File No. 33-56741
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 236
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 December 8, 1994 at 1:30 p.m.
pursuant to Rule 487.
________________________
*Previously paid
THE FIRST TRUST COMBINED
SERIES 236
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 *
periodic payment plan certificates
57.
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 (registered trademark) of Insured Municipal
Bonds-Multi-State:
Missouri Trust, Series 26 New York Trust, Series 56
The First Trust Advantage: Maine Trust, Series 15
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 236 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 ("the Bonds"), although
interest on certain Bonds in the Maine Advantage Trust will be
a preference item for purposes of the Alternative Minimum Tax.
In addition, the interest income of each Trust is, in the opinion
of Special Counsel, exempt to the extent indicated from state
and local income taxes when held by residents of the state in
which the issuers of the Bonds in such Trust are located. The
Sponsor has a limited right to substitute other bonds in each
Trust portfolio in the event of a failed contract. The Bonds 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 Bonds.
INSURANCE GUARANTEEING THE SCHEDULED PAYMENTS OF PRINCIPAL AND
INTEREST ON ALL BONDS IN THE PORTFOLIO OF EACH INSURED TRUST HAS
BEEN OBTAINED FROM FINANCIAL GUARANTY INSURANCE COMPANY AND/OR
AMBAC INDEMNITY CORPORATION BY THE INSURED TRUSTS OR WAS DIRECTLY
OBTAINED BY THE BOND ISSUER, THE UNDERWRITERS, THE SPONSOR OR
OTHERS PRIOR TO THE INITIAL DATE OF DEPOSIT FROM FINANCIAL GUARANTY
INSURANCE COMPANY, AMBAC INDEMNITY CORPORATION, OR OTHER INSURERS
(THE "PREINSURED BONDS"). INSURANCE OBTAINED BY AN INSURED TRUST
APPLIES ONLY WHILE BONDS ARE RETAINED IN SUCH TRUST, WHILE INSURANCE
ON PREINSURED BONDS IS EFFECTIVE SO LONG AS SUCH BONDS ARE OUTSTANDING.
PURSUANT TO AN IRREVOCABLE COMMITMENT OF FINANCIAL GUARANTY INSURANCE
COMPANY, AND/OR AMBAC INDEMNITY CORPORATION IN THE EVENT OF A
SALE OF A BOND INSURED UNDER AN INSURANCE POLICY OBTAINED BY AN
INSURED TRUST, THE TRUSTEE HAS THE RIGHT TO OBTAIN PERMANENT INSURANCE
FOR SUCH BOND UPON THE PAYMENT OF A SINGLE PREDETERMINED INSURANCE
PREMIUM FROM THE PROCEEDS OF THE SALE OF SUCH BOND. THE INSURANCE,
IN EITHER CASE, RELATES ONLY TO THE BONDS IN THE INSURED TRUSTS
AND NOT TO THE UNITS OFFERED HEREBY. AS A RESULT OF SUCH INSURANCE,
THE UNITS OF EACH INSURED TRUST HAVE RECEIVED A RATING OF "AAA"
BY STANDARD & POOR'S CORPORATION. SEE "WHY AND HOW ARE THE INSURED
TRUSTS INSURED?" ON PAGE A-12. 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 December 8, 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, although
interest on certain Bonds in the Maine Advantage Trust will be
a preference item for purposes of the Alternative Minimum Tax.
ACCORDINGLY, THE MAINE ADVANTAGE TRUST MAY BE APPROPRIATE ONLY
FOR INVESTORS WHO ARE NOT SUBJECT TO THE ALTERNATIVE MINIMUM TAX.
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?"
The Sponsor may, from time to time during a period of up to approximately
360 days after the Initial Date of Deposit, deposit additional
Bonds in each Trust. Such deposits of additional Bonds will be
done in such a manner that the original proportionate relationship
amongst the individual issues of the Bonds shall be maintained.
See "What is the First Trust Combined Series?" and "How May Bonds
be Removed from the Fund?"
Risk Factors. An investment in the Trusts should be made with
an understanding of the risks associated therewith, including,
among other factors, the inability of the issuer or an insurer
to pay the principal of or interest on a bond when due, volatile
interest rates, early call provisions, and changes to the tax
status of the Bonds. See "What are Certain General Matters Relating
to the Trusts?-Risk Factors."
Page 2
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Bonds-December 8, 1994
Sponsor: Nike Securities L.P.
Trustee: United States Trust Company of New York
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
Missouri New York Maine
Insured Insured Advantage
Trust, Trust, Trust,
Series 26 Series 56 Series 15
__________ __________ __________
<S> <C> <C> <C>
General Information
Principal Amount of Bonds in the Trusts $3,500,000 $2,845,000 $2,950,000
Number of Units 3,500 2,794 2,924
Fractional Undivided Interest in the
Trust per Unit 1/3,500 1/2,794 1/2,924
Principal Amount (Par Value) of
Bonds per Unit (1) $ 1,000.00 $ 1,018.25 $ 1,008.89
Public Offering Price
Aggregate Offering Price Evaluation of
Bonds in the Portfolio $3,310,071 $2,657,103 $2,780,733
Aggregate Offering Price Evaluation per Unit $ 945.73 $ 951.00 $ 951.00
Sales Charge (2) $ 48.73 $ 49.00 $ 49.00
Public Offering Price per Unit (3) $ 994.46 $ 1,000.00 $ 1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 945.73 $ 951.00 $ 951.00
Redemption Price per Unit (4) $ 935.73 $ 940.82 $ 940.91
Excess of Public Offering Price per Unit Over
Redemption Price per Unit $ 58.73 $ 59.18 $ 59.09
Excess of Sponsor's Initial Repurchase Price per
Unit Over Redemption Price per Unit $ 10.00 $ 10.18 $ 10.09
</TABLE>
First Settlement Date December 15, 1994
Discretionary Liquidation Amount A Trust may be terminated if
the value of such Trust is less than
20% of the aggregate principal
amount of the Bonds deposited in such
Trust during the primary offering
period.
Mandatory Termination Date December 31, 2043
Supervisory Fee (5) Maximum of $0.25 per Unit annually (6)
Evaluator's Annual Fee $0.30 per $1,000 principal amount
of Bonds at the Initial 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, including the Missouri Insured
Trust, 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 the New York Insured Trust
and the Maine Advantage Trust 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 Initial
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 State Trust and 3.9%
(4.058%) for an 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) In addition, the Sponsor will also be reimbursed for bookkeeping
and other administrative expenses currently at a maximum annual
rate of $0.10 per Unit.
(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 236 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-Multi-State:
Missouri Trust, Series 26 and New York Trust, Series 56 and The
First Trust Advantage: Maine Trust, Series 15 (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 Initial Date of Deposit,
with Nike Securities L.P., as Sponsor, United States Trust Company
of New York, as Trustee, Securities Evaluation Service, Inc.,
as Evaluator and First Trust Advisors L.P., as Portfolio Supervisor.
On the Initial Date of Deposit, the Sponsor deposited with the
Trustee interest-bearing obligations, including delivery statements
relating to contracts for the purchase of certain such obligations
and 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, although interest on certain Bonds in the Maine
Advantage Trust will be a preference item for purposes of the
Alternative Minimum Tax. The current market value and certain
of the obligations in a Discount Trust are significantly below
face value when the obligations are acquired by such Trusts. The
prices at which the obligations are acquired result in a Discount
Trusts' 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 Initial Date of Deposit from Financial Guaranty, AMBAC
Indemnity, or other insurers (the "Preinsured Bonds"). NO PORTFOLIO
INSURANCE POLICY HAS BEEN OBTAINED BY THE TRUSTS WITH THE NAME
DESIGNATION OF "THE FIRST TRUST ADVANTAGE" (THE "ADVANTAGE TRUSTS").
The portfolio insurance obtained by the Insured Trusts is effective
only while the Bonds thus insured are held in such Trusts, while
insurance on Preinsured Bonds is effective so long as such Bonds
are outstanding. See "Why and How are the Insured Trusts Insured?"
THERE IS, OF COURSE, NO GUARANTEE THAT THE FUND'S OBJECTIVES WILL
BE ACHIEVED. AN INVESTMENT IN THE FUND SHOULD BE MADE WITH AN
UNDERSTANDING OF THE RISKS WHICH AN INVESTMENT IN FIXED RATE LONG-TERM
DEBT OBLIGATIONS MAY ENTAIL, INCLUDING THE RISK THAT THE VALUE
OF THE UNITS WILL DECLINE WITH INCREASES IN INTEREST RATES.
With the deposit of the Bonds on the Initial Date of Deposit,
the Sponsor established a percentage relationship between the
amounts of Bonds in each Trust's portfolio. From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to
the Indenture, may deposit additional Bonds in a Trust and Units
may be continuously offered for sale to the public by means of
this Prospectus, resulting in a potential increase in the outstanding
number of Units of a Trust. Any additional Bonds deposited in
a Trust will maintain, as nearly as is practicable, the original
proportionate relationship of the Bonds in a Trust's portfolio.
Any deposit by the Sponsor of additional Bonds will duplicate,
as nearly as is practicable, the original proportionate relationship
Page 4
and not the actual proportionate relationship on the subsequent
date of deposit, since the actual proportionate relationship may
be different than the original proportionate relationship. Any
such difference may be due to the sale, redemption or liquidation
of any of the Bonds deposited in a Trust on the Initial Date of
Deposit, or any subsequent date of deposit. See "How May Bonds
be Removed from the Fund?" Since the prices of the underlying
Bonds will fluctuate daily, the ratio, on a market value basis,
will also change daily. The portion of Bonds represented by each
Unit will not change as a result of the deposit of additional
Bonds in a Trust.
On the Initial Date of Deposit, each Unit of a Trust represented
the undivided fractional interest in the Bonds deposited in a
Trust set forth under "Summary of Essential Information." To the
extent that Units of a Trust are redeemed, the aggregate value
of the Bonds in a Trust will be reduced and the undivided fractional
interest represented by each outstanding Unit of a Trust will
increase. However, if additional Units are issued by a Trust in
connection with the deposit of additional Bonds by the Sponsor,
the aggregate value of the Bonds in a Trust will be increased
by amounts allocable to additional Units, and the fractional undivided
interest represented by each Unit of a Trust will be decreased
proportionately. See "How May Units be Redeemed?" Each Trust has
a Mandatory Termination Date as set forth herein under "Summary
of Essential Information."
Neither the Public Offering Price of the Units of an Insured Trust
nor any evaluation of such Units for purposes of repurchases or
redemptions reflects any element of value for the insurance obtained
by such Trust unless Bonds are in default in payment of principal
or interest or in significant risk of such default. See "Public
Offering-How is the Public Offering Price Determined?" On the
other hand, the value of insurance obtained by the Bond issuer,
the underwriters, the Sponsor or others is reflected and included
in the market value of such Bonds.
Insurance obtained by an Insured Trust or by the Bond issuer,
the underwriters, the Sponsor or others is not a substitute for
the basic credit of an issuer, but supplements the existing credit
and provides additional security thereof. 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?"
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.
Page 5
UNDERWRITERS
The Underwriters named below, including the Sponsor, have severally
purchased Units in the following respective amounts:
<TABLE>
<CAPTION>
Missouri Insured Trust, Series 26
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 2,350
Underwriters
B.C. Christopher Division 4717 Grand Ave., Suite 700, Kansas City, MO 64112 250
of Fahnestock Inc.
