Obligation A (4) 2001 @ 100 98,212
Public Facility, Series 1993B, 5.10%,
Due 12/01/2012
120,000 General Obligation Refunding, Series 1993B A (4) 2004 @ 100 121,415
of Madison County, Mississippi, 5.35%,
Due 6/01/2010
485,000 Medical Center Educational Building A- 2004 @ 102 495,913
Corporation, Revenue, Series 1993 (University 2015 @ 100 S.F.
of Mississippi Medical Center Project),
5.90%, Due 12/01/2023
500,000 Mississippi Hospital Equipment and Facilities AAA 2003 @ 102 502,030
Authority, Hospital Revenue, Series 1993 2014 @ 100 S.F.
(Singing River Hospital System Project)
(FSA Insured), 5.50%, Due 3/01/2023
250,000 Southeastern Regional Wastewater Management A (4) 2001 @ 102 250,933
District (Mississippi), Wastewater Treatment
Facilities Junior Lien Revenue, Series 1993,
5.25%, Due 12/01/2011
___________ ___________
$2,995,000 $2,966,178
=========== ===========
</TABLE>
[FN]
[] These Bonds are of the same issue as another Bond in the Trust.
For industry concentrations of the Bonds in the Trust, see "Mississippi
Advantage Trust Summary."
See "Notes to Portfolios" on page 59.
Page 56
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST COMBINED SERIES 209
We have audited the accompanying statements of net assets, including
the portfolios, of The First Trust of Insured Municipal Bonds,
Series 225; The First Trust of Insured Municipal Bonds-Multi-State:
Colorado Trust, Series 12-Long Intermediate and The First Trust
Advantage: Mississippi Trust, Series 10, comprising The First
Trust Combined Series 209 (the Trusts) as of the opening of business
on January 26, 1994. These statements of net assets are the responsibility
of the Trusts' Sponsor. Our responsibility is to express an opinion
on these statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statements
of net assets are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statements of net assets. Our procedures included
confirmation of the letter of credit held by the Trustee and allocated
among the Trusts on January 26, 1994. An audit also includes assessing
the accounting principles used and significant estimates made
by the Sponsor, as well as evaluating the overall presentation
of the statements of net assets. We believe that our audit of
the statements of net assets provides a reasonable basis for our
opinion.
In our opinion, the statements of net assets referred to above
present fairly, in all material respects, the financial position
of The First Trust of Insured Municipal Bonds, Series 225; The
First Trust of Insured Municipal Bonds-Multi-State: Colorado Trust,
Series 12-Long Intermediate and The First Trust Advantage: Mississippi
Trust, Series 10, comprising The First Trust Combined Series 209
at the opening of business on January 26, 1994 in conformity with
generally accepted accounting principles.
ERNST & YOUNG
Chicago, Illinois
January 26, 1994
Page 57
Statements of Net Assets
The First Trust Combined Series 209
At the Opening of Business on the Date of Deposit
January 26, 1994
<TABLE>
<CAPTION>
Colorado
Insured
National Trust Mississippi
Insured Series 12- Advantage
Trust Long Trust
Series 225 Intermediate Series 10
__________ _________ ___________
NET ASSETS
<S> <C> <C> <C>
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $ 9,837,153 $ 2,988,465 $ 2,966,178
Accrued interest on underlying bonds (2)(3)(5) 78,034 20,050 29,430
___________ ___________ ___________
9,915,187 3,008,515 2,995,608
Less distributions payable (5) 78,034 20,050 29,430
___________ ___________ ___________
Net assets $ 9,837,153 $ 2,988,465 $ 2,966,178
=========== =========== ===========
Outstanding Units 10,344 3,126 3,119
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C> <C> <C>
Cost to investors (4) $10,344,009 $ 3,126,009 $ 3,119,009
Less gross underwriting commissions (4) 506,856 137,544 152,831
___________ ___________ ___________
Net assets $ 9,837,153 $ 2,988,465 $ 2,966,178
=========== =========== ===========
</TABLE>
[FN]
NOTES TO STATEMENTS OF NET ASSETS
(1) The aggregate offering price of the bonds for each Trust at
the opening of business on the Date of Deposit and the cost to
the applicable Trust are the same. The offering price is determined
by the Evaluator.
(2) Pursuant to delivery statements relating to contracts to purchase
bonds, an irrevocable letter of credit has been allocated among
the Trusts as collateral. The amount of available letter of credit
and the amount expected to be utilized for each Trust is shown
below. The amount expected to be utilized is (a) the cost to the
respective Trust of the principal amount of the bonds to be purchased,
(b) accrued interest on those bonds to the Date of Deposit, and
(c) accrued interest on those bonds from the Date of Deposit to
the expected dates of delivery of the bonds, which is exclusive
of the amount by which the Trustee has agreed to reduce its fees
during the first year ($554 in the National Insured Trust and
$366 in the Colorado Insured Trust-Long Intermediate).
<TABLE>
<CAPTION>
Accrued
Aggregate Accrued Interest to
Letter of Credit Offering Interest to Expected
To be Price of Date of Dates of
Trust Allocated Utilized Bonds Deposit Delivery
________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
National Insured Trust,
Series 225 $10,000,000 $9,918,661 $9,837,153 $78,034 $3,474
Colorado Insured
Trust, Series 12-
Long Intermediate $3,100,000 $3,009,673 $2,988,465 $20,050 $1,158
Mississippi Advantage
Trust, Series 10 $3,000,000 $2,995,761 $2,966,178 $29,430 $ 153
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the National
Insured Trust and the Colorado Insured Trust-Long Intermediate
and delivered to the Trustee has been obtained by each Insured
Trust or has been obtained directly by the Bond issuer, the underwriters,
the Sponsor or others prior to the Date of Deposit.
Page 58
(4) The aggregate cost to investors (exclusive of accrued interest)
and the aggregate gross underwriting commissions of 4.9% (4.4%
for the Colorado Insured Trust-Long Intermediate) are computed
assuming no reduction of sales charge for quantity purchases.
(5) The Trustee will advance to each Trust the amount of net interest
accrued to February 2, 1994, the First Settlement Date, for distribution
to the Sponsor as the Unit holder of record.
NOTES TO PORTFOLIOS
The following Notes to Portfolios pertain to the information contained
in the Trust Portfolios (the National Insured Trust, Series 225
on pages 43-44, the Colorado Insured Trust, Series 12-Long Intermediate
on page 51, and the Mississippi Advantage Trust, Series 10 on
page 56).
(1) Sponsor's contracts to purchase Bonds were entered into during
the period from December 10, 1993 to January 24, 1994. All contracts
to purchase Bonds are expected to be settled on or prior to February
2, 1994 unless otherwise indicated.
Other information regarding the Bonds in each Trust on the Date
of Deposit is as follows:
<TABLE>
<CAPTION>
Aggregate Annual Annual
Offering Cost of Profit Or Insurance Interest
Price of Bonds To (Loss) To Bid Price Cost To Income
Trust Bonds Sponsor Sponsor of Bonds Trust to Trust
__________________ ________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
National Insured
Trust, Series 225 $9,837,153 $9,720,967 $116,186 $9,788,523 $ - $543,431
Colorado Insured
Trust, Series 12-
Long Intermediate $2,988,465 $2,945,873 $ 42,592 $2,973,715 $ 560 $142,475
Mississippi Advantage
Trust, Series 10 $2,966,178 $2,948,567 $ 17,611 $2,951,203 $ - $160,038
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor
reflects underwriting profits or losses received or incurred by
the Sponsor through its participation in underwriting syndicates
but such amounts reflect the cost of insurance obtained by the
Sponsor prior to the Date of Deposit for individual Bonds. The
Offering and Bid Prices of Bonds were determined by Securities
Evaluation Service, Inc., certain shareholders of which are officers
of the Sponsor.
(2) All ratings are by Standard & Poor's Corporation unless otherwise
indicated (NR indicates "No Rating"). Such ratings were obtained
from a municipal bond information reporting service.
(3) There is shown under this heading the year in which each issue
of Bonds initially is redeemable and the redemption price for
that year or, if currently redeemable, the redemption price in
effect on the Date of Deposit. Issues of Bonds are redeemable
at declining prices (but not below par value) in subsequent years
except for original issue discount Bonds which are redeemable
at prices based on the issue price plus the amount of original
issue discount accreted to the redemption date plus, if applicable,
some premium, the amount of which will decline in subsequent years.