Huntleigh Securities Corporation 222 South Central, Suite 300, St. Louis, MO 63105 250
Stifel, Nicolaus 500 North Broadway, 16th Floor, St. Louis, MO 63102 250
& Company, Incorporated
Morgan Keegan & Morgan Keegan Tower, 50 Front Street, Memphis, 200
Company, Incorporated TN 38103
Advest, Inc. One Commercial Plaza, 280 Trumbull Street, 18th Floor, 100
Hartford, CT 06103
B.C. Ziggler and Company 215 N. Main Street, West Bend, WI 53095 100
_____
3,500
=====
</TABLE>
<TABLE>
<CAPTION>
New York Insured Trust, Series 56
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 1,194
Underwriters
McLaughlin, Piven, Vogel 30 Wall Street, Fifth Floor, New York, NY 10005 500
Securities, Inc.
Advest, Inc. One Commercial Plaza, 280 Trumbull Street, 18th Floor, 250
Hartford, CT 06103
Gruntal & Co., Incorporated 14 Wall Street, 20th Floor, New York, NY 10005 250
Corporate Securities 980 North Federal Highway, Ste. 210, Boca Raton, FL 33432 100
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, MO 63103 100
Nathan & Lewis Securities, Inc. 119 West 40th Street, New York, NY 10018 100
Oppenheimer & Co., Inc. Oppenheimer Tower, One World Financial Center, 100
8th Floor, New York, NY 10281
Pershing, Division of Donaldson, One Pershing Plaza, Jersey City, NJ 07399 100
Lufkin & Jenrette
Securities Corporation
Smith Barney, Inc. 388 Greenwich St., 23rd Floor, New York, NY 10013 100
_____
2,794
=====
</TABLE>
Page 6
<TABLE>
<CAPTION>
Maine Advantage Trust, Series 15
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 2,024
Underwriters
A.G. Edwards & Sons, Inc. One North Jefferson Avenue, St. Louis, MO 63103 500
Advest, Inc. One Commercial Plaza, 280 Trumbull Street, 18th Floor, 100
Hartford, CT 06103
Fidelity Capital Markets, A division World Trade Center, 164 Northern Avenue, ZT3, 100
of National Financial Services Boston, MA 02210
Corporation
First Investors Corporation 95 Wall Street, 22nd Floor, New York, NY 10005 100
Linsco/Private Ledger Corp. 155 Federal Street, 14th Floor, Boston, MA 02110 100
_____
2,924
=====
</TABLE>
On the Initial 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. For further
information on underwriting, see "What are the Underwriting Concessions?"
on page A-24.
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 7
Missouri Insured Trust, Series 26
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 63.49 $ 63.49
Less: Estimated Annual Expense per Unit $ 2.40 $ 1.90
Estimated Net Annual Interest Income per Unit $ 61.09 $ 61.59
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 61.09 $ 61.59
Divided by 12 and 2, respectively $ 5.09 $ 30.80
Estimated Daily Rate of Net Interest Accrual per Unit $ .169702 $ .171091
Initial Distribution - January 31, 1995 (1) $ 5.09 $ 5.13
Partial Distribution - June 30, 1995 (1) $ - $ 25.66
Regular Distribution (1) $ 5.09 $ 30.80
(Commencing) 1/31/95 12/31/95
Estimated Current Return Based on Public Offering Price (2) 6.14% 6.19%
Estimated Long-Term Return Based on Public Offering Price (2) 6.23% 6.29%
CUSIP 3371M4 349 356
</TABLE>
Trustee's Annual Fee $1.35 and $.90 per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing December 8, 1994.
[FN]
(1) The Trust's initial distribution per Unit will be made on
January 31, 1995 to monthly and semi-annual Unit holders of record
on January 15, 1995. The Trust will make a partial distribution
on June 30, 1995 to semi-annual Unit holders of record on June
15, 1995. Regular distributions to monthly Unit holders will be
paid the last day of each month commencing on January 31, 1995
to Unit holders of record on the fifteenth day of such month commencing
January 15, 1995. Regular distributions to semi-annual Unit holders
will be paid the last day of June and December commencing December
31, 1995 to Unit holders of record on the fifteenth day of June
and December commencing December 15, 1995.
(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 Initial Date of Deposit. Since the market values and estimated
retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the 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 8
Missouri Insured Trust Summary
The Missouri Insured Trust consists of six obligations of issuers
located in Missouri. 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 Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
<C> <S> <C>
2 Health Care 35.00%
1 Airport 21.43%
1 Electric 14.28%
2 Miscellaneous 29.29%
</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 21%. None of the Bonds in the Trust are subject
to call within five years of the Initial Date of Deposit, although
certain Bonds may be subject to an extraordinary call.
Approximately 21% of the aggregate principal amount (approximately
23% 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
10 years after the Initial Date of Deposit. See "What Is the First
Trust Combined Series?," "Missouri Insured Trust, Series 26-Portfolio"
and "Description of Bond Ratings."
Federal and Missouri 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 9
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________ _____________________________________
Single Joint Tax 6.00% 6.50% 7.00%
Return Return Rate* Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 19.4% 7.44 8.06 8.68
22.8 - 55.1 38.0 - 91.9 32.3 8.86 9.60 10.34
55.1 - 115.0 91.9 - 140.0 35.1 9.24 10.02 10.79
115.0 - 250.0 140.0 - 250.0 39.8 9.97 10.80 11.63
Over 250.0 Over 250.0 43.2 10.56 11.44 12.32
</TABLE>
[FN]
* Combined State and Federal tax rate was computed by taking
into account the deductibility of State tax in determining Federal
tax and the recently enacted limitations on the deductibility
of Federal tax in determining State tax. Specifically, the deduction
allowed for Federal income tax liability may not exceed $5,000
and $10,000 for single and joint taxpayers, respectively. Accordingly,
the combined tax rate reflects the cross-deductibility of each
tax in determining the other only for levels of income corresponding
to the 15% Federal tax rate.
Risk Factors
Currently, Missouri has a population of over 5 million people.
Missouri's population has climbed steadily upward, averaging an
increase of approximately 6 percent each decade. Population projections
indicate by the year 2010, there will be about 5.5 million people
in Missouri, a continuation of the steady, moderate growth which
has been the trend.
Farming plays a vital role in Missouri's economy. Cash receipts
from sales of crops and livestock average $3.8 billion annually.
These cash receipts come from a variety of agricultural commodities
produced in the State. The largest portion of the State's agricultural
income comes from the production of meat animals (36.6 percent).
Oil crops account for 18.9 percent; feed crops 13.3 percent; dairy
products 8.6 percent; poultry and eggs 11.2 percent; food grains
4.0 percent; miscellaneous crops 3.3 percent and cotton 3.4 percent.
According to data obtained by the Missouri Division of Employment
Security, in 1993 over two million workers had nonagricultural
jobs in Missouri. Nearly 27 percent of these workers were employed
in services, approximately 24 percent were employed in wholesale
and retail trade, and 17 percent were employed in manufacturing.
In the last ten years, Missouri has experienced a significant
increase in employment in the service sector and in wholesale
and retail trade.
In 1993, per capita personal income in Missouri was $19,463, a
2.6 percent increase over the 1992 figure of $18,970. For the
United States as a whole, per capita income in 1993 was $20,817,
a 3.6 percent increase over the 1992 per capita income of $20,105.
The total value of Missouri's annual mineral production in 1992
exceeded $1.1 billion. The State ranked first nationally in the
production of lime and lead. It ranked second in production of
crude iron oxide pigments; third in barite, fire clay and iron
pigments; fourth in zinc; fifth in portland cement; sixth in copper
and eighth in silver. Mining employment totaled 4,700 jobs. Missouri
ranks 11th in the nation in the production of non-fuel minerals.
Although the June 1993 revenue estimate had been revised downward
by $27.5 million, the State budget for Fiscal Year 1993 remained
balanced due primarily to delayed spending for desegregation capital
projects. The downward revision in revenues was considered necessary
because of weak economic performance, and more importantly an
economic outlook for the second half of Fiscal Year 1993 which
projected slower growth than was anticipated in June 1992.
For Fiscal Year 1994, the majority of revenues for the State of
Missouri will be obtained from individual income taxes (53.1%),
sales and use taxes (30.0%), corporate income taxes (5.9%) and
county foreign insurance taxes (3.0%). Major expenditures for
Fiscal Year 1994 include elementary and secondary education (30.6%),
human services (25.4%), higher education (14.8%) and desegregation
(8.9%).
The Fiscal Year 1994 budget balances resources and obligations
based on the consensus revenue and refund estimate and an opening
balance resulting from continued withholdings and delayed spending
for desegregation
Page 10
capital projects. The total general revenue operating budget for
Fiscal Year 1994 exclusive of desegregation is $3,844.6 million.
The court-ordered desegregation estimate is $377.7 million, an
increase of $30.7 million over the revised Fiscal Year 1993 estimate.
According to the United States Bureau of Labor Statistics, the
1992 unemployment rate in Missouri was 5.7% and the 1993 rate
was 6.4%. Although not strictly comparable, the preliminary seasonally
adjusted rate for September of 1994 was 4.3%.
Currently, Moody's Investors Service, Inc. rates Missouri general
obligation bonds "Aaa" and Standard & Poor's Corporation rates
Missouri general obligation bonds "AAA." Although these ratings
indicate that the State of Missouri is in relatively good economic
health, there can be, of course, no assurance that this will continue
or that particular bond issues may not be adversely affected by
changes in the State or local economic or political conditions.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact certain issuers of
Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of obligations
held by the Missouri Insured 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 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 the Bonds, the market value or marketability
of the Bonds or the ability of the respective issuers of the Bonds
acquired by the Missouri Insured Trust to pay interest on or principal
of the Bonds.
Missouri Tax Status
The assets of the Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Missouri (the "State")
or counties, municipalities, authorities or political subdivisions
thereof (the "Missouri Bonds") or by the Commonwealth of Puerto
Rico, Guam and the United States Virgin Islands (the "Possession
Bonds") (collectively, the "Bonds").
Neither the Sponsor nor its counsel have independently examined
the Bonds to be deposited in and held in the Trust. However, although
no opinion is expressed herein regarding such matters, it is assumed
that: (i) the Bonds were validly issued, (ii) the interest thereon
is excludable from gross income for Federal income tax purposes
and (iii) interest on the Missouri Bonds, if received directly
by a Unit holder, would be exempt from the Missouri income tax
applicable to individuals and corporations ("Missouri State Income
Tax"). The opinion set forth below does not address the taxation
of persons other than full time residents of Missouri.
In the opinion of Chapman and Cutler, Special Counsel to the Fund
for Missouri tax matters, under existing law:
The Trust is not an association taxable as a corporation for Missouri
income tax purposes, and each Unit holder of the Trust will be
treated as the owner of a pro rata portion of the Trust and the
income of such portion of the Trust will be treated as the income
of the Unit holder for Missouri State Income Tax purposes.
Interest paid and original issue discount, if any, on the Bonds
which would be exempt from the Missouri State Income Tax if received
directly by a Unit holder will be exempt from the Missouri State
Income Tax when received by the Trust and distributed to such
Unit holder; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
To the extent that interest paid and original issue discount,
if any, derived from the Trust by a Unit holder with respect to
Possession Bonds is excludable from gross income for Federal income
tax purposes pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section
1423a, and 48 U.S.C. Section 1403, such interest paid and original
issue discount, if any, will not be subject to the Missouri State
Income Tax; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
Page 11
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
Each Unit holder of the Trust will recognize gain or loss for
Missouri State Income Tax purposes if the Trustee disposes of
a bond (whether by redemption, sale, or otherwise) or if the Unit
holder redeems or sells Units of the Trust to the extent that
such a transaction results in a recognized gain or loss to such
Unit holder for Federal income tax purposes. Due to the amortization
of bond premium and other basis adjustments required by the Internal
Revenue Code, a Unit holder, under some circumstances, may realize
taxable gain when his or her Units are sold or redeemed for an
amount equal to their original cost.
Any insurance proceeds paid under policies which represent maturing
interest on defaulted obligations which are excludable from gross
income for Federal income tax purposes will be excludable from
Missouri State Income Tax to the same extent as such interest
would have been so excludable if paid by the issuer of such Bonds
held by the Trust; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
The Missouri State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase
or carry Units in the Trust, the interest on which is exempt from
such Tax.
The Trust will not be subject to the Kansas City, Missouri Earnings
and Profits Tax and each Unit holder's share of income of the
Bonds held by the Trust will not generally be subject to the Kansas
City, Missouri Earnings and Profits Tax or the City of St. Louis
Earnings Tax (except in the case of certain Unit holders, including
corporations, otherwise subject to the St. Louis City Earnings
Tax).
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Page 12
Missouri Insured Trust, Series 26
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Initial Date of Deposit of the Bonds-December 8, 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 Jackson County, Missouri, Public Facilities AAA 2004 @ 100 $ 467,850
Authority Leasehold Revenue Refunding and 2007 @ 100 S.F.
Improvement (Jackson County, Missouri, Capital
Improvements Project), Series 1994 (MBIA Insured),
6.125%, Due 12/01/2015 (5)
750,000 City of Kansas City, Missouri, General Improvement AAA 2004 @ 101 761,003
Airport Revenue, Series 1994B (Capital Guaranty 2013 @ 100 S.F.
Insured), 6.875%, Due 9/01/2014 (5)
525,000 {Kansas City (Missouri) Municipal Assistance AAA 2001 @ 100 474,526
Corporation, Leasehold Improvement Revenue, 2016 @ 100 S.F.
Series 1991B (H. Roe Bartle Convention Center Project)
(AMBAC Insured), 6.00%, Due 4/15/2020 (5)
500,000 Health and Educational Facilities Authority of AAA 2002 @ 102 460,295
the State of Missouri, Health Facilities Revenue 2013 @ 100 S.F.
(Health Midwest), Series 1992B (MBIA Insured),
6.25%, Due 2/15/2022 (5)
725,000 Health and Educational Facilities Authority of AAA 2002 @ 102 683,327
the State of Missouri, Health Facilities Revenue 2004 @ 100 S.F.
(Heartland Health Systems Project), Series 1992
(AMBAC Insured), 6.35%, Due 11/15/2017 (5)
500,000 City of Sikeston, Missouri, Electric System AAA 2002 @ 102 463,070
Revenue Refunding, 1992 Series (MBIA Insured), 2013 @ 100 S.F.
6.25%, Due 6/01/2022 (5)
__________ __________
$3,500,000 $3,310,071
========== ==========
</TABLE>
[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 May
1, 1991 at a price of 89.731% of their original principal amount.
For industry concentrations of the Bonds in the Trust, see
"Missouri Insured Trust Summary."
See "Notes to Portfolios" on page 33.
Page 13
New York Insured Trust, Series 56
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 64.46 $ 64.46
Less: Estimated Annual Expense per Unit $ 2.41 $ 1.91
Estimated Net Annual Interest Income per Unit $ 62.05 $ 62.55
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 62.05 $ 62.55
Divided by 12 and 2, respectively $ 5.17 $ 31.28
Estimated Daily Rate of Net Interest Accrual per Unit $ .172364 $ .173753
Initial Distribution - January 31, 1995 (1) $ 5.17 $ 5.21
Partial Distribution - June 30, 1995 (1) $ - $ 26.06
Regular Distribution (1) $ 5.17 $ 31.28
(Commencing) 1/31/95 12/31/95
Estimated Current Return Based on Public Offering Price (2) 6.21% 6.26%
Estimated Long-Term Return Based on Public Offering Price (2) 6.28% 6.33%
CUSIP 3371M4 406 414
</TABLE>
Trustee's Annual Fee $1.35 and $.90 per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing December 8, 1994.
[FN]
(1) The Trust's initial distribution per Unit will be made on
January 31, 1995 to monthly and semi-annual Unit holders of record
on January 15, 1995. The Trust will make a partial distribution
on June 30, 1995 to semi-annual Unit holders of record on June
15, 1995. Regular distributions to monthly Unit holders will be
paid the last day of each month commencing on January 31, 1995
to Unit holders of record on the fifteenth day of such month commencing
January 15, 1995. Regular distributions to semi-annual Unit holders
will be paid the last day of June and December commencing December
31, 1995 to Unit holders of record on the fifteenth day of June
and December commencing December 15, 1995.
(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 Initial Date of Deposit. Since the market values and estimated
retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the 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 14
New York Insured Trust Summary
The New York Insured Trust consists of six obligations of issuers
located in New York. 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 Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
<C> <S> <C>
1 General Obligation 17.57%
1 University and School 19.17%
1 Electric 17.57%
1 Health Care 17.57%
1 Transportation 17.57%
1 Water and Sewer 10.55%
</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 19%. None of the Bonds in the Trust are subject
to call within five years of the Initial Date of Deposit, although
certain Bonds may be subject to an extraordinary call.
Approximately 35% of the aggregate principal amount (approximately
38% 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 Initial Date of Deposit. See "What Is the
First Trust Combined Series?," "New York Insured Trust, Series
56-Portfolio" and "Description of Bond Ratings."
Federal and New York 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 15
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
_________________________ _____________________________________
Single Joint Tax 6.00% 6.50% 7.00%
Return Return Rate* Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 21.7% 7.66 8.30 8.94
22.8 - 55.1 38.0 - 91.9 33.7 9.05 9.80 10.56
55.1 - 115.0 91.9 - 140.0 36.4 9.43 10.22 11.01
115.0 - 250.0 140.0 - 250.0 41.0 10.17 11.02 11.86
Over 250.0 Over 250.0 44.4 10.79 11.69 12.59
</TABLE>
[FN]
* Combined Federal and State tax rate was computed assuming that
the investor is not subject to local income taxes, such as New
York City taxes. Should a Unit holder reside in a locality which
imposes an income tax, the Unit holder's equivalent taxable estimated
current return would be greater than the equivalent taxable estimated
current returns indicated in the table. The table does not reflect
the New York State supplemental income tax based upon a taxpayer's
New York State taxable income and New York State adjusted gross
income. This supplemental tax results in an increased marginal
State income tax rate to the extent a taxpayer's New York State
adjusted gross income ranges between $100,000 and $150,000. In
addition, the table does not reflect the amendments to the New
York State income tax law that impose limitations on the deductibility
of itemized deductions. The application of the New York State
supplemental income tax and limitation on itemized deductions
may result in a higher combined Federal, State and local tax rate
than indicated in the table.
Risk Factors
The New York Trust includes obligations issued by New York State
(the "State"), by its various public bodies (the "Agencies"),
and/or by other entities located within the State, including the
City of New York (the "City").
Some of the more significant events and conditions relating to
the financial situation in New York are summarized below. This
section provides only a brief summary of the complex factors affecting
the financial situation in New York and is derived from sources
that are generally available to investors and is believed to be
accurate. It is based in part on Official Statements and prospectuses
issued by, and on other information reported by the State, the
City, and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that current or future statewide or
regional economic difficulties, and the resulting impact on State
or local government finances generally, will not adversely affect
the market value of New York Municipal Obligations held in the
portfolio of the Trust or the ability of particular obligors to
make timely payments of debt service on (or relating to) those
obligations.
(1) The State: The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy
has grown more slowly than that of the nation as a whole, gradually
eroding the State's relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration
of the more affluent to the suburbs and an influx of generally
less affluent residents. Regionally, the older Northeast cities
have suffered because of the relative success that the South and
the West have had in attracting people and business. The City
has also had to face greater competition as other major cities
have developed financial and business capabilities which make
them less dependent on the specialized services traditionally
available almost exclusively in the City.
The State has for many years had a very high state and local tax
burden relative to other states. The burden of State and local
taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate
within, the State.
Slowdown of Regional Economy. A national recession commenced in
mid-1990. The downturn continued throughout the State's 1990-91
fiscal year and was followed by a period of weak economic growth
during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to
grow faster than in 1992, but still at a very moderate rate, as
compared to other recoveries. Moderate economic growth is expected
to continue in calendar year 1994 at a slightly faster rate than
in 1993. Economic recovery
Page 16
started considerably later in the State than in the nation as
a whole due in part to the significant retrenchment in the banking
and financial services industries, downsizing by several major
corporations, cutbacks in defense spending, and an oversupply
of office buildings. Many uncertainties exist in forecasts of
both the national and State economies and there can be no assurance
that the State economy will perform at a level sufficient to meet
the State's projections of receipts and disbursements.
1994-95 Fiscal Year. The Governor presented the recommended Executive
Budget for the 1994-95 fiscal year on January 18, 1994, and amended
it on February 17, 1994. The Recommended 1994-95 State Financial
Plan projects a balanced General Fund, receipts and transfers
from other funds at $33.422 billion (including a projected $339
million surplus anticipated for the State's 1993-94 fiscal year)
and disbursements and transfers to other funds at $33.399 billion.
The recommended 1994-95 Executive Budget includes tax and fee
reductions ($210 million), retention of revenues currently received,
primarily by deferral of a scheduled personal income tax rate
reduction ($1.244 billion), and additional increases to miscellaneous
revenue sources ($237 million). No major additional programs are
recommended other than a $198 million increase in school aid,
$185 million in Medicaid cost-containment initiatives and $110
million in local government Medicaid costs to be assumed by the
State.
There can be no assurance that the State Legislature will enact
the Executive Budget as proposed, nor can there be any assurance
that the Legislature will enact a budget for the State's 1994-95
fiscal year prior to its commencement. A delay in its enactment
may negatively affect certain proposed actions and reduce projected
savings.
1993-94 Fiscal Year. The 1993-94 State Financial Plan issued on
April 16, 1993, projected General Fund receipts and transfers
from other funds at $32.367 billion and disbursements and transfers
to other funds at $32.300 billion. In comparison to the Governor's
recommended Executive Budget for the 1993-94 fiscal year, as revised
on February 18, 1993, the 1993-94 State Financial Plan reflected
increases in both receipts and disbursements in the General Fund
of $811 million.
The 1993-94 State Financial Plan was last revised on January 18,
1994. The State projects a surplus of $299 million, as the result
of developments which positively impacted upon receipts and disbursements.
In the revised Plan, the State announced its intention to pay
a 53rd weekly Medicaid payment, estimated at $120 million, and
to add $82 million to a reserve fund for contingencies.
On January 21, 1994, the State entered into a settlement with
Delaware with respect to State of Delaware v. State of New York,
which is discussed below at State Litigation. The State made an
immediate $35 million payment and agreed to make a $33 million
annual payment in each of the next five fiscal years. The State
has not settled with other parties to the litigation and will
continue to incur litigation expenses as to those claims.
On November 16, 1993, the Court of Appeals, the State's highest
court, affirmed the decision of a lower court in three actions,
which declared unconstitutional State actuarial funding methods
for determining State and local contributions to the State employee
retirement system. Following the decision, the State Comptroller
developed a plan to phase in a constitutional funding method and
to restore prior funding levels of the retirement systems over
a four-year period. The plan is not expected to require the State
to make additional contributions with respect to the 1993-94 fiscal
year nor to materially and adversely affect the State's financial
condition thereafter. Through fiscal year 1998-99, the State expects
to contribute $643 million more to the retirement plans than would
have been required under the prior funding method.