"S.F." indicates a sinking fund is established with respect to
an issue of Bonds. In addition, certain Bonds in the portfolio
may be redeemed in whole or in part other than by operation of
the stated redemption or sinking fund provisions under certain
unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such Bonds. See "What
Is the First Trust Combined Series?" for a description of certain
of such unusual or extraordinary circumstances. 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 with the original
Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared
to the original Public Offering Price of the Units, excluding
the effect of the sales charge on the Units. Distributions will
generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium
received on such redemption (except to the extent the proceeds
of the redeemed Bonds are used to pay for Unit redemptions). The
estimated current return and the long-term return in this event
may be affected by such redemptions. For the Federal and state
Page 59
tax effect on Unit holders of such redemptions and resultant distributions,
see "The First Trust Combined Series-What is the Federal Tax Status
of Unit Holders?", "Colorado Insured Trust-Long Intermediate Summary-Colorado
Tax Status" and "Mississippi Advantage Trust Summary-Mississippi
Tax Status."
(4) Ratings by Moody's Investors Service, Inc. Such ratings were
obtained from a municipal bond information reporting service.
(5) Insurance has been obtained by the Bond issuer, the underwriters,
the Sponsor or others prior to the Date of Deposit. No insurance
premium is payable by the Trust.
(6) Rating is contingent upon the issuance of insurance.
(7) Rating is contingent upon receipt of documentation confirming
investments and cash flow.
(8) A portfolio insurance policy has been obtained by the Trust
for this Bond from AMBAC Indemnity Corporation.
DESCRIPTION OF BOND RATINGS*
* As published by the rating companies.
Standard & Poor's Corporation. A brief description of the applicable
Standard & Poor's Corporation rating symbols and their meanings
follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect
to a specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold
a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
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 Corporation.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful completion
of the project being financed by the bonds being rated and indicates
that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent
to completion of the project,
Page 60
makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise
his/her own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings
of bonds and other fixed income securities. It focuses on events
and trends which place companies and government units under special
surveillance by S&P's 180-member analytical staff. These may include
mergers, voter referendums, actions by regulatory authorities,
or developments gleaned from analytical reviews. Unless otherwise
noted, a rating decision will be made within 90 days. Issues appear
on Credit Watch where an event, situation, or deviation from trends
occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is
inevitable. Since S&P continuously monitors all of its ratings,
Credit Watch is not intended to include all issues under review.
Thus, rating changes will occur without issues appearing on Credit
Watch.
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 larger 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 61
Estimated Cash Flows to Unit Holders
The tables below set forth the per Unit estimated monthly distributions
of interest and principal to Unit holders. The tables assume the
receipt of principal of the underlying Bonds upon their maturity
or expected retirement date, no changes in expenses, no changes
in the current interest rates, no exchanges, redemptions, sales
or prepayments of the underlying Bonds prior to their maturity
or expected retirement date. To the extent the foregoing assumptions
change, actual distributions will vary.
<TABLE>
<CAPTION>
National Insured Trust, Series 225
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ _____________ ___________ _____________
<S> <C> <C> <C>
February 1994 1.81 1.81
March 1994-January 2004 4.18 4.18
February 2004 4.13 21.75 25.88
March 2004-January 2005 4.08 4.08
February 2005 3.74 145.01 148.75
March 2005-July 2005 3.41 3.41
August 2005 3.07 145.01 148.08
September 2005 2.74 96.67 99.41
October 2005-January 2006 2.30 2.30
February 2006 2.14 67.67 69.81
March 2006-July 2007 1.98 1.98
August 2007 1.75 96.67 98.42
September 2007-May 2011 1.52 1.52
June 2011 1.52 67.67 69.19
July 2011-August 2019 1.20 1.20
September 2019 1.20 145.01 146.21
October 2019-May 2020 0.56 0.56
June 2020 0.56 41.09 41.65
July 2020-June 2023 0.56 0.56
July 2023 0.46 48.34 48.80
August 2023-January 2024 0.35 0.35
February 2024 0.13 96.67 96.80
</TABLE>
Page 62
<TABLE>
<CAPTION>
Colorado Insured Trust, Series 12-Long Intermediate
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ _____________ ___________ _____________
<S> <C> <C> <C>
February 1994 1.56 1.56
March 1994-October 2002 3.59 3.59
November 2002 3.29 159.95 163.24
December 2002-April 2003 2.99 2.99
May 2003 2.68 159.95 162.63
June 2003-December 2003 2.37 2.37
January 2004 2.05 159.95 162.00
February 2004-June 2004 1.74 1.74
July 2004 1.53 111.96 113.49
August 2004-December 2004 1.33 1.33
January 2005 1.00 159.95 160.95
February 2005-December 2005 0.68 0.68
January 2006 0.30 191.94 192.24
</TABLE>
<TABLE>
<CAPTION>
Mississippi Advantage Trust, Series 10
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ _____________ ___________ _____________
<S> <C> <C> <C>
February 1994 1.77 1.77
March 1994-November 2000 4.08 4.08
December 2000 3.71 160.31 164.02
January 2001-December 2003 3.35 3.35
January 2004 3.17 80.15 83.32
February 2004-June 2004 3.00 3.00
July 2004 2.92 38.47 41.39
August 2004-March 2005 2.84 2.84
April 2005 2.48 160.31 162.79
May 2005-December 2006 2.12 2.12
January 2007 1.75 155.50 157.25
February 2007-December 2011 1.37 1.37
January 2012 1.15 110.61 111.76
February 2012-December 2012 0.92 0.92
January 2013 0.77 70.53 71.30
February 2013-February 2014 0.63 0.63
March 2014 0.27 184.35 184.62
</TABLE>
Page 63
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Summary of Essential Information 3
The First Trust Combined Series:
What is the First Trust Combined Series? 4
What are Estimated Long-Term Return and
Estimated Current Return? 12
How is Accrued Interest Treated? 13
Why and How are the Insured Trusts Insured? 13
What is the Federal Tax Status of Unit Holders? 21
What are the Expenses and Charges? 23
Public Offering:
How is the Public Offering Price Determined? 25
How are Units Distributed? 28
What are the Sponsor's Profits? 28
Will There be a Secondary Market? 29
Rights of Unit Holders:
How are Certificates Issued and Transferred? 29
How are Interest and Principal Distributed? 30
How Can Distributions to Unit Holders be
Reinvested? 30
What Reports will Unit Holders Receive? 31
How May Units be Redeemed? 32
How May Units be Purchased by the Sponsor? 33
How May Bonds be Removed from the Fund? 33
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 34
Who is the Trustee? 34
Limitations on Liabilities of Sponsor and
Trustee 35
Who is the Evaluator? 35
Other Information:
How May the Indenture be Amended or
Terminated? 35
Legal Opinions 36
Experts 36
Underwriting 37
The Separate Trusts:
National Insured Trust, Series 225 40
Colorado Insured Trust, Series 12
Long Intermediate 45
Mississippi Advantage Trust, Series 10 52
Report of Independent Auditors 57
Statements of Net Assets 58
Notes to Statements of Net Assets 58
Notes to Portfolios 59
Description of Bond Ratings 60
Estimated Cash Flows to Unit Holders 62
</TABLE>
___________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST
The First Trust Combined Series 209
The First Trust of Insured
Municipal Bonds, Series 225
The First Trust of Insured
Municipal Bonds-Multi-State:
Colorado Trust, Series 12-
Long Intermediate
The First Trust Advantage:
Mississippi Trust, Series 10
First Trust
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
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
January 26, 1994
Page 64
CONTENTS OF REGISTRATION STATEMENT
Item A. Bonding Arrangements of Depositor
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being National
Union Fire Insurance Company of Pittsburgh.
Item B.
This Registration Statement on Form S-6 comprises the
following papers and documents:
The Facing Sheet
The Cross-Reference Sheet
The Prospectus
The Signatures
Exhibits
S-1
SIGNATURES
The Registrant, The First Trust Combined Series 209, hereby
identifies The First Trust Combined Series 83, The First Trust
Combined Series 198 and The First Trust Special Situations Trust,
Series 18, for purposes of the representations required by Rule
487 and represents the following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the
Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 209, has duly
caused this Amendment of Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on January 26, 1994.
THE FIRST TRUST COMBINED SERIES 209
By: NIKE SECURITIES L.P.
(Depositor)
By: Carlos E. Nardo
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
Name Title* Date
Robert D. Van Kampen Sole Director )
of Nike Securities )
Corporation, the ) January 26, 1994
General Partner of )
Nike Securities L.P. )
)
)
) Carlos E. Nardo
) Attorney-in-Fact**
)
)
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Special Situations Trust, Series 18 (File No. 33-42683) and
the same is hereby incorporated herein by this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 26, 1994 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 33-51811) and related Prospectus of The First Trust Combined
Series 209.