Future Fiscal Years. There can be no assurance that the State
will not face substantial potential budget gaps in the future
resulting from a significant disparity between tax revenues projected
from a lower recurring receipts base and the spending required
to maintain State programs at current levels. To address any potential
budgetary imbalance, the State may need to take significant actions
to align recurring receipts and disbursements.
Indebtedness. As of December 31, 1993, the total amount of long-term
State general obligation debt authorized but unissued stood at
$2.3 billion. As of the same date, the State had approximately
$5.0 billion in general
Page 17
obligation bonds and $2.94 million of Bond Anticipation Notes
("BANS"). The State issued $850 million in tax and revenue anticipation
notes ("TRANS") on May 4, all of which matured on December 31,
1993. The State does not project the need to issue additional
TRANS during the State's 1994-95 fiscal year.
The State anticipates that its borrowings for capital purposes
during the State's 1994-95 fiscal year will consist of $413 million
in general obligation bonds and BANS. The projection of the State
regarding its borrowings for the 1994-95 fiscal year may change
if actual receipts fall short of State projections or if other
circumstances require.
In June 1990, legislation was enacted creating the New York Local
Government Assistance Corporation ("LGAC"), a public benefit corporation
empowered to issue long-term obligations to fund certain payments
to local governments traditionally funded through the State's
annual seasonal borrowing. As of February 28, 1994, LGAC has issued
its bonds to provide net proceeds of $3.7 billion. The Governor
has recommended the issuance of additional bonds to provide net
proceeds of $315 million during the State's 1994-95 fiscal year.
The Legislature passed a proposed constitutional amendment which
would permit the State subject to certain restrictions to issue
revenue bonds without voter referendum. Among the restrictions
proposed is that such bonds would not be backed by the full faith
and credit of the State. The Governor intends to submit changes
to the proposed amendment, which before becoming effective must
be passed again by the next separately-elected Legislature and
approved by voter referendum at a general election. The earliest
such an amendment could take effect would be in November 1995.
Ratings. The $850 million in TRANS issued by the State in April
1993 were rated SP-1-Plus by S&P on April 26, 1993, and MIG-1
by Moody's on April 23, 1993, which represents the highest ratings
given by such agencies and the first time the State's TRANS have
received these ratings since its May 1989 TRANS issuance. Both
agencies cited the State's improved fiscal position as a significant
factor in the upgrading of the April 1993 TRANS.
Moody's rating of the State's general obligation bonds stood at
A on April 23, 1993, and S&P's rating stood at A- with a stable
outlook on April 26, 1993, an improvement from S&P's negative
outlook prior to April 1993. Previously, Moody's lowered its rating
to A on June 6, 1990, its rating having been A1 since May 27,
1986. S&P lowered its rating from A to A- on January 13, 1992.
S&P's previous ratings were A from March 1990 to January 1992,
AA- from August 1987 to March 1990 and A+ from November 1982 to
August 1987.
Moody's maintained its A rating and S&P continued its A- rating
in connection with the State's issuance of $224.1 million of its
general obligation bonds in March 1994.
(2) The City and the Municipal Assistance Corporation ("MAC"):
The City accounts for approximately 41% of the State's population
and personal income, and the City's financial health affects the
State in numerous ways.
In response to the City's fiscal crisis in 1975, the State took
a number of steps to assist the City in returning to fiscal stability.
Among other actions, the State Legislature (i) created MAC to
assist with long-term financing for the City's short-term debt
and other cash requirements and (ii) created the State Financial
Control Board (the "Control Board") to review and approve the
City's budgets and City four-year financial plans (the financial
plans also apply to certain City-related public agencies (the
"Covered Organizations")).
Over the past three years, the rate of economic growth in the
City has slowed substantially, and the City's economy is currently
in recession. The Mayor is responsible for preparing the City's
four-year financial plan, including the City's current financial
plan. The City Comptroller has issued reports concluding that
the recession of the City's economy will be more severe and last
longer than is assumed in the financial plan.
Fiscal Year 1993 and 1994-97 Financial Plan. The City's 1993 fiscal
year results are projected to be balanced in accordance with generally
accepted accounting principles ("GAAP"). The City was required
to close substantial budget gaps in its 1990, 1991 and 1992 fiscal
years in order to maintain balanced operating results.
Page 18
On August 10, 1993, the City adopted and submitted to the Control
Board its Financial Plan for fiscal years 1994-97, which was subsequently
modified on November 23, 1993. As modified in November 1993, the
Plan projects a balanced budget for fiscal year 1994 based upon
revenues of $31.585 billion, and projects budget gaps of $1.7
billion, $2.5 billion and $2.7 billion in fiscal years 1995 through
1997, respectively.
During December 1993, a three-member panel appointed by the Mayor,
the Office of the State Deputy Comptroller and the Control Board
each issued reports that were critical of the City's 1994-97 Financial
Plan. While each report noted improvement in the outlook for fiscal
year 1994, the reports indicated that the budget gap for fiscal
year 1995 could be as much as $450 million higher than projected
and that the budget gap might continue to increase in later years
to as much as $1.5 billion above current projections by fiscal
year 1997. Recommendations included addressing the City's tax
and cost structure to maximize revenues on a recurring basis and
minimize expenditures, a review of capital spending plans, service
cuts, productivity gains and economic development measures.
On February 2, 1994, the Mayor proposed further modifications
to the 1994-97 Financial Plan. The Mayor's proposed Plan projects
a balanced budget for fiscal year 1994, assuming revenues of $31.735
billion, and includes a reserve of $198 million. The proposed
modification projects budget gaps for fiscal years 1995, 1996
and 1997 of $2.3 billion, $3.2 billion and $3.3 billion, respectively.
The Mayor identified $2.2 billion in gap closing measures for
fiscal year 1995. Implementation of these measures will require
the cooperation of municipal labor unions, the City Council and
the State and Federal governments. The Mayor's proposal includes
a tax reduction program which will have a financial impact on
later years.
Given the foregoing factors, there can be no assurance that the
City will continue to maintain a balanced budget, or that it can
maintain a balanced budget without additional tax or other revenue
increases or reductions in City services, which could adversely
affect the City's economic base.
Pursuant to State law, the City prepares a four-year annual financial
plan, which is reviewed and revised on a quarterly basis and which
includes the City's capital, revenue and expense projections.
The City is required to submit its financial plans to review bodies,
including the Control Board. If the City were to experience certain
adverse financial circumstances, including the occurrence or the
substantial likelihood and imminence of the occurrence of an annual
operating deficit of more than $100 million or the loss of access
to the public credit markets to satisfy the City's capital and
seasonal financial requirements, the Control Board would be required
by State law to exercise certain powers, including prior approval
of City financial plans, proposed borrowings and certain contracts.
The City depends on the State for State aid both to enable the
City to balance its budget and to meet its cash requirements.
If the State experiences revenue shortfalls or spending increases
beyond its projections during its 1993 fiscal year or subsequent
years, such developments could result in reductions in projected
State aid to the City. In addition, there can be no assurance
that State budgets in future fiscal years will be adopted by the
April 1 statutory deadline and that there will not be adverse
effects on the City's cash flow and additional City expenditures
as a result of such delays.
The City projections set forth in its financial plan are based
on various assumptions and contingencies which are uncertain and
which may not materialize. Changes in major assumptions could
significantly affect the City's ability to balance its budget
as required by State law and to meet its annual cash flow and
financing requirements. Such assumptions and contingencies include
the timing of any regional and local economic recovery, the absence
of wage increases in excess of the increases assumed in its financial
plan, employment growth, provision of State and Federal aid and
mandate relief, State legislative approval of future State budgets,
levels of education expenditures as may be required by State law,
adoption of future City budgets by the New York City Council,
and approval by the Governor or the State Legislature and the
cooperation of MAC with respect to various other actions proposed
in such financial plan.
The City's ability to maintain a balanced operating budget is
dependent on whether it can implement necessary service and personnel
reduction programs successfully. As discussed above, the City
must identify additional expenditure reductions and revenue sources
to achieve balanced operating budgets for fiscal years 1994 and
thereafter. Any such proposed expenditure reductions will be difficult
to implement because
Page 19
of their size and the substantial expenditure reductions already
imposed on City operations in the past two years.
Attaining a balanced budget is also dependent upon the City's
ability to market its securities successfully in the public credit
markets. The City's financing program for fiscal years 1994 through
1997 contemplates capital spending of $16.2 billion, which will
be financed through issuance of $10.5 billion of general obligation
bonds, $4.3 billion of Water Authority Revenue Bonds and the balance
by Covered Organization obligations, and will be utilized primarily
to reconstruct and rehabilitate the City's infrastructure and
physical assets and to make capital investments. A significant
portion of such bond financing is used to reimburse the City's
general fund for capital expenditures already incurred. In addition,
the City issues revenue and tax anticipation notes to finance
its seasonal working capital requirements. The terms and success
of projected public sales of City general obligation bonds and
notes will be subject to prevailing market conditions at the time
of the sale, and no assurance can be given that the credit markets
will absorb the projected amounts of public bond and note sales.
In addition, future developments concerning the City and public
discussion of such developments, the City's future financial needs
and other issues may affect the market for outstanding City general
obligation bonds and notes. If the City were unable to sell its
general obligation bonds and notes, it would be prevented from
meeting its planned operating and capital expenditures.
Fiscal Years 1990, 1991 and 1992. The City achieved balanced operating
results as reported in accordance with GAAP for the 1992 fiscal
year. During the 1990 and 1991 fiscal years, the City implemented
various actions to offset a projected budget deficit of $3.2 billion
for the 1991 fiscal year, which resulted from declines in City
revenue sources and increased public assistance needs due to the
recession. Such actions included $822 million of tax increases
and substantial expenditure reductions.
The City is a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, actions commenced
and claims asserted against the City arising out of alleged constitutional
violations, torts, breaches of contracts, and other violations
of law and condemnation proceedings. While the ultimate outcome
and fiscal impact, if any, on the proceedings and claims are not
currently predictable, adverse determinations in certain of them
might have a material adverse effect upon the City's ability to
carry out its financial plan. As of June 30, 1992, legal claims
in excess of $341 billion were outstanding against the City for
which the City estimated its potential future liability to be
$2.3 billion.
Ratings. As of the date of this prospectus, Moody's rating of
the City's general obligation bonds stood at Baa1 and S&P's rating
stood at A-. On February 11, 1991, Moody's had lowered its rating
from A.
On December 6, 1993, in confirming its Baa1 rating, Moody's noted
that:
The fiscal 1994 budget is nominally balanced, in part through
reliance on one-shot revenues, but contains a number of risks
. . .[T]he financial plan . . . shows increased gaps in succeeding
years.
The financial plan for fiscal 1995 and beyond shows an ongoing
imbalance between the City's expenditures and revenues . . . A
key risk is that the replacement of one-shot revenues is likely
to become increasingly difficult over time. Moody's continues
to expect that the City's progress toward achieving long-term
balance will be slow and uneven, but that the City will be diligent
and prudent in closing gaps as they arise.
As discussed above under Fiscal Year 1993 and 1994-97 Financial
Plan, on July 2, 1993, after a review of the City's budget for
fiscal year 1994, its proposed budget for fiscal year 1995 and
certain additional cuts in both proposed by the Mayor and the
City Comptroller, S&P confirmed its A- rating with a negative
outlook of the City's general obligation bonds but indicated a
continuing concern about budgets for fiscal year 1995 and thereafter.
S&P's rating of the City's general obligation bonds remains unchanged.