ERNST & YOUNG
Chicago, Illinois
January 26, 1994
CONSENTS OF COUNSEL
The consents of counsel are contained in their respective
opinions filed by this amendment as Exhibits 3.1, 3.2, 3.3, 3.4
and 3.5 to the Registration Statement.
CONSENT OF SECURITIES EVALUATION SERVICE, INC.
The consent of Securities Evaluation Service, Inc. to the
use of its name in the Prospectus included in the Registration
Statement is filed as Exhibit 4.1 to the Registration Statement.
CONSENT OF STANDARD & POOR'S CORPORATION
The consent of Standard & Poor's Corporation to the use of
its name in the Prospectus included in the Registration Statement
is filed as Exhibit 4.2 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Combined Series 145 and subsequent Series
effective October 16, 1991, among Nike Securities L.P.,
as Depositor, United States Trust Company of New York,
as Trustee, Securities Evaluation Service, Inc., as
Evaluator and Nike Financial Advisory Services L.P., as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-43289] filed on
behalf of The First Trust Combined Series 145).
1.1.1 Form of Trust Agreement for Series 209 among Nike
Securities L.P., as Depositor, United States Trust
Company of New York, as Trustee, Securities Evaluation
Service, Inc., as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, General Partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, General
Partner of Nike Securities L.P., Depositor (incorporated
by reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.6 Copy of Municipal Bond Investment Trust Insurance Policy
issued by Financial Guaranty Insurance Company and/or
AMBAC Indemnity Corporation.
S-5
1.7 Master Agreement Among Underwriters (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43289] filed on behalf of The First Trust Combined
Series 145).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
on page 2 and incorporated herein by reference).
3.1 Opinion of counsel as to legality of securities being
registered.
3.2 Opinion of counsel as to Federal income tax status of
securities being registered.
3.3 Opinion of counsel as to New York tax status of
securities being registered.
3.4 Opinion of counsel as to advancement of funds by Trustee.
3.5 Opinions of state counsel.
4.1 Consent of Securities Evaluation Service, Inc.
4.2 Consent of Standard & Poor's Corporation.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
S-6
EXHIBIT 1.1.1
THE FIRST TRUST COMBINED SERIES 209
TRUST AGREEMENT
Dated: January 26, 1994
This Trust Agreement among Nike Securities L.P., as
Depositor, United States Trust Company of New York, as Trustee,
Securities Evaluation Service, Inc., as Evaluator, and First
Trust Advisors L.P., as Portfolio Supervisor, sets forth certain
provisions in full and incorporates other provisions by reference
to the document entitled "Standard Terms and Conditions of Trust
for The First Trust Combined Series 145 and subsequent Series,
Effective October 16, 1991" (herein called the "Standard Terms
and Conditions of Trust"), and such provisions as are set forth
in full and such provisions as are incorporated by reference
constitute a single instrument. All references herein to
Articles and Sections are to Articles and Sections of the
Standard Terms and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the Provisions of Part II hereof, all the
provisions contained in the Standard Terms and Conditions of
Trust are herein incorporated by reference in their entirety and
shall be deemed to be a part of this instrument as fully and to
the same extent as though said provisions had been set forth in
full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST
The following special terms and conditions are hereby agreed
to:
(a) The Bonds defined in Section 1.01(5) listed in Schedule
A hereto have been deposited in trust under this Trust Agreement.
(b) The fractional undivided interest in and ownership of
the Trust Fund represented by each Unit for a Trust is the amount
set forth under the captions "Summary of Essential Information -
Fractional Undivided Interest in the Trust per Unit" in the
Prospectus.
(c) The number of units in a Trust referred to in Section
2.03 is set forth under the caption "Summary of Essential
Information - Number of Units" in the Prospectus.
(d) The approximate amount, if any, which the Trustee shall
be required to advance out of its own funds and cause to be paid
to the Depositor pursuant to the second sentence of Section 3.05
shall be the amount per Unit for each Trust that the Trustee
agreed to reduce its fee or pay Trust Fund expenses set forth in
the footnotes to the "Summary of Essential Information" for each
Trust in the Prospectus times the number of units for such Trust
referred to in Part II (c) of this Trust Agreement.
(e) For each Trust the First General Record Date and the
amount of the second distribution of funds from the Interest
Account shall be the record date for the Interest Account and the
amount set forth under "Trust Summary-Distributions" for such
Trust in the Prospectus.
(f) For each Trust the "First Settlement Date" is the date
set forth under "Summary of Essential Information-First
Settlement Date" for such Trust in the Prospectus.
(g) Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust Advisors
L.P. and its successors in interest, or any successor portfolio
supervisor appointed as hereinafter provided."
(h) The first three sentences of Section 6.04 shall be
amended to read as follows:
"For services performed under this Indenture the Trustee
shall be paid an amount per annum specified in Part II of the
Trust Agreement. During the first year of a Trust, such
compensation shall be reduced by the amount of interest which
accrues on "when-issued" Bonds and Contract Bonds from the
First Settlement Date, as defined in Part II of the Trust
Agreement, to the respective delivery dates of such Bonds and
Contract Bonds, provided, However, that such reduction shall
not exceed a total of $.70 multiplied by the number of Units
outstanding on the First Settlement Date.
-2-
(i) The Trustee's annual fee referred to in Section 6.04 is
set forth for each Trust under "Trust Summary-Special Trust
Information" for such Trust in the Prospectus.
(j) Section 1.01(20) shall be added and shall read as
follows:
(k) The first paragraph of Section 3.05 shall be amended to
read as follows:
"The Trustee, as of the "First Settlement Date", as
defined in Part II of the Trust Agreement, shall advance from
its own funds and shall pay to the Depositor the amount of
interest accrued to such date on the Bonds deposited in the
respective Trusts, less the respective amounts of Purchased
Interest with respect to such Trusts. The Trustee, as of the
"First Settlement Date," as defined in Part II of the Trust
Agreement, shall also advance to the Trust from its own funds
and distribute to the Depositor the amount specified in Part
II of the Trust Agreement, which is the amount by which the
Trustee's fee is reduced in respect of interest accrued on
"when-issued" Bonds and on Contract Bonds delivered to the
Trustee subsequent to the First Settlement Date pursuant to
Section 6.04. The Trustee shall be entitled to
reimbursement, without interest, for such advancements from
interest received by the Trust. Subsequent distributions
shall be made as hereinafter provided."
(l) Notwithstanding anything to the contrary in Section
3.05, Certificateholders may not elect to receive distributions
on a semiannual basis.
PART III
Notwithstanding any provision to the contrary contained in
the Standard Terms and Conditions of Trust and in lieu of the
receipt of Certificates evidencing ownership of Units of the
Fund, the Sponsor or any Underwriter of the Fund listed under the
caption "Underwriting" in the Prospectus, at its option, may
elect
-3-
that Units of the Fund owned by it be reflected by book entry on
the books and records of the Trustee. For all purposes such
Sponsor or Underwriter shall be deemed the owner of such Units as
if a Certificate evidencing ownership of Units of the Fund had
actually been issued by the Trustee. The Units reflected by book
entry on the books and records of the Trustee may be transferable
by the registered owner of such Units by written instrument in
form satisfactory to the Trustee. The registered owner of Units
reflected by book entry on the books and records of the Trustee
shall have the right at any time to obtain Certificates
evidencing ownership of such Units.
-4-
IN WITNESS WHEREOF, Nike Securities L.P., United States
Trust Company of New York, Securities Evaluation Service, Inc.
and First Trust Advisors L.P. have each caused this Trust
Agreement to be executed and the respective corporate seal to be
hereto affixed and attested (if applicable) by authorized
officers; all as of the day, month and year first above written.
NIKE SECURITIES L.P.,
Depositor
By Carlos E. Nardo
Senior Vice President
UNITED STATES TRUST COMPANY OF NEW
YORK, Trustee
(SEAL) By Thomas Porrazzo
Vice President
Attest:
Rosalia A. Raviele
Assistant Secretary
SECURITIES EVALUATION SERVICE,
INC., Evaluator
(SEAL) By James R. Couture
President
Attest:
James G. Prince
Vice President and
Assistant Secretary
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Carlos E. Nardo
Senior Vice President
-5-
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
THE FIRST TRUST COMBINED SERIES 209
(Note: Incorporated herein and made a part hereof is the
"Portfolio" as set forth for each Trust in the
Prospectus.)
-6-
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 209
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Combined Series 209, in
connection with the preparation, execution and delivery of a
Trust Agreement dated January 26, 1994 among Nike Securities
L.P., as Depositor, United States Trust Company of New York, as
Trustee, Securities Evaluation Service, Inc., as Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor, pursuant to
which the Depositor has delivered to and deposited the Bonds
listed in Schedule A to the Trust Agreement with the Trustee and
pursuant to which the Trustee has issued to or on the order of
the Depositor a certificate or certificates representing units of
fractional undivided interest in and ownership of the Fund
created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. The execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-51811)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF/jlg
Exhibit 3.2
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
United States Trust Company
of New York
770 Broadway, 6th Floor
New York, New York 10003
The First Trust Combined Series 209
Gentlemen:
We have served as counsel for Nike Securities L.P.,
Depositor of The First Trust Combined Series 209 (the "Fund") in
connection with the issuance of Units of fractional undivided
interest in said Fund under a Trust Agreement dated January 26,
1994 (the "Indenture") among Nike Securities L.P., as Depositor,
United States Trust Company of New York, as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents as we have deemed pertinent.
Based upon the foregoing, and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing federal income tax law:
(i) Each Trust is not taxable as an association but will
be governed by the provisions of Subchapter J (relating to
Trusts) of Chapter 1, Internal Revenue Code of 1986 (the "Code").
(ii) Each Certificateholder will be considered as owning a
share of each asset of the respective Trust in the proportion
that the number of Units of such Trust held by him bears to the
total number of Units outstanding of such Trust. Under Subpart
E, Subchapter J of Chapter 1 of the Code, income of the Trust
will be treated as income of each Certificateholder in the
proportion described, and an item of Trust income will have the
same character in the hands of a Certificateholder as it would
have in the hands of the Trustee. Accordingly, to the extent
that the income of a Trust consists of interest and original
issue discount excludable from gross income under Section 103 of
the Code, such income will be excludable from federal gross
income of the Certificateholder, except in the case of a
Certificateholder who is a substantial user (or a person related
to such user) of a facility financed through issuance of any
industrial development bonds or certain private activity bonds
held by the Trust. In the case of such Certificateholder who is
a substantial user (and no other) interest received and original
issue discount with respect to his Units attributable to such
industrial development bonds or such private activity bonds is
includable in his gross income. To the extent a Trust holds
Bonds that are "specified private activity Bonds" within the
meaning of Section 57(a)(5) of the Code, a Certificateholder's
pro rata portion of the income on such Bonds will be included as
an item of tax preference in the computation of the alternative
minimum tax applicable to individuals, trusts and corporations.
In the case of certain corporations, interest on all of the Bonds
is included in computing the alternative minimum tax pursuant to
Section 56(c) of the Code, the environmental tax (the "Superfund
Tax") imposed by Section 59A of the Code, and the branch profits
tax imposed by Section 884 of the Code with respect to U.S.
branches of foreign corporations.
(iii) Gain or loss will be recognized to a Certificateholder
upon redemption or sale of his Units. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of the Units represented by his
Certificate. Before adjustment, such basis would normally be
cost if the Certificateholder had acquired his Units by purchase,
plus his aliquot share of advances by the Trustee to the
respective Trust to pay interest on Bonds delivered after the
Certificateholder's settlement date to the extent that such
interest accrued on the Bonds during the period from the
Certificateholder's settlement date to the date such Bonds are
delivered to the Trust, but only to the extent that such advances
are to be repaid to the Trustee out of interest received by such
Trust with respect to such Bonds. In addition, such basis will be
increased by the Certificateholder's aliquot share of the accrued
original issue discount with respect to each Bond held by the
Trust with respect to which there was an original issue discount
at the time the Bond was issued and reduced by the annual
amortization of bond premium, if any, on Bonds held by the Trust.
(iv) If the Trustee disposes of an asset of a Trust
(whether by sale, payment on maturity, redemption or otherwise),
gain or loss is recognized to the Certificateholder and the
amount thereof is measured by comparing the Certificateholder's
aliquot share ofthe total proceeds from the transaction with his
basis for his fractional interest in the asset disposed of. Such
basis is ascertained by apportioning the tax basis for his Units
among each of the assets of such Trust (as of the date on which
his Units were acquired) ratably according to their values as of
the valuation date nearest the date on which he purchased such
Units. A Certificateholder's basis in his Units and of his
fractional interest in each asset of the Trust must be reduced by
the amount of his aliquot share of interest received by the Fund,
if any, on Bonds delivered after the Certificateholder's
settlement date to the extent that such interest accrued on the
Bonds during the period from the Certificateholder's settlement
date to the date such Bonds are delivered to the Trust; must be
reduced by the annual amortization of bond premium, if any, on
Bonds held by the Trust; and must be increased by the
Certificateholder's share of the accrued original issue discount
with respect to each Bond which, at the time the Bond was issued,
had original issue discount.
(v) In the case of any Bond held by the Trust where the
"stated redemption price at maturity" exceeds the "issue price",
such excess shall be original issue discount. With respect to
each Certificateholder, upon the purchase of his Units subsequent
to the original issuance of Bonds held by the Trust, Section
1272(a)(7) of the Code provides for a reduction in the accrued
"daily portion" of such original issue discount upon the purchase
of a Bond subsequent to the Bond's original issue, under certain
circumstances. In the case of any Bond held by the Trust the
interest on which is excludable from gross income under Section
103 of the Code, any original issue discount which accrues with
respect thereto will be treated as interest which is excludable
from gross income under Section 103 of the Code.
(vi) We have examined the Municipal Bond Investment Trust
Insurance policies, if any, issued to certain of the Trusts on
the Date of Deposit by AMBAC Indemnity Corporation, Financial
Guaranty Insurance Company, or a combination thereof. Each such
policy, or a combination of such policies, insures all Bonds in
the Trust covered by that policy against default in the prompt
payment of principal and interest. In our opinion, any amounts
paid under each said policy representing 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. Paragraph
(II) of this opinion is accordingly applicable to policy proceeds
representing maturing interest.
(vii) Certain bonds in the portfolio of the Trust have been
insured by the issuers, underwriters, the Sponsor or others
against default in the prompt payment of principal and interest
(the "Insured Bonds"). Such Bonds are so designated on the
portfolio pages in the Prospectus for each Trust. Insurance on
Insured Bonds is effective so long as such bonds remain
outstanding. For each of these bonds, we have been advised that
the aggregate principal amount of such bonds listed on the
portfolio page was acquired by the Trust and are part of the
series of such bonds in the listed aggregate principal amount.
Based upon the assumption that the Insured Bonds of the Trust are
part of a series covered by an insurance policy, it is our
opinion that any amounts received by the Trust representing
maturing interest on such bonds will be excludable from Federal
gross income if, and to the same extent as, such interest would
have been so excludable if paid in normal course by the Issuer
notwithstanding that the source of the payment is from policy
proceeds. Paragraph (ii) of this opinion is accordingly
applicable to such payment representing maturing interest.
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 accrued to prior owners. The
application of these rules will also vary depending on the value
of the Bond on the date a Certificateholder acquires his Units,
and the price the Certificateholder pays for his Units.
Except with respect to those Trusts that hold "specified private
activity bonds" within the meaning of Section 57(a)(5) of the
Code issued on or after August 8, 1986 as identified in the
Prospectus related hereto (the "AMT Trusts"), the Trusts do not
include any specified private activity bonds and accordingly none
of the interest income of the Trusts (other than the AMT Trusts,
if any) shall be treated as an item of tax preference when
computing the alternative minimum tax. Because the AMT Trusts
include "specified private activity bonds," all or a portion of
the income of the AMT Trusts shall be treated as an item of tax
preference for alternative minimum tax purposes in the case of
individuals, trusts and corporations. In the case of
corporations, for taxable years beginning after December 31,
1986, the alternative minimum tax and the Superfund Tax depend
upon the corporation's alternative minimum taxable income
("AMTI"), which is the corporation's taxable income with certain
adjustments.
Pursuant to Section 56(c) of the Code, 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) for taxable years
beginning after 1989, 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 Trust, and tax-exempt original issue discount.
Effective for tax returns filed after December 31, 1987, all
taxpayers are required to disclose to the Internal Revenue
Service the amount of tax-exempt interest earned during the year.
Section 265 of the Code generally provides for a reduction
in each taxable year of 100% of the otherwise deductible interest
on indebtedness incurred or continued by financial institutions,
to which either Section 585 or Section 593 of the Code applies,
to purchase or carry obligations acquired after August 7, 1986,
the interest on which is exempt from federal income taxes for
such taxable year. Under rules prescribed by Section 265, the
amount of interest otherwise deductible by such financial
institutions in any taxable year which is deemed to be
attributable to tax-exempt obligations acquired after August 7,
1986, will be the amount that bears the same ratio to the
interest deduction otherwise allowable (determined without regard
to Section 265) to the taxpayer for the taxable year as the
taxpayer's average adjusted basis (within the meaning of Section
1016) of tax-exempt obligations acquired after August 7, 1986,
bears to such average adjusted basis for all assets of the
taxpayer, unless such financial institution can otherwise
establish, under regulations to be prescribed by the Secretary of
the Treasury, the amount of interest an indebtedness incurred or
continued to purchase or carry such obligations.