On October 12, 1993, Moody's increased its rating of the City's
issuance of $650 million of Tax Anticipation Notes ("TANS") to
MIG-1 from MIG-2. Prior to that date, on May 9, 1990, Moody's
revised downward its rating on outstanding City revenue anticipation
notes from MIG-1 to MIG-2 and rated the $900 million Notes then
being sold MIG-2. S&P's rating of the October 1993 TANS issue
increased to SP-1 from SP-2. Prior to that date, on April 29,
1991, S&P revised downward its rating on City revenue anticipation
notes from SP-1 to SP-2.
Page 20
As of June 30, 1993, the City and MAC had, respectively, $19.6
billion and $4.5 billion of outstanding net long-term indebtedness.
(3) The State Agencies: Certain Agencies of the State have faced
substantial financial difficulties which could adversely affect
the ability of such Agencies to make payments of interest on,
and principal amounts of, their respective bonds. The difficulties
have in certain instances caused the State (under so-called "moral
obligation" provisions which are non-binding statutory provisions
for State appropriations to maintain various debt service reserve
funds) to appropriate funds on behalf of the Agencies. Moreover,
it is expected that the problems faced by these Agencies will
continue and will require increasing amounts of State assistance
in future years. Failure of the State to appropriate necessary
amounts or to take other action to permit those Agencies having
financial difficulties to meet their obligations could result
in a default by one or more of the Agencies. Such default, if
it were to occur, would be likely to have a significant adverse
effect on investor confidence in, and therefore the market price
of, obligations of the defaulting Agencies. In addition, any default
in payment on any general obligation of any Agency whose bonds
contain a moral obligation provision could constitute a failure
of certain conditions that must be satisfied in connection with
Federal guarantees of City and MAC obligations and could thus
jeopardize the City's long-term financing plans.
As of September 30, 1992, the State reported that there were eighteen
Agencies that each had outstanding debt of $100 million or more.
These eighteen Agencies had an aggregate of $63.5 billion of outstanding
debt, including refunding bonds, of which $7.7 billion was moral
obligation debt of the State and $19.3 billion was financed under
lease-purchase or contractual obligation financing arrangements.
(4) State Litigation: The State is a defendant in numerous legal
proceedings pertaining to matters incidental to the performance
of routine governmental operations. Such litigation includes,
but is not limited to, claims asserted against the State arising
from alleged torts, alleged breaches of contracts, condemnation
proceedings, and other alleged violations of State and Federal
laws. Included in the State's outstanding litigation are a number
of cases challenging the constitutionality or the adequacy and
effectiveness of a variety of significant social welfare programs
primarily involving the State's mental hygiene programs. Adverse
judgments in these matters generally could result in injunctive
relief coupled with prospective changes in patient care which
could require substantial increased financing of the litigated
programs in the future.
The State is also engaged in a variety of claims wherein significant
monetary damages are sought. Actions commenced by several Indian
nations claim that significant amounts of land were unconstitutionally
taken from the Indians in violation of various treaties and agreements
during the eighteenth and nineteenth centuries. The claimants
seek recovery of approximately six million acres of land as well
as compensatory and punitive damages.
The U.S. Supreme Court on March 30, 1993, referred to a Special
Master for determination of damages an action by the State of
Delaware to recover certain unclaimed dividends, interest and
other distributions made by issuers of securities held by New
York based-brokers incorporated in Delaware (State of Delaware
v. State of New York). The State had taken such unclaimed property
under its Abandoned Property Law. New York and Delaware have entered
into a settlement agreement which provides for a payment of $35
million in fiscal year 1993-94 and thereafter five $33 million
annual payments. Claims of other states and the District of Columbia
have not been settled and the State expects that additional payments,
which may be significant, may be required with respect thereto
during fiscal year 1994 and thereafter.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz
1993"), petitioners have challenged the constitutionality of mass
transportation bonding programs of the New York State Thruway
Authority and the Metropolitan Transportation Authority. On May
24, 1993, the Supreme Court, Albany County, temporarily enjoined
the State from implementing those bonding programs. In previous
actions Mr. Schulz and others have challenged on similar grounds
bonding programs for the New York State Urban Development Corporation
and the New York Local Government Assistance Corporation. While
there have been no decisions on the merits in such previous actions,
by an opinion dated May 11, 1993, the New York Court of Appeals
held in
Page 21
a proceeding commenced on April 29, 1991, in the Supreme Court,
Albany County (Schulz v. State of New York), that petitioners
had standing as voters under the State Constitution to bring such
action.
Petitioners in Schulz 1993 have asserted that issuance of bonds
by the two Authorities is subject to approval by statewide referendum.
By decision dated October 21, 1993, the Appellate Division, Third
Department, affirmed the order of the Supreme Court, Albany County,
granting the State's motion for summary judgment, dismissing the
complaint and vacating the temporary restraining order. In December
1993, the New York Court of Appeals indicated that it would hear
the plaintiffs' appeal of the Appellate Division's decision in
Schulz 1993. At this time there can be no forecast of the likelihood
of success on the merits by the petitioners, but a decision upholding
this constitutional challenge could restrict and limit the ability
of the State and its instrumentalities to borrow funds in the
future.
Adverse developments in the foregoing proceedings or new proceedings
could adversely affect the financial condition of the State in
the future.
(5) Other Municipalities: Certain localities in addition to New
York City could have financial problems leading to requests for
additional State assistance. The potential impact on the State
of such actions by localities is not included in projections of
State receipts and expenditures in the State's 1993-94 and 1994-95
fiscal years.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the
City of Yonkers (the "Yonkers Board") by the State in 1984. The
Yonkers Board is charged with oversight of the fiscal affairs
of Yonkers. Future actions taken by the Governor or the State
Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1991, the total indebtedness
of all localities in the State was approximately $31.6 billion,
of which $16.8 billion was debt of New York City (excluding $6.7
billion in MAC debt). State law requires the Comptroller to review
and make recommendations concerning the budgets of those local
government units other than New York City authorized by State
law to issue debt to finance deficits during the period that such
deficit financing is outstanding. Fifteen localities had outstanding
indebtedness for state financing at the close of their fiscal
year ending in 1991. In 1992, an unusually large number of local
government units requested authorization for deficit financings.
According to the Comptroller, ten local government units have
been authorized to issue deficit financing in the aggregate amount
of $131.1 million.
Certain proposed Federal expenditure reductions could reduce,
or in some cases eliminate, Federal funding of some local programs
and accordingly might impose substantial increased expenditure
requirements on affected localities. If the State, New York City
or any of the Agencies were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets,
the marketability of notes and bonds issued by localities within
the State, including notes or bonds in the New York Insured Trust,
could be adversely affected. Localities also face anticipated
and potential problems resulting from certain pending litigation,
judicial decisions, and long-range economic trends. The longer-range
potential problems of declining urban population, increasing expenditures,
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
(6) Other Issuers of New York Municipal Obligations. There are
a number of other agencies, instrumentalities and political subdivisions
of the State that issue Municipal Obligations, some of which may
be conduit revenue obligations payable from payments from private
borrowers. These entities are subject to various economic risks
and uncertainties, and the credit quality of the securities issued
by them may vary considerably from the credit quality of obligations
backed by the full faith and credit of the State.
New York Tax Status
In the opinion of Carter, Ledyard & Milburn, New York, New York,
Special Counsel to the Fund for New York tax matters, under existing
law:
The New York Trust is not an association taxable as a corporation
and the income of the Trust will be treated as the income of the
Unit holders under the existing income tax laws of the State and
City of New York in
Page 22
the same manner as for Federal income tax purposes (subject to
differences in accounting for discount and premium to the extent
the State and/or City of New York do not conform to current Federal
law);
Individuals holding units of the New York Insured Trust who reside
in New York State or City will not be subject to State and City
personal income tax on interest income which is excludable from
Federal gross income under section 103 of the Internal Revenue
Code of 1986 and derived from any obligation of New York State
or a political subdivision thereof, or of the Government of Puerto
Rico or a political subdivision thereof, or of the Government
of Guam or by its authority, although they will be subject to
New York State and City personal income tax with respect to any
gains realized when such obligations are sold, redeemed or paid
at maturity or when any such Units are sold or redeemed; and
For individuals holding units of the New York Insured Trust who
reside in New York State or City, any proceeds paid to the Trustee
under the applicable insurance policies which represent maturing
interest on defaulted obligations held by the Trustee will not
be subject to New York State or City personal income tax if, and
to the same extent as, such interest would not have been subject
to New York State or City personal income tax if paid by the issuer
of the defaulted obligations.
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 23
New York Insured Trust, Series 56
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Initial Date of Deposit of the Bonds-December 8, 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>
$ 300,000 {Albany Municipal Water Finance Authority (New AAA 2003 @ 102 $ 249,858
York), Water and Sewer System Revenue, Series 2013 @ 100 S.F.
1993A (FGIC Insured), 5.50%, Due 12/01/2022 (5)
500,000 Metropolitan Transportation Authority (New York), AAA 2003 @ 101.5 442,315
Transit Facilities Service Contract, Series P 2013 @ 100 S.F.
(CapMAC Insured), 5.75%, Due 7/01/2015 (5)
500,000 The City of New York (New York), General AAA 2002 @ 101.5 504,970
Obligation, Fiscal 1992, Current Interest, Series H
(Capital Guaranty Insured), 7.00%, Due 2/01/2022 (5)
545,000 {Dormitory Authority of the State of New York, AAA 2004 @ 100 469,605
State University Educational Facilities, Revenue, 2021 @ 100 S.F.
Series 1994B (FSA Insured), 5.75%, Due 5/15/2024 (5)
500,000 New York State Energy Research and Development AAA 2004 @ 102 513,780
Authority, Pollution Control Refunding Revenue
(Niagara Mohawk Power Corporation Project), 1994
Series A (FGIC Insured), 7.20%, Due 7/01/2029 (5)
500,000 New York State Medical Care Facilities Finance AAA 2002 @ 102 476,575
Agency, Mental Health Services Facilities 2013 @ 100 S.F.
Improvement Revenue, 1992 Series F (Capital
Guaranty Insured), 6.50%, Due 2/15/2019 (5)
__________ __________
$2,845,000 $2,657,103
========== ==========
</TABLE>
[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:
<TABLE>
<CAPTION>
Date %
________ _______
<S> <C> <C>
Albany Municipal Water Finance Authority 2/1/93 93.746
Dormitory Authority of the State of New York 8/15/94 91.125
</TABLE>
For industry concentrations of the Bonds in the Trust, see
"New York Insured Trust Summary."
See "Notes to Portfolios" on page 33.
Page 24
Maine Advantage Trust, Series 15
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 64.96 $ 64.96
Less: Estimated Annual Expense per Unit $ 2.40 $ 1.90
Estimated Net Annual Interest Income per Unit $ 62.56 $ 63.06
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ 62.56 $ 63.06
Divided by 12 and 2, respectively $ 5.21 $ 31.53
Estimated Daily Rate of Net Interest Accrual per Unit $ .173769 $ .175158
Initial Distribution - January 31, 1995 (1) $ 5.21 $ 5.25
Partial Distribution - June 30, 1995 (1) $ - $ 26.27
Regular Distribution (1) $ 5.21 $ 31.53
(Commencing) 1/31/95 12/31/95
Estimated Current Return Based on Public Offering Price (2) 6.26% 6.31%
Estimated Long-Term Return Based on Public Offering Price (2) 6.35% 6.39%
CUSIP 33732D 362 370
</TABLE>
Trustee's Annual Fee $1.35 and $.90 per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing December 8, 1994.