We also call attention to the fact that, under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units by taxpayers other than certain financial
institutions, as referred to above, is not deductible for federal
income tax purposes. Under rules used by the Internal Revenue
Service for determining when borrowed funds are considered used
for the purpose of purchasing or carrying particular assets, the
purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units. However, these rules
generally do not apply to indebtedness incurred for expenditures
of a personal nature such as a mortgage incurred to purchase or
improve a personal residence.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") was
recently enacted. 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). Market discount can arise based on the price a
Trust pays for Bonds or the price a Certificateholder 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 Certificateholders when principal payments
are received on the Bond, upon sale or at redemption (including
early redemption), or upon the sale or redemption of his or her
Units, unless a Certificateholder elects to include market
discount in taxable income as it accrues.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 33-51811)
relating to the Units referred to above and to the use of our
name and to the reference of our firm in said Registration
Statement and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF/jlg
EXHIBIT 3.3
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 26, 1994
The First Trust Combined Series 209
c/o United States Trust Company
of New York, as Trustee
770 Broadway - 6th Floor
New York, New York 10003
Re: The First Trust Combined Series 209
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for The First Trust Combined Series 209, which will
be established under a Standard Terms and Conditions of Trust
dated October 16, 1991, and a related Trust Agreement dated
today's date (collectively, the "Indenture"), among Nike
Securities L.P., as Depositor (the "Depositor"); Securities
Evaluation Service, Inc., as Evaluator; First Trust Advisors
L.P., as Portfolio Supervisor and United States Trust Company of
New York, as Trustee (the "Trustee"). Pursuant to the terms of
the Indenture, units of fractional undivided interest in the
Trusts (the "Units") will be issued in the aggregate number set
forth in the Indenture.
We have examined and are familiar with originals or certified
copies, or copies otherwise identified to our satisfaction, of
such documents as we have deemed necessary or appropriate for the
purpose of this opinion. In giving this opinion, we have relied
upon the two opinions, each dated today and addressed to the
Trustee, of Chapman and Cutler, counsel for the Depositor, with
respect to the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. 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.
2. 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.
3. By reason of the exemption contained in paragraph (a)
of Subdivision 8 of Section 270 of the New York Tax Law, no New
York State stock transfer tax will be payable in respect of any
transfer of the Certificates.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 33-51811) filed with the
Securities and Exchange Commission with respect to the
registration of the sale of the Units and to the references to
our name under the captions "What is the Federal Tax Status of
Unit Holders" and "Legal Opinions" in such Registration Statement
and the preliminary prospectus included therein.
Very truly yours,
CARTER, LEDYARD & MILBURN
EXHIBIT 3.4
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 26, 1994
United States Trust Company
of New York, as Trustee of
The First Trust Combined
Series 209
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. C. William Steelman
Executive Vice President
Re: The First Trust Combined Series 209
Dear Sirs:
We are acting as counsel for United States Trust Company of
New York (the "Trust Company") in connection with the execution
and delivery of a Standard Terms and Conditions of Trust dated
October 16, 1991, and a related Trust Agreement, dated today's
date (collectively, the "Indenture"), among Nike Securities L.P.,
as Depositor (the "Depositor"); Securities Evaluation Service,
Inc., as Evaluator; First Trust Advisors L.P., as Portfolio
Supervisor; and the Trust Company, as Trustee (the "Trustee"),
establishing The First Trust Combined Series 209, and the
execution by the Trust Company, as Trustee under the Indenture,
of a certificate or certificates evidencing ownership of units in
the aggregate number set forth in the Indenture (such certificate
or certificates and such aggregate units being herein called
"Certificates" and "Units"), each of which represents an
undivided interest in the Trusts, which consist of interest
bearing, tax-exempt bonds (including confirmations of contracts
for the purchase of certain bonds not yet delivered and cash,
cash equivalents or an irrevocable letter of credit or a
combination thereof, in the amount required for such purchase
upon the receipt of such bonds), such bonds being defined in the
Indenture as Bonds and listed in the Schedule or Schedules to the
Indenture. Upon delivery of the Bonds in an Insured Trust to the
Trustee, such Bonds shall be insured against the nonpayment of
principal and interest.
We have examined the Indenture, the Closing Memorandum dated
today's date and such other documents as we have deemed necessary
in order to render this opinion. Based on the foregoing, we are
of the opinion that:
1. The Trust Company is a duly organized and existing
corporation having the powers of a trust company under the laws
of the State of New York.
2. The Indenture has been duly executed and delivered by
the Trust Company and, assuming due execution and delivery by the
other parties thereto, constitutes the valid and legally binding
obligation of the Trust Company.
3. The Certificates are in proper form for execution and
delivery by the Trust Company as Trustee.
4. The Trust Company, as Trustee, has duly executed and
delivered to or upon the order of the Depositor a Certificate or
Certificates evidencing ownership of the Units, registered in the
name of the Depositor. Upon receipt of confirmation of the
effectiveness of the registration statement for the sale of the
Units filed with the Securities and Exchange Commission under the
Securities Act of 1933, the Trustee may deliver such other
Certificates, in such names and denominations as the Depositor
may request, to or upon the order of the Depositor as provided in
the Closing Memorandum.
5. The Trust Company, as Trustee, may lawfully under the
New York Banking Law advance to each Trust amounts as may be
necessary to provide monthly interest distributions of
approximately equal amounts, and be reimbursed, without interest,
for any such advances from funds in the interest account on the
ensuing record date, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Bonds have been duly authorized
and delivered, the efficacy of the insurance, or the federal tax
status of the Bonds.
Very truly yours,
CARTER, LEDYARD & MILBURN
EXHIBIT 4.1
SES
Securities Evaluation Service, Inc.
Suite 200
531 E. Roosevelt Road
Wheaton, Illinois 60187
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST COMBINED SERIES 209
Gentlemen:
We have examined the Registration Statement File No. 33-
51811 for the above captioned fund. We hereby consent to the use
in the Registration Statement of the references to Securities
Evaluation Service, Inc. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
Securities Evaluation Service, Inc.
James R. Couture
President
Standard & Poor's Corporation
Bond Insurance Administration
25 Broadway
New York, New York 10004-1064
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 209
Pursuant to your request for a Standard & Poor's rating on
the units of the above-captioned trust, SEC # 33-51811, we have
reviewed the information presented to us and have assigned a
'AAA' rating to the units of the trust and a 'AAA' rating to the
securities contained in the trust for as long as they remain in
the trust. The ratings are direct reflections, of the portfolio
of the trust, which will be composed solely of securities covered
by bond insurance policies that insure against default in the
payment of principal and interest on the securities so long as
they remain in the trust. Since such policies have been issued
by one or more insurance companies which have been assigned 'AAA'
claims paying ability ratings by S&P, S&P has assigned a 'AAA'
rating to the units of the trust and to the securities contained
in the trust for as long as they remain in the trust.
You have permission to use the name of Standard & Poor's
Corporation and the above-assigned ratings in connection with
your dissemination of information relating to these units,
provided that it is understood that the ratings are not "market"
ratings nor recommendations to buy, hold, or sell the units of
the trust or the securities contained in the trust. Further, it
should be understood the rating on the units does not take into
account the extent to which fund expenses or portfolio asset
sales for less than the fund's purchase price will reduce payment
to the unit holders of the interest and principal required to be
paid on the portfolio assets. S&P reserves the right to advise
its own clients, subscribers, and the public of the ratings. S&P
relies on the sponsor and its counsel, accountants, and other
experts for the accuracy and completeness of the information
submitted in connection with the ratings. S&P does not
independently verify the truth or accuracy of any such
information.
This letter evidences our consent to the use of the name of
Standard & Poor's Corporation in connection with the rating
assigned to the units in the registration statement or prospectus
relating to the units or the trust. However, this letter should
not be construed as a consent by us, within the meaning of
Section 7 of the Securities Act of 1933, to the use of the name
of Standard & Poor's Corporation in connection with the ratings
assigned to the securities contained in the trust. You are
hereby authorized to file a copy of this letter with the
Securities and Exchange Commission.
Please be certain to send us three copies of your final
prospectus as soon as it becomes available. Should we not
receive them within a reasonable time after the closing or should
they not conform to the representations made to us, we reserve
the right to withdraw the rating.
We are pleased to have had the opportunity to be of service
to you. If we can be of further help, please do not hesitate to
call upon us.
Sincerely,
STANDARD & POOR'S
CORPORATION
EXHIBIT 3.5
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, IL 60603
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
United States Trust Company
of New York
770 Broadway, 6th Floor
New York, New York 10003
Gentlemen:
We have acted as counsel to The First Trust Combined Series
209 containing The First Trust Advantage: Colorado Trust, Series
12 - Long Intermediate (the "Colorado Trust"), with respect to
certain matters preliminary to the issuance and sale of units of
interest therein (the "Units") pursuant to a Trust Indenture and
Agreement, dated as of the date hereof (the "Indenture"), among
Nike Securities L.P., as Depositor, United States Trust Company
of New York, as Trustee, Securities Evaluation Service, Inc., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor. The Units represent fractional undivided interests
in the principal of and net income on obligations deposited in
one of several separate trusts, including the Colorado Trust.
Each separate trust will be administered as a distinct entity
with investments, expenses, books and records.
The assets of the Colorado Trust will consist of interest-
bearing obligations issued by or on behalf of the State of
Colorado (the "State"), its political subdivisions and
authorities, and, provided the interest thereon is exempt from
State income taxes, by or on behalf of territories or possessions
of the United States of America, or its political subdivisions,
agencies or instrumentalities (the "Bonds"). Distributions of
interest on the Bonds received by the Trust will be made monthly.
Although we express no opinion with respect thereto, in
rendering the opinion expressed herein, we have assumed that the
Bonds were validly issued by the State of Colorado, or its
instrumentalities or municipalities and by or on behalf of
territories or possessions of the United States of America, or
its instrumentalities or municipalities, as the case may be.
We have examined the income tax law of the State of
Colorado, which is based upon the Federal Law, to determine its
applicability to the Colorado Trust (the "Colorado Trust") being
created as part of the Fund and to the holders of Units in the
Colorado Trust who are residents of the State of Colorado
("Colorado Unit holders"). Although we express no opinion with
respect to the issuance of the Bonds, in rendering our opinion
expressed herein, we have assumed that: (i) the Bonds were
validly issued, (ii) the interest thereon is excludable from
gross income for Federal income tax purposes, and (iii) interest
on the Bonds, if received directly by a Unit holder, would be
exempt from the income tax imposed by the State that is
applicable to individuals and corporations (the "State Income
Tax"). This opinion does not address the taxation of persons
other than full time residents of Colorado. Based upon the
foregoing, it is our opinion that under Colorado income tax law,
as presently enacted and construed:
(a) The Colorado Trust is not an association taxable
as a corporation for purposes of Colorado income taxation.
(b) Each Colorado Unit holder will be treated as
owning a pro-rata share of each asset of the Colorado Trust
for Colorado income tax purposes in the proportion that the
number of Units of such Trust held by him bears to the total
number of outstanding Units of the Colorado Trust, and the
income of the Colorado Trust will therefore be treated as
the income of each Colorado Unit holder under Colorado law
in the proportion described and an item of income of the
Colorado Trust will have the same character in the hands of
a Colorado Unit holder as it would have in the hands of the
Trustee.
(c) Gain or loss will be recognized by a Colorado Unit
holder upon redemption or sale of his Units. Such gain or
loss is measured by comparing the proceeds of such
redemption or sale with the adjusted basis of the Units
represented by his Certificate. Before adjustment, such
basis would normally be cost if the Colorado Unit holder has
acquired his Units by purchase, plus his aliquot share of
advances by the Trustee to the Colorado Trust to pay
interest on bonds delivered after the Colorado Unit holder's
settlement date to the extent that such interest accrued on
such bonds during the period from the Colorado Unit holder's
settlement date to the date such bonds are delivered to the
Colorado Trust, but only to the extent that such advances
are to be repaid to the Trustee out of interest received by
such Trust with respect to such bonds. In addition, such
basis will be increased by the Colorado Unit holder's
aliquot share of the accrued original issue discount with
respect to each bond held by such Trust with respect to
which there was an original issue discount at the time such
bond was issued and reduced by the annual amortization of
bond premium, if any, on the bonds held by the Colorado
Trust.
(d) If the Trustee disposes of a bond (whether by
sale, payment on maturity, redemption or otherwise) gain or
loss is recognized to the Colorado Unit holder and the
amount thereof is measured by comparing the Colorado Unit
holder's aliquot share of the total proceeds from the
transaction with his basis for his fractional interest in
the bond disposed of. Such basis is ascertained by
apportioning the tax basis for his Units among each of the
bonds (as of the date on which his units were acquired)
ratably according to their values as of the valuation date
nearest the date on which he purchased such Units. A
Colorado Unit holder's basis in his Units and of his
fractional interest in each bond must be reduced by the
amount of his aliquot share of interest received by the
Colorado Trust, if any, in bonds delivered after the
Colorado Unit holder's settlement date to the extent that
such interest accrued on such bonds during the period from
the Colorado Unit holder's settlement date to the date such
bonds are delivered to the Colorado Trust, must be reduced
by the annual amortization of bond premium, if any, on bonds
held by such Trust and must be increased by the Colorado
Unit holder's share of the accrued original issue discount
with respect to each bond which, at the time such bond was
issued, had original issue discount.
(e) If interest on indebtedness incurred or continued
by a Colorado Unit holder to purchase Units in the Colorado
Trust is not deductible for Federal income tax purposes, it
will also be nondeductible for Colorado income tax purposes.
(f) So long as the Colorado Trust holds obligations
issued, on or after May 1, 1980, by the State of Colorado or
its political subdivisions (the "Colorado Bonds"), then to
the extent the interest on the Colorado bonds is excludable
from Federal gross income of a Colorado Unit holder pursuant
to Section 103 of the Code, such interest will be excludable
from Colorado adjusted gross income of such Unit holder.
(g) Any amounts paid under an insurance policy issued
to the Colorado Trust which represent maturing interest on
defaulted obligations held by the Trustee will be excludable
from Colorado adjusted gross income if, and to the same
extent as, such interest would have been so excludable if
paid by the issuer. Paragraph (f) of this opinion is
accordingly applicable to insurance proceeds representing
maturing interest.
(h) Certain of the bonds in the Colorado Trust have
been insured by the issuers, the underwriters or the Sponsor
thereof, or others, against default in the prompt payment of
principal and interest. Based upon the exemptions and
assumptions referred to above, it is our opinion that any
amounts received by the Colorado Trust representing maturing
interest on such bonds will be excludable from Colorado
adjusted gross income if, and to the same extent as, such
interest would have been so excludable if paid in normal
course by the issuer notwithstanding the source of the
payment is from policy proceeds. Paragraph (f) of this
opinion is accordingly applicable to such payment.
We have not examined any of the Bonds to be deposited and
held in the Colorado Trust or the proceedings for the issuance
thereof or the opinions of bond counsel with respect thereto, and
therefore express no opinion as to the exemption from State
income taxes of interest on the Bonds if received directly by a
Unit holder.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (No. 33-51811) filed
pursuant to the Securities Act of 1933, as amended (the "Act"),
with respect to the registration of the sale of the Units and to
the references to our firm in such Registration Statement and the
preliminary prospectus included therein. In giving such consent,
we do not thereby admit that we are persons whose consent is
required by Section 7 of the Act, or the rules and regulations
thereunder.
Very truly yours,
Chapman and Cutler
EFF/jlg
PHELPS DUNBAR
COUNSELLORS AT LAW
SEVENTH FLOOR
ONE MISSISSIPPI PLAZAA
TUPELO, MISSISSIPPI 38802-1220
January 26, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
United States Trust Company
of New York
770 Broadway
New York, New York 10003
Re: The First Trust Combined Series 209
The First Trust Advantage Trust: Mississippi Trust,
Series 10
Gentlemen:
We have acted as special Mississippi counsel as to certain
Mississippi tax matters to the First Trust Combined Series 209
(the "Fund") concerning a Registration Statement (No. 33-51811)
on Form S-6 under the Securities Act of 1933, as amended,
covering the issuance by the Fund of Units of fractional
undivided interest (the "Units") in several trusts (the
"Trusts"), one of which is The First Trust Advantage Trust:
Mississippi Trust, Series 10 (the "Mississippi Trust"). Each
such Unit will be purchased by various investors ("Unit
Holders"). You have asked that we render an opinion to you with
respect to certain Mississippi tax matters.