[FN]
(1) The Trust's initial distribution per Unit will be made on
January 31, 1995 to monthly and semi-annual Unit holders of record
on January 15, 1995. The Trust will make a partial distribution
on June 30, 1995 to semi-annual Unit holders of record on June
15, 1995. Regular distributions to monthly Unit holders will be
paid the last day of each month commencing on January 31, 1995
to Unit holders of record on the fifteenth day of such month commencing
January 15, 1995. Regular distributions to semi-annual Unit holders
will be paid the last day of June and December commencing December
31, 1995 to Unit holders of record on the fifteenth day of June
and December commencing December 15, 1995.
(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 Initial Date of Deposit. Since the market values and estimated
retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the 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 25
Maine Advantage Trust Summary
The Maine Advantage Trust consists of six obligations of issuers
located in Maine. 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 Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
<C> <S> <C>
2 Health Care 32.20%
1 Water 25.42%
1 Other Housing 16.95%
1 Sewer 16.95%
1 Miscellaneous 8.48%
</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
92%. The largest such issue represents approximately 25%. None
of the Bonds in the Trust are subject to call within five years
of the Initial Date of Deposit, although certain Bonds may be
subject to an extraordinary call.
Approximately 17% of the aggregate principal amount (approximately
18% 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
10 years after the Initial Date of Deposit. See "What Is the
First Trust Combined Series?," "Maine Advantage Trust, Series
15-Portfolio" and "Description of Bond Ratings."
Interest on certain of the Bonds in the Maine Advantage Trust
will be an item of tax preference for purposes of the Alternative
Minimum Tax ("AMT"). The investment by non-AMT individual taxpayers
in AMT municipal bonds generally results in a higher yield to
such bondholders than non-AMT municipal bonds. Since a portion
of the interest from the Maine Advantage Trust is an AMT preference
item, the Maine Advantage Trust may be more appropriate for investors
who are not subject to AMT.
Federal and Maine 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. The following table does not take into account
the possible effect of the Alternative Minimum Tax.
Page 26
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________ _____________________________________
Single Joint Tax 6.00% 6.50% 7.00%
Return Return Rate Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 22.8 $ 0 - 38.0 22.2% 7.71 8.35 9.00
22.8 - 55.1 38.0 - 91.9 34.1 9.10 9.86 10.62
55.1 - 115.0 91.9 - 140.0 36.9 9.51 10.30 11.09
115.0 - 250.0 140.0 - 250.0 41.4 10.24 11.09 11.95
Over 250.0 Over 250.0 44.7 10.85 11.75 12.66
</TABLE>
Risk Factors
The State of Maine, which includes nearly one-half of the total
land area of the six New England states, has a population of approximately
1,235,000.
During the 1980s Maine's economy grew rapidly. However, due largely
to an overheating of the New England construction/real estate
markets in 1987-88, the New England and Maine economies were much
softer in 1989 and the first portion of 1990. The Maine Economic
Growth Index, a broad measure of overall growth corrected for
inflation, declined 2.9% in 1991 and rose 2.0% in 1992. The United
States Economic Growth Index reflected a decline of 1.4% in 1991
and an increase of 1.4% in 1992, during the same period.
The largest industries in Maine in 1993 were services (134,000
jobs) and retail and wholesale trade (130,100 jobs) followed by
government (95,000 jobs), finance, insurance and real estate (25,600
jobs) and transportation and public utilities (21,900 jobs).
The unemployment rates for Maine in 1992 and 1993 were 7.1% and
7.9%, respectively. Although not strictly comparable, the preliminary
seasonally adjusted rate for August 1994 was 6.9%. According to
the Maine State Planning Office, per capita income in Maine was
$17,125 in 1990, $17,442 in 1991 and $18,226 in 1992. The corresponding
U.S. per capita income figures were $18,635, $19,091 and $19,841
for 1990, 1991 and 1992 respectively.
The Constitution of the State of Maine provides that the Legislature
shall not create any debt which exceeds $2,000,000 except to suppress
insurrection, to repel invasion or for purposes of war except
when two-thirds of the Legislature and a majority of the voters
authorize the issuance of debt. The Constitution also provides
that tax anticipation loans must be repaid during the fiscal year
of issuance. Constitutional amendments have been adopted which
also allow the Legislature to authorize the issuance of bonds:
to insure payments on revenue bonds of up to $4,800,000 for local
public school building projects; in the amount of up to $4,000,000
to guarantee student loans; to insure payments on up to $1,000,000
of mortgage loans for Indian housing; to insure payments on up
to $4,000,000 of mortgage loans or small business loans to war
veterans; and to insure payments on up to $90,000,000 of mortgage
loans for industrial, manufacturing, fishing, agricultural, and
recreational enterprises. This last authorization has been limited
statutorily to a maximum of $87,500,000 available for issue through
the Finance Authority of Maine.
The State operates under a biennial budget which is formulated
in even-numbered years and presented for approval to the Legislature
in odd-numbered years. The First Regular Session of the 116th
Legislature convened in January, 1993 and on June 30, 1993 adopted
budgets for the fiscal years ending June 30, 1994 and June 30,
1995. As enacted, the budgets provide in fiscal year 1994 for
General Fund expenditures of $1,577,877,634 and Highway Fund expenditures
of $196,051,619 and for fiscal year 1995 General Fund expenditures
of $1,626,771,903 and Highway Fund expenditures of $197,593,241.
The budgets for the biennium include the extension of the one
cent increase in the sales tax that was temporarily enacted for
the previous two year period and statutory language that would
continue the increase if certain economic conditions exist. The
budgets also include the introduction of a 7% gross receipts tax
on prepared meals in establishments licensed for consumption of
alcoholic beverages and for nursing home receipts, and a 35 year
reamortization of the unfunded liability of the Maine State Retirement
System. Proposed
Page 27
General Fund expenditures for fiscal year 1994 reflect a reduction
of .16% from fiscal year 1993 and a 3.17% increase from fiscal
year 1994 to fiscal year 1995.
Maine's outstanding general obligations are currently rated AA+
by Standard & Poor's Corporation and Aa by Moody's Investors Service,
Inc.
The Portfolio may contain obligations of the Maine Municipal Bond
Bank. All Maine Municipal Bond Bank debt is secured by loan repayments
of borrowing municipalities and the State's moral obligation pledge.
The state of the economy in Maine could impact the ability of
municipalities to pay debt service on their obligations. Maine
Municipal Bond Bank debt continues to carry a A+ rating from Standard
& Poor's Corporation and a Aa rating from Moody's Investors Service,
Inc.
The Portfolio may contain obligations issued by Regional Waste
Systems, Inc., a quasi-municipal corporation organized pursuant
to an interlocal agreement among approximately 20 Southern Maine
communities ("RWS") or other quasi-municipal solid waste disposal
facilities. RWS and other similar solid waste disposal projects
operate regional solid waste disposal facilities and process the
solid waste of the participating municipalities as well as the
solid waste of other non-municipal users. The continued viability
of such facilities is dependent, in part, upon the approach taken
by the State of Maine with respect to solid waste disposal generally.
Pursuant to Public Law 1989 Chapter 585, the newly formed Maine
Waste Management Agency is charged with preparation and adoption
by rule of an analysis and a plan for the management, reduction
and recycling of solid waste for the State of Maine. The plan
to be developed by the Maine Waste Management Agency is based
on the waste management priorities and recycling goals established
by State law. Pursuant to State law, Maine has established minimum
goals for recycling and composting requiring that a minimum of
25% of the municipal solid waste stream be recycled or composted
by 1992 and 50% be recycled or composted by 1994. Although RWS
may participate in the mandated recycling activities, its principal
existing facility consists of a mass burn 250 ton per day furnace
boiler with associated equipment for production of electric energy.
Thus, the source material for the RWS' primary facility could
be substantially reduced as a result of implementation of the
State's recycling goals. Other mass burn solid waste disposal
facilities in the State have experienced seasonal shortages in
waste fuel.
Revenue bonds are issued by the Maine Health and Higher Education
Facilities Authority to finance hospitals and other health care
facilities. The revenues of such facilities consist, in varying
but typically material amounts, of payment from insurers and third-party
reimbursement programs, including Medicaid, Medicare and Blue
Cross. The health care industry in Maine is becoming increasingly
competitive. The utilization of new programs and modified benefits
by third-party reimbursement programs and the advent of alternative
health care delivery systems such as health maintenance organizations
contribute to the increasingly competitive nature of the health
care industry. This increase in competition could adversely impact
the ability of health care facilities in Maine to satisfy their
financial obligations.
Further, health care providers are subject to regulatory actions,
changes in law and policy changes by agencies that administer
third-party reimbursement programs and regulate the health care
industry. Any such changes could adversely impact the financial
condition of such facilities.
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 Maine Trust
are subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not
within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of the State
and various agencies and political subdivisions located in the
State. The Sponsor is unable to predict whether or to what extent
such factors or other factors may affect the issuers of Bonds,
the market value or marketability of the Bonds or the ability
of the respective issuers of the Bonds acquired by the Maine Trust
to pay interest on or principal of the Bonds.
Maine Tax Status
The assets of the Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Maine (the "State") or
counties, municipalities, authorities or political subdivisions
thereof (the "Maine Bonds")
Page 28
or by the Commonwealth of Puerto Rico, Guam and the United States
Virgin Islands (the "Possession Bonds") (collectively, the "Bonds").
Neither the Sponsor nor its counsel have independently examined
the Bonds to be deposited in and held in the Trust. However, although
no opinion is expressed herein regarding such matters, it is assumed
that: (i) the Bonds were validly issued, (ii) the interest thereon
is excludable from gross income for Federal income tax purposes,
(iii) interest on the Maine Bonds, if received directly by a Unit
holder, would be exempt from the Maine income tax applicable to
individuals, trusts and estates and corporations ("Maine Income
Tax") and (iv) interest on the Bonds will not be taken into account
by individuals and corporations in computing an additional tax
("Maine Minimum Tax") imposed under the Maine Income Tax, or in
the case of corporations, a surcharge ("Maine Corporate Income
Tax Surcharge") enacted in 1991 and scheduled to apply to tax
years beginning in 1991 and 1992. The opinion set forth below
does not address the taxation of persons other than full time
residents of Maine.
In the opinion of Chapman and Cutler, Special Counsel to the Fund
for Maine tax matters, under existing law as of the date of this
prospectus and based upon the assumptions set forth above:
(1) the Trust is not an association taxable as a corporation,
thus each Unit holder of the Trust will be essentially treated
as the owner of a pro rata portion of the Trust and the income
of such portion of the Trust will be treated as the income of
the Unit holder for Maine Income Tax purposes;
(2) interest on the Bonds which is exempt from the Maine Income
Tax when received by the Trust, and which would be exempt from
the Maine Income Tax and the Maine Minimum Tax if received directly
by a Unit holder, will retain its status as exempt from the Maine
Income Tax and the Maine Minimum Tax when received by the Trust
and distributed to the Unit holder;
(3) to the extent that interest derived from the Trust by a Unit
holder with respect to the Possession Bonds is excludable from
gross income for Federal income tax purposes pursuant to 48 U.S.C.
Section 745, 48 U.S.C. Section 1423a and 48 U.S.C. Section 1403,
such interest will not be subject to the Maine Income Tax;
(4) each Unit holder of the Trust will recognize gain or loss
for Maine Income Tax purposes if the Trustee disposes of a bond
(whether by redemption, sale or otherwise) or if the Unit holder
redeems or sells Units of the Trust to the extent that such a
transaction results in a recognized gain or loss to such Unit
holder for Federal income tax purposes; and
(5) the Maine Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase
or carry Units in the Trust, the interest on which is exempt from
the Tax.