The Fund is organized pursuant to a Trust Agreement (the
"Trust Agreement") dated January 26, 1994 (the "Date of Deposit")
between Nike Securities L.P. (the "Sponsor"), United States Trust
Company of New York, as Trustee (the "Trustee"), Securities
Evaluation Service, Inc., as Evaluator, and First Trust Advisors
L.P., as Portfolio Supervisor. Each Unit of the Mississippi
Trust represents a fractional undivided interest in the principal
and net income of the Mississippi Trust, established in the Trust
Agreement. The Mississippi Trust will be comprised of that
number of Units which will establish as close as possible as of
the Date of Deposit a Public Offering Price (as defined in the
prospectus) of One Thousand Dollars ($1,000) per Unit. The
Mississippi Trust will be administered as a distinct entity
pursuant to the Trust Agreement.
In acting as special counsel, we have examined the Trust
Agreement and such other documents as we deem necessary.
The assets of the Mississippi Trust will consist of interest
bearing obligations issued by, or on behalf of, the State of
Mississippi, or counties, municipalities, authorities and other
political subdivisions thereof and may also include interest
bearing obligations issued by, on or in behalf of, one or more
possessions of the United States, state taxation on the interest
of which is prohibited by federal law (the "Bonds"). We have
been advised that in the opinion of bond counsel to each issuer
of the Bonds, the interest on each of the Bonds in the
Mississippi Trust is exempt from Federal income tax under
existing law at the time of the issuance of such Bonds.
Distributions of the interest received by the Mississippi Trust
will be made to each Unit Holder monthly unless the Unit Holder
elects to receive such distributions on a semi-annual basis.
We understand that on the Date of Deposit, the Sponsor has
deposited with the Trustee the total principal amount of the
interest bearing obligations, and/or contracts for the purchase
thereof, together with an irrevocable letter of credit in the
amount required for the purchase price and accrued interest, if
any.
You have advised us that, in the opinion of Chapman and
Cutler, for Federal income tax purposes the Fund and the
Mississippi Trust will not be taxable as a corporation or
association, but will be governed by the provisions of Subchapter
J (relating to trusts) of Chapter 1 of the Internal Revenue Code
of 1986. Each Unit Holder will be considered to be the owner of
a pro rata portion of the Mississippi Trust and will be subject
to tax on the income therefrom under the provisions of Subpart E
of Subchapter J of Chapter 1 of the Internal Revenue Code of
1986. The Mississippi Trust itself will not be subject to
Federal income taxes. For Federal income tax purposes, each item
of trust income will have the same character in the hands of the
Unit Holder as it would have in the hands of the Trustee.
Accordingly, to the extent that the income of the Mississippi
Trust consists of interest excludable from gross income under
Section 103 of the Internal Revenue Code of 1986, such income
will be excludable from Federal income of the Unit Holder.
Assuming the correctness of the foregoing, it is our opinion
that:
1. For purposes of Mississippi income taxation, the
Mississippi Trust will be recognized as a trust and will not
be taxable as a corporation or an association. The
Mississippi Trust will not be subject to Mississippi income
tax.
2. With respect to Unit Holders who are residents of
Mississippi, the income of the Mississippi Trust which is
allocable and distributable to each such Unit Holder will be
treated as the income of such Unit Holder under the
Mississippi income tax laws. Interest on the underlying
Bonds which would be exempt from Mississippi income tax if
directly received by such Unit Holder will retain its status
as tax-exempt interest when received by the Mississippi
Trust and distributed to such Unit Holder.
3. To the extent that gain or loss is recognized for
Federal income tax purposes, each Unit Holder of the
Mississippi Trust will recognize gain or loss for
Mississippi income tax purposes if the Trustee disposes of a
Bond (whether by sale, payment on maturity, retirement or
otherwise) or if the Unit Holder redeems or sells such
Units. Due to the amortization of Bond premium and other
basis adjustments, a Unit Holder, under some circumstances,
may realize taxable gain when his or her Units are sold or
redeemed for an amount equal to their original cost.
4. The Units are not exempt from Mississippi estate
tax and are subject to assessment for Mississippi ad valorem
tax purposes. (However, it is not the current practice of
the State of Mississippi to assess intangible personal
property owned by individuals or corporations, other than
certain financial institutions, for ad valorem tax
purposes.)
We have not examined any of the obligations to be deposited
into the Fund and express no opinion as to whether the interest
on any such obligations would in fact be tax-exempt if directly
received by a Unit Holder, nor have we made any review of the
proceedings relating to the issuance of Bonds or the basis for
bond counsel opinion. We have relied on the opinion of Chapman
and Cutler referred to above and have assumed the due execution
of the Trust Agreement and other documents referred to herein.
We hereby consent to the filing of this opinion as an
exhibit to Registration Statement (No. 33-51811) filed with the
Securities and Exchange Commission for the purpose of registering
the Units and to the reference to our firm and a summary of this
opinion included in such Registration Statement and the
prospectus included therein. (In giving such consent we do not
thereby admit that we are in the category of a person whose
consent is required by Section 7 of the Securities Act of 1933,
as amended, and the rules and regulations thereunder.)
The foregoing opinions are limited to the laws of the State
of Mississippi and the federal laws of the United States of
America. We express no opinion as to matters governed by the
laws of any other state. Furthermore, no opinion is expressed
herein as to the effect of any future acts of the parties or
changes in existing law. We undertake no responsibility to
advise you of any changes after the date hereof in the law or the
facts presently in effect that would alter the scope or substance
of the opinions herein expressed.
The opinions expressed herein are rendered as of the date
hereof, may be relied upon only by you and shall not be otherwise
used, circulated or quoted.
This letter expresses our legal opinion as to the foregoing
matters based on our professional judgment at this time; it is
not, however, to be construed as a guaranty, nor is it a warranty
that a court considering such matters would not rule in a manner
contrary to the opinions set forth above.
Very truly yours,
PHELPS DUNBAR
AMBAC Indemnity Corporation
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Municipal Bond Investment
Trust Insurance Policy
AMBAC Indemnity Corporation (AMBAC) A Wisconsin Stock Insurance
Company
Agrees to Guarantee
FIRST TRUST COMBINED, SERIES 209;
Colorado Trust, Series 12
to
Nike Securities, L.P.
("Investment Trust") the insured, the payment of that portion of
the principal of and interest on each of the Bonds which shall be
due during the Policy Period but is unpaid by reason of
Nonpayment by the Issuer, in consideration of the insurance
premium paid and subject to the terms and conditions contained
herein or added hereto.
Policy No. Policy Date January 26, 1994
FE013125
Trustee U.S. TRUST COMPANY
770 Broadway, 6th Floor
Address New York, New York
In Witness Whereof, the Insurer has caused this Policy to be
affixed with a facsimile of its corporate seal and to be signed
by its duly authorized officers in facsimile to become effective
as its original seal and signatures and binding upon the Insurer
by virtue of the countersignature of its duly authorized
representative.
AMBAC Indemnity Corporation
P. Lassiter Stephen D. Cooke
President Secretary
Nancy Davila
/w/ Nancy Davila
Authorized Representative
1. Definitions
(a) "Policy" is this policy of insurance and all applications
and schedules for Municipal Bond Investment Trust Insurance
relating hereto, all of which are hereby incorporated by
reference herein.
(b) "Bonds" are the specific securities covered by this Policy
and are identified and described in the Schedule attached hereto
and hereby made a part hereof.
(c) "Issuer" is each respective issuer, identified in the
Schedule, of the Bonds.
(d) "Investment Trust" is the entity represented to have an
insurable interest in the Bonds insured under this Policy,
identified on the face of this Policy.
(e) "Trustee" is the Trustee of the Investment Trust, or any
successor Trustee thereto or Co-Trustee therewith.
(f) "Sponsor" is the firm or entity responsible for creating the
Investment Trust and thereafter performing the services to it
required of its sponsor, or any successor Sponsor thereof or Co-
Sponsor therewith.
(g) "Insured Instrument" is any instrument evidencing all or any
part of the principal or of interest on a Bond which is Due for
Payment.
(h) "Policy Period" is the period during which this Policy of
insurance is effective. The Policy Period commences at
12:01 A.M., New York local time on the Policy Date. The Policy
Date shall be the date on which AMBAC issues its Policy. The
Policy Period ends at 12:00 A.M. on the date on which the
proceeds of the last of the Bonds, together with accrued
interest, are received by the Trustee.
(i) "Premium Installment Period" is the period for which
installments of the annual insurance premium are payable monthly,
quarterly or semiannually, as determined initially for the
Investment Trust.
(j) "Nonpayment" is the failure of an Issuer to provide
sufficient funds to the payment agent for payment in full of all
principal and interest on a Bond which is Due for Payment.
(k) "Due for Payment," when referring to principal of a Bond (or
Insured Instrument evidencing such principal), is when the stated
maturity date has been reached, and does not refer to any earlier
date on which payment is due by reason of call for redemption,
acceleration or other advancement of maturity; and when referring
to interest on a Bond (or Insured Instrument evidencing such
interest), is when the stated date for payment has been reached.