Prospective purchasers subject to the Maine Franchise Tax should
be advised that for purposes of the Maine Franchise Tax, interest
on the Bonds received by the Trust and distributed to a Unit holder
subject to such tax will be added to the Unit holder's Federal
taxable income and therefore will be taxable.
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 29
Maine Advantage Trust, Series 15
Portfolio
At the Opening of Business
On the Initial Date of Deposit of the Bonds-December 8, 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 #Town of Jay, Maine, 1993 Series B, Solid Waste A- 2003 @ 102 $ 443,265
Disposal Revenue (International Paper Company
Projects), 6.00%, Due 12/01/2017
750,000 Kennebec Water District (Waterville, Maine), A (4) 2002 @ 101.5 672,338
Water, Series 1992, 6.00%, Due 12/01/2021 2014 @ 100 S.F.
500,000 Maine Health and Higher Educational Facilities AAA 2004 @ 102 505,890
Authority, Revenue, Series 1994B (FSA Insured), 2006 @ 100 S.F.
7.00%, Due 7/01/2024
450,000 Maine Health and Higher Educational Facilities AAA 2001 @ 102 442,125
Authority, Hospital Revenue, Eastern Maine 2006 @ 100 S.F.
Healthcare Issue, Series 1991 (FGIC Insured),
6.625%, Due 10/01/2011
250,000 Maine Municipal Bond Bank, 1993 Series B, A+ 2003 @ 102 217,160
5.85%, Due 11/01/2020
500,000 Maine State Housing Authority, Mortgage Purchase, AA- 2001 @ 102 499,955
1991 Series B, 7.10%, Due 11/15/2016 2009 @ 100 S.F.
__________ __________
$2,950,000 $2,780,733
========== ==========
</TABLE>
[FN]
__________________
# Interest on these bonds (approximately 17% of the aggregate
principal amount of the Bonds in the Trust) will be an item of
tax preference for purposes of the Alternative Minimum Tax. See
"What is the Federal Tax Status of Unit Holders?" and "Maine Advantage
Trust Summary."
For industry concentrations of the Bonds in the Trust, see
"Maine Advantage Trust Summary."
See "Notes to Portfolios" on page 33.
Page 30
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST COMBINED SERIES 236
We have audited the accompanying statements of net assets, including
the portfolios, of The First Trust Combined Series 236, comprised
of The First Trust of Insured Municipal Bonds-Multi-State: Missouri
Trust, Series 26 and New York Trust, Series 56 and The First Trust
Advantage: Maine Trust, Series 15 (the Trusts), as of the opening
of business on December 8, 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 December 8, 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 Combined Series 236, comprised of The First
Trust of Insured Municipal Bonds-Multi-State: Missouri Trust,
Series 26 and New York Trust, Series 56 and The First Trust Advantage:
Maine Trust, Series 15, at the opening of business on December
8, 1994 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 8, 1994
Page 31
Statements of Net Assets
The First Trust Combined Series 236
At the Opening of Business on the Initial Date of Deposit
December 8, 1994
<TABLE>
<CAPTION>
Missouri New York Maine
Insured Insured Advantage
Trust, Trust, Trust,
Series 26 Series 56 Series 15
__________ __________ __________
NET ASSETS
<S> <C> <C> <C>
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $3,310,071 $2,657,103 $2,780,733
Accrued interest on underlying bonds (2)(3)(4) 21,885 52,510 13,014
___________ ___________ ___________
3,331,956 2,709,613 2,793,747
Less distributions payable (4) 21,885 52,510 13,014
___________ ___________ ___________
Net assets $3,310,071 $2,657,103 $2,780,733
=========== =========== ===========
Outstanding Units 3,500 2,794 2,924
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C> <C> <C>
Cost to investors (5) $3,480,621 $2,794,009 $2,924,009
Less gross underwriting commissions (5) 170,550 136,906 143,276
___________ ___________ ___________
Net assets $3,310,071 $2,657,103 $2,780,733
=========== =========== ===========
</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 Initial 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 as collateral 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 Initial Date of Deposit, and (c) accrued interest on those
bonds from the Initial Date of Deposit to the expected dates of
delivery of the bonds.
<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>
Missouri Insured
Trust, Series 26 $ 3,500,000 $ 3,332,959 $ 3,310,071 $21,885 $1,003
New York Insured
Trust, Series 56 $ 2,800,000 $ 2,710,280 $ 2,657,103 $52,510 $ 667
Maine Advantage
Trust, Series 15 $ 3,000,000 $ 2,795,344 $ 2,780,733 $13,014 $1,597
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the Missouri
Insured Trust and the New York Insured Trust 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 Initial Date of Deposit.
(4) The Trustee will advance to each Trust the amount of net interest
accrued to December 15, 1994, the First Settlement Date, for distribution
to the Sponsor as the Unit holder of record.
(5) The aggregate cost to investors (exclusive of accrued interest)
and the aggregate gross underwriting commissions of 4.9% are computed
assuming no reduction of sales charge for quantity purchases.
Page 32
NOTES TO PORTFOLIOS
The following Notes to Portfolios pertain to the information contained
in the Trust Portfolios (the Missouri Insured Trust, Series 26
on page 13, the New York Insured Trust, Series 56 on page 24 and
the Maine Advantage Trust, Series 15 on page 30).
(1) Sponsor's contracts to purchase Bonds were entered into during
the period from November 17, 1994 to December 5, 1994. All contracts
to purchase Bonds are expected to be settled on or prior to December
15, 1994 unless otherwise indicated.
Other information regarding the Bonds in each Trust on the Initial
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>
Missouri Insured
Trust, Series 26 $ 3,310,071 $ 3,279,782 $ 30,289 $ 3,275,071 $- $222,225
New York Insured
Trust, Series 56 $ 2,657,103 $ 2,608,600 $ 48,503 $ 2,628,647 $- $180,088
Maine Advantage
Trust, Series 15 $ 2,780,733 $ 2,727,666 $ 53,067 $ 2,751,233 $- $189,938
</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 Initial Date of Deposit for individual Bonds
and certain portfolio hedging transaction costs and hedging gains
or losses. 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 Initial 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
are Certain General Matters Relating to the Trusts?" 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 estimated long-term return in
this event may be affected by such redemptions. For the Federal
and state tax effect on Unit holders of such redemptions and resultant
distributions, see "Rights of Unit Holders-What is the Federal
Tax Status of Unit Holders?," "Missouri Insured Trust Summary-Missouri
Tax Status," "New York Insured Trust Summary-New York Tax Status,"
and "Maine Advantage Trust Summary-Maine Tax Status."
Page 33
(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 Initial Date of Deposit. No
insurance premium is payable by the Trust.
(6) Rating is contingent upon receipt of documentation confirming
the issuance of insurance.
(7) Rating is contingent upon receipt of documentation confirming
investments and cash flow.
Page 34
Estimated Cash Flows to Unit Holders
The tables below set forth the per Unit estimated monthly and
semi-annual 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, and 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>
Missouri Insured Trust, Series 26
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995-August 2007 5.09 5.09
September 2007 4.49 214.29 218.78
October 2007-November 2015 3.89 3.89
December 2015 3.53 142.86 146.39
January 2016-October 2017 3.17 3.17
November 2017 3.17 207.14 210.31
December 2017-March 2020 2.10 2.10
April 2020 2.10 150.00 152.10
May 2020-January 2022 1.37 1.37
February 2022 1.37 142.86 144.23
March 2022-May 2022 0.64 0.64
June 2022 0.28 142.86 143.14
</TABLE>
<TABLE>
<CAPTION>
Semi-Annual
Date Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
___________________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995 5.13 5.13
June 1995 25.66 25.66
December 1995-June 2007 30.80 30.80
September 2007 214.29 214.29
December 2007 26.56 26.56
June 2008-June 2015 23.53 23.53
December 2015 23.17 142.86 166.03
June 2016-June 2017 19.22 19.22
November 2017 207.14 207.14
December 2017 18.14 18.14
June 2018-December 2019 12.73 12.73
April 2020 150.00 150.00
June 2020 11.26 11.26
December 2020-December 2021 8.30 8.30
February 2022 142.86 142.86
June 2022 5.00 142.86 147.86
</TABLE>
Page 35
Estimated Cash Flows to Unit Holders
<TABLE>
<CAPTION>
New York Insured Trust, Series 56
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995-January 2004 5.17 5.17
February 2004 4.66 178.95 183.61
March 2004-June 2006 4.15 4.15
July 2006 3.62 178.95 182.57
August 2006-June 2015 3.09 3.09
July 2015 2.67 178.95 181.62
August 2015-January 2019 2.26 2.26
February 2019 2.26 178.95 181.21
March 2019-November 2022 1.31 1.31
December 2022 1.07 107.37 108.44
January 2023-April 2024 0.83 0.83
May 2024 0.83 195.06 195.89
</TABLE>
<TABLE>
<CAPTION>
Semi-Annual
Date Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
___________________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995 5.21 5.21
June 1995 26.06 26.06
December 1995-December 2003 31.27 31.27
February 2004 178.95 178.95
June 2004 26.64 26.64
December 2004-June 2006 25.09 25.09
July 2006 178.95 178.95
December 2006 19.26 19.26
June 2007-June 2015 18.73 18.73
July 2015 178.95 178.95
December 2015 14.09 14.09
June 2016-December 2018 13.66 13.66
February 2019 178.95 178.95
June 2019 9.84 9.84
December 2019-June 2022 7.93 7.93
December 2022 7.69 107.37 115.06
June 2023-December 2023 5.03 5.03
May 2024 4.19 195.06 199.25
</TABLE>
Page 36
Estimated Cash Flows to Unit Holders
<TABLE>
<CAPTION>
Maine Advantage Trust, Series 15
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995-June 2006 5.21 5.21
July 2006 4.72 171.00 175.72
August 2006-September 2011 4.23 4.23
October 2011 3.82 153.90 157.72
November 2011-October 2016 3.40 3.40
November 2016 3.40 171.00 174.40
December 2016-November 2017 2.41 2.41
December 2017 1.99 171.00 172.99
January 2018-October 2020 1.57 1.57
November 2020 1.37 85.50 86.87
December 2020-November 2021 1.17 1.17
December 2021 0.54 256.50 257.04
</TABLE>
<TABLE>
<CAPTION>
Semi-Annual
Date Estimated Estimated Estimated
(Each June and December Interest Principal Total
Unless Otherwise Indicated) Distribution Distribution Distribution
___________________________ ____________ ____________ ____________
<S> <C> <C> <C>
January 1995 5.25 5.25
June 1995 26.27 26.27
December 1995-June 2006 31.53 31.53
July 2006 171.00 171.00
December 2006 26.11 26.11
June 2007-June 2011 25.62 25.62
October 2011 153.90 153.90
December 2011 23.52 23.52
June 2012-June 2016 20.59 20.59
November 2016 171.00 171.00
December 2016 19.59 19.59
June 2017 14.60 14.60
December 2017 14.18 171.00 185.18
June 2018-June 2020 9.54 9.54
November 2020 85.50 85.50
December 2020 8.93 8.93
June 2021 7.08 7.08
December 2021 6.45 256.50 262.95
</TABLE>
Page 37
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Page 38
GENERAL TRUST INFORMATION
What are Certain General Matters Relating to the Trusts?
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 Initial Date of Deposit, a Bond may cease to be rated or
its rating may be reduced below the minimum required as of the
Initial Date of Deposit. Neither event requires elimination of
such Bond from the portfolio, but may be considered in the Sponsor's
determination as to whether or not to direct the Trustee to dispose
of the Bond. See "Rights of Unit Holders-How May Bonds be Removed
from the Fund?" For additional risks specific to the individual
Trusts see "Risk Factors" for each Trust.