(l) "Bond Proceedings" are the legal proceedings by which each
of the Bonds has been authorized, issued or secured, including
the governing statutes, the pertinent resolutions and ordinances
of the Issuer, and any trust indenture, mortgage, lease agreement
or other contract relating to the Bond of its security.
2. Noncancellability and Termination-Refunds of Premium
This Policy cannot be cancelled by AMBAC. The insurance provided
by this Policy shall remain in force throughout the Policy
Period. This Policy provides for payment to the Trustee as a
result of Nonpayment of the Bonds. In the event the Trustee
sells any of the Bonds, then this Policy shall be terminated as
to any such Bond on the date of said sale, and AMBAC shall not
have any liability under this Policy on account of Nonpayment of
any such Bond occurring thereafter. This Policy shall be
terminated as to any Bond which AMBAC has been notified by the
Sponsor or by the Trustee has been redeemed from or sold by the
Investment Trust, or was not deposited by the Sponsor, or the
contract to purchase which has failed, on the date such notice is
received by AMBAC, and AMBAC shall not have any liability under
this Policy on account of Nonpayment of any such Bond occurring
thereafter. When AMBAC is notified by the Trustee or the Sponsor
that any of the Bonds have been redeemed or sold from the
Investment Trust, or were not deposited into it, or a contract to
purchase any such Bonds has failed, a refund of any prepaid
premium thereon shall be made to the Investment Trust or the
Sponsor, as the case may be. Such notification to AMBAC must
specify the amount of Bonds affected, identify each by its Item
Number in an Application identified by its date and designate the
date of such disposal or failure.
3. Payment by Insurer-Amount, When and How Payable
(a) Amount-Payment by AMBAC of the aggregate of the face amount
of all Insured Instruments of the Investment Trust as to which
there has been a Nonpayment, reduced by the aggregate of:
(i) the amount which the Issuer shall have provided for payment
of Insured Instruments by the time of Nonpayment; and (ii) the
amount which has been received from any other source to pay
Insured Instruments; such payment shall fully discharge AMBAC
from any further liability on account of the Nonpayment.
(b) When Payable-The payment due the Investment Trust shall be
made not later than thirty days after notice from the Trustee is
received by AMBAC that Nonpayment has occurred, but not earlier
than the date on which the Insured Instruments are Due for
Payment.
(c) How Payable - The payment due the Investment Trust shall be
paid by AMBAC in exchange for delivery of Insured Instruments,
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 an Insured Instrument is issuable
only in a form whereby principal is payable to registered holders
or their assigns, AMBAC shall pay principal only upon
presentation and surrender of the unpaid Insured Instrument,
uncancelled and free of any adverse claim, together with an
instrument of assignment, in satisfactory form, so as to permit
ownership of such Insured Instrument to be registered in the name
of AMBAC or its nominee. In cases where an Insured Instrument is
issuable only in a form whereby interest is payable to registered
holders of their assigns. AMBAC shall pay interest only upon
presentation of proof that the claimant is the person entitled to
the payment of interest on the Insured Instrument and delivery of
an instrument of assignment, in satisfactory form, transferring
to AMBAC all rights under such Insured Instrument to receive the
interest in respect of which the insurance payment was made.
4. Rights of AMBAC
(a) Subrogation-When AMBAC has made payment with respect to an
Insured Instrument, it shall be subrogated to all of the rights
to payment of the Investment Trust thereon or in relation thereto
to the extent of such payment.
(b) Vesting of Rights and Powers-When AMBAC has made the payment
due to the Investment Trust as described in Condition 3, and
until the full amount of such payment has been recovered, AMBAC
shall be vested with all of the Investment Trust's options,
votes, rights, powers and the like under the Bond Proceedings.
AMBAC shall not be liable to the Investment Trust for any loss or
damage resulting from the exercise of or failure to exercise any
of such options, votes, rights, powers and the like.
(c) Exercise of Rights and Powers-AMBAC may, in its absolute
discretion, exercise or fail to exercise any option, vote, right,
power or the like it may have as holder or registered owner of an
Insured Instrument with respect to which it has made payment.
AMBAC shall not be liable to the Investment Trust for any loss or
damage resulting therefrom.
(d) Security of Rights-The Trustee shall execute and deliver
instruments and do whatever else is necessary to secure the
foregoing rights for AMBAC, and will do nothing to prejudice
them.
5. Payment of Insurance Premium Installments
The Trustee shall pay, when due, successively, the full amount of
each installment of the insurance premium. Each installment of
the insurance premium is due on or before the last day of the
expiring Premium Installment Period.
If AMBAC has not received such payment on or before such last
day, it shall give notice to the Sponsor to that effect. Such
installment shall be deemed to have been paid when due if AMBAC
receives such payment within ten days after it has given such
notice.
The Trustee shall, with each payment, notify AMBAC of all Bonds
which, during the expiring Premium Installment period, were
redeemed from or sold by the Investment Trust, or the contract to
purchase which failed, or which have not been deposited by the
Sponsor. Such notification to AMBAC must specify the amounts of
Bonds affected and identify each by its Item Number in an
Application identified by date. No such notice need be given as
to Bonds with respect to which AMBAC has previously been notified
to the same effect.
6. Where Notice is Given
All submissions, designations, payments, notices, reports and
other data or documents required to be submitted shall be mailed
to AMBAC at its administrative office, or to the Investment Trust
at its address shown on the face of this Policy or such other
address as it shall designate.
7. Waiver of Conditions
No permission affecting this insurance shall exist, or waiver of
any condition be valid, unless expressed in writing added hereto.
Each of the conditions of this Policy is hereby made severable,
and waiver of one condition is not a waiver of any other
condition.
8. Suit
No suit or action on this Policy for the recovery of any amount
shall be sustained in any court of law or equity unless all of
the conditions of this Policy shall have been complied with
(unless specifically waived by AMBAC in writing) and unless
commenced within two years after a Nonpayment.
9. Conflict of Laws
Any provision of this Policy which is in conflict which the laws
of the jurisdiction in which it is effective is hereby amended to
conform with the minimum requirement of such laws.
AMBAC Indemnity Corporation
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
One State Street Plaza
New York, New York 10004
Endorsement
Policy issued to: Attached and forming part of
FE013125
FIRST TRUST COMBINED, SERIES 209;
Colorado Trust, Series 12
Effective Date of Endorsement:
January 26, 1994
The Policy to which this Endorsement is attached and of which it
forms a part is hereby amended to provide that there shall be no
acceleration payment due under the Policy unless such
acceleration is at the sole option of AMBAC.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned Policy other than as above
stated.
In Witness Whereof, the Company has caused its Corporate Seal to
be hereto affixed and these presents to be signed by its duly
authorized officers in facsimile to become effective as its
original seal and signatures and binding on the Company by virtue
of countersignature by its duly authorized agent.
AMBAC Indemnity Corporation
P. Lassiter Stephen D. Cooke
President Secretary
Nancy Davila
/w/ Nancy Davila
Authorized Representative
AMBAC Indemnity Corporation
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Endorsement
Policy issued to: Attached and forming part of
FE013125
FIRST TRUST COMBINED, SERIES 209;
Colorado Trust, Series 12
Effective Date of Endorsement:
January 26, 1994
The insurance provided by this Policy is not covered by the
property/casualty insurance security fund specified by the
insurance laws of the State of New York.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned Policy other than as above
stated.
In Witness Whereof, the Company has caused its Corporate Seal to
be hereto affixed and these presents to be signed by its duly
authorized officers in facsimile to become effective as its
original seal and signatures and binding on the Company by virtue
of countersignature by its duly authorized agent.
AMBAC Indemnity Corporation
P. Lassiter Stephen D. Cooke
President Secretary
Nancy Davila
/w/ Nancy Davila
Authorized Representative
AMBAC Indemnity Corporation
c/o CT Corporation Systems
44 East Mifflin Street
Madison, Wisconsin 53703
Administrative Office:
One State Street Plaza
New York, New York 10004
Schedule of Bonds (a part of the Application and Policy)
FIRST TRUST COMBINED, SERIES 209
Colorado Trust, Series 12
Date of Application: January 26, 1994
Full
Item Par Name of Purpose Interest
No. Value Issuer of Bonds Rate
1. $350M City of Colorado Revenue Bonds (The Colorado 4.700%
Springs, Colorado College Project) Series 1994
(SHIP Option Premium
Rate: .93%)
Upfront Cost: $10,712
Initial
Item Date of Maturity Annual Annual
No. Bonds Date Premium Rate Premium
1. 01/01/94 06/01/04 .1600% $560.00
* Premium attributable to the original insured amount of each
Item of Bonds.