Risk Factors
Discount Bonds. Certain of the Bonds in the Trusts may have been
acquired at a market discount from par value at maturity. The
coupon interest rates on the discount bonds at the time they were
purchased and deposited in the Trusts 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.
Original Issue Discount Bonds. Certain of the Bonds in the Trusts
may be original issue discount bonds. Under current law, the original
issue discount, which is the difference between the stated redemption
price at maturity and the issue price of the Bonds, is deemed
to accrue on a daily basis and the accrued portion is treated
as tax-exempt interest income for Federal income tax purposes.
On sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable
as capital gain unless the gain is attributable to market discount
in which case the accretion of market discount is taxable as ordinary
income. See "What is the Federal Tax Status of Unit Holders?"
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.
Zero Coupon Bonds. 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
Page A-1
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.
Premium Bonds. 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.
General Obligation Bonds. Certain of the Bonds in the Trusts may
be general obligations of a governmental entity that are backed
by the taxing power of such entity. All other Bonds in the Trusts
are revenue bonds payable from the income of a specific project
or authority and are not supported by the issuer's power to levy
taxes. General obligation bonds are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal
and interest. Revenue bonds, on the other hand, are payable only
from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special
excise tax or other specific revenue source. There are, of course,
variations in the security of the different Bonds in the Fund,
both within a particular classification and between classifications,
depending on numerous factors.
Healthcare Revenue Bonds. 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
Page A-2
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.
Single Family Mortgage Revenue Bonds. 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.
Multi-Family Mortgage Revenue Bonds. Certain of the Bonds in the
Trusts may be obligations of issuers whose revenues are primarily
derived from mortgage loans to housing projects for low to moderate
income families. The ability of such issuers to make debt service
payments will be affected by events and conditions affecting financed
projects, including, among other things, the achievement and maintenance
of sufficient occupancy levels and adequate rental income, increases
in taxes, employment and income conditions prevailing in local
labor markets, utility costs and other operating expenses, the
managerial ability of project managers, changes in laws and governmental
regulations, the appropriation of subsidies and social and economic
trends affecting the localities in which the projects are located.
The occupancy of housing projects may be adversely affected by
high rent levels and income limitations imposed under Federal
and state programs. Like single family mortgage revenue bonds,
multi-family mortgage revenue bonds are subject to redemption
and call features, including extraordinary mandatory redemption
features, upon prepayment, sale or non-origination of mortgage
loans as well as upon the occurrence of other events. Certain
issuers of single or multi-family housing bonds have considered
various ways to redeem bonds they have issued prior to the stated
first redemption dates for such bonds. In one situation the New
York City Housing Development Corporation, in reliance on its
interpretation of certain language in the indenture under which
one of its bond issues was created, redeemed all of such issue
at par in spite of the fact that such indenture provided that
the first optional redemption was to include a premium over par
and could
Page A-3
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 Initial 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.
Water and Sewerage Bonds. 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.
Electric Utility Bonds. 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.
Lease Obligation 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.
Industrial Revenue Bonds. 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
Page A-4
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.
Transportation Facility Revenue 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.
Educational Obligation Bonds. Certain of the Bonds in the Trusts
may be obligations of issuers which are, or which govern the operation
of, schools, colleges and universities and whose revenues are
derived mainly from ad valorem taxes, or for higher education
systems, from tuition, dormitory revenues, grants and endowments.
General problems relating to school bonds include litigation contesting
the state constitutionality of financing public education in part
from ad valorem taxes, thereby creating a disparity in educational
funds available to schools in wealthy areas and schools in poor
areas. Litigation or legislation on this issue may affect the
sources of funds available for the payment of school bonds in
the Trusts. General problems relating to college and university
obligations would include the prospect of a declining percentage
of the population consisting of "college" age individuals, possible
inability to raise tuitions and fees sufficiently to cover increased
operating costs, the uncertainty of continued receipt of Federal
grants and state funding and new government legislation or regulations
which may adversely affect the revenues or costs of such issuers.
All of such issuers have been experiencing certain of these problems
in varying degrees.
Page A-5
Resource Recovery Facility Bonds. 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.
Bonds of Issuers Located in the Commonwealth of Puerto Rico. Certain
Trusts of the Fund may contain Bonds of issuers located in the
Commonwealth of Puerto Rico or issuers which will be affected
by general economic conditions of Puerto Rico. Puerto Rico's unemployment
rate remains significantly higher than the U.S. unemployment rate.
Furthermore, the economy is largely dependent for its development
upon U.S. policies and programs that are being reviewed and may
be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
The Puerto Rican economy is affected by a number of Commonwealth
and Federal investment incentive programs. For example, Section
936 of the Internal Revenue Code provides for a credit against
Federal income taxes for U.S. companies operating on the island
if certain requirements are met. The Omnibus Budget Reconciliation
Act of 1993 imposes limits on such credit, effective for tax years
beginning after 1993. In addition, from time to time proposals
are introduced in Congress which, if enacted into law, would eliminate
some or all of the benefits of Section 936. Although no assessment
can be made at this time of the precise effect of such limitation,
it is expected that the limitation of Section 936 credits would
have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets
Page A-6
for these obligations, and the types, levels and quality of revenue
sources pledged for the payment of existing and future debt obligations.
Such possible consequences include, without limitation, legislative
proposals seeking restoration of the status of Section 936 benefits
otherwise subject to the limitations discussed above. However,
no assessment can be made at this time of the economic and other
effects of a change in federal laws affecting Puerto Rico as a
result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the financial difficulties which may impact certain issuers
of Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of the Bonds are
subject. Additionally, many factors including national economic,
social and environmental policies and conditions, which are not
within the control of the issuers of Bonds, could affect or could
have an adverse impact on the financial condition of Puerto Rico
and various agencies and political subdivisions located in Puerto
Rico. The Sponsor is unable to predict whether or to what extent
such factors or other factors may affect the issuers of Bonds,
the market value or marketability of the Bonds or the ability
of the respective issuers of the Bonds acquired by the Trusts
to pay interest on or principal of the Bonds.
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
Page A-7
date the Bonds are issued on the issuer of the Bonds or the user
of the proceeds of the Bonds; an administrative or judicial decree
which requires the cessation of a substantial part of the operations
of the project financed with the proceeds of the Bonds; an overestimate
of the costs of the project to be financed with the proceeds of
the Bonds resulting in excess proceeds of the Bonds which may
be applied to redeem Bonds; or an underestimate of a source of
funds securing the Bonds resulting in excess funds which may be
applied to redeem Bonds. See also the discussion of single family
mortgage and multi-family mortgage revenue bonds above for more
information on the call provisions of such bonds. The exercise
of redemption or call provisions will (except to the extent the
proceeds of the called Bonds are used to pay for Unit redemptions)
result in the distribution of principal and may result in a reduction
in the amount of subsequent interest distributions; it may also
affect the long-term return and the current return on Units of
each Trust. Redemption pursuant to call provisions is more likely
to occur, and redemption pursuant to sinking fund provisions may
occur, when the Bonds have an offering side valuation which represents
a premium over par or for original issue discount bonds a premium
over the accreted value. Unit holders may recognize capital gain
or loss upon any redemption or call.
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
Initial 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 Initial 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 Initial 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 Initial
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.
Page A-8
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 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 Initial 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 Initial 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,
except that interest income of certain Bonds in certain Trusts
may be included as an item of tax preference in calculating the
Alternative Minimum Tax applicable to both individuals and corporations.
In addition, other factors may arise from time to time which potentially
may impair the ability of issuers to meet obligations undertaken
with respect to the Bonds.
What are Estimated Long-Term Return and Estimated Current Return?
At the opening of business on the Initial Date of Deposit, the
Estimated Current Return (if applicable) and the Estimated Long-Term
Return under the monthly and semi-annual distribution plans 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 Initial Date of Deposit. Since the market values and estimated
retirements of the Bonds and the expenses of the Trust will change,
there is no assurance that the Estimated Long-Term Return indicated
in 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
Initial 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 Bonds which exceed the amounts furnished
by the Sponsor. The Trustee has agreed to pay for any amounts
Page A-9
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 Initial 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 Initial Date of Deposit, the Trustee will neither reduce
its fee nor pay expenses of a Trust as described above.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with
the Distribution Dates being the last day of the month in which
the related Record Date occurs. It is anticipated that an amount
equal to approximately one-half of the amount of net annual interest
income per Unit will be distributed on or shortly after each Distribution
Date to Unit holders of record on the preceding Record Date. See
"Special Trust Information" for each Trust.
Record Dates for monthly distributions of interest are the fifteenth
day of each month. The Distribution Dates for distributions of
interest under the monthly plan is the last day of each month
in which the related Record Date occurs. All Unit holders will
receive the first distribution of interest regardless of the plan
of distribution chosen and all Unit holders will receive such
distributions, if any, from the Principal Account as are made
as of the Record Dates for monthly distributions.
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.
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
Page A-10
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.
What are the Expenses and Charges?
At no cost to the Trusts, the Sponsor has borne all the expenses
of creating and establishing the Fund, including the cost of the
initial preparation, printing and execution of the Indenture and
the certificates for the Units, legal and accounting expenses,
expenses of the Trustee and other out-of-pocket expenses. With
the exception of bookkeeping and other administrative services
provided to the Trust, for which the Sponsor will be reimbursed in amounts
as set forth under "Summary of Essential Information," the Sponsor
will not receive any fees in connection with its activities
relating to the Trust. Such bookkeeping and administrative charges
may be increased without approval of the Unit holders by amounts
not exceeding proportionate increases under the category "All
Services Less Rent of Shelter" in the Consumer Price Index published
by the United States Department of Labor. The fees payable to the Sponsor
for such services may exceed the actual costs of providing such services
for this Fund, but at no time will the total amount received for such
services rendered to unit investment trusts of which Nike Securities L.P.
is the Sponsor in any calendar year exceed the aggregate cost to the
Sponsor of supplying such services in such year. 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
Page A-11
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. 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 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.
Why and How are the Insured Trusts Insured?
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS.
THE BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED
BY INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as
to the scheduled payment of interest and principal by policies
obtained by each Insured Trust from Financial Guaranty Insurance
Company ("Financial Guaranty" or "FGIC"), a New York stock insurance
company, or AMBAC Indemnity Corporation ("AMBAC Indemnity" or
"AMBAC"), a Wisconsin-domiciled stock insurance company, or obtained
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit directly from Financial Guaranty,
AMBAC Indemnity or other insurers (the "Preinsured Bonds"). The
insurance policy obtained by each Insured Trust is noncancellable
and will continue in force for such Trust so long as such Trust
is in existence and the Bonds described in the policy continue
to be held by such Trust (see "Portfolio" for each Insured Trust).
Nonpayment of premiums on the policy obtained by each Insured
Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or AMBAC Indemnity to take action
against the Trustee to recover premium payments due it. Premium
rates for each issue of Bonds protected by the policy obtained
by each Insured Trust are fixed for the life of such Trust. The
premium for any Preinsured Bonds has been paid in advance by the
Bond issuer, the underwriters, the Sponsor or others and any such
policy or policies are noncancellable and will continue in force
so long as the Bonds so insured are outstanding and the insurer
and/or insurers thereof remain in business. If the provider of
an original issuance insurance policy is unable to meet its obligations
under such policy, or if the rating assigned to the claims-paying
ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure any issue adversely
affected by either of the above described events. A monthly premium
is paid by each Insured Trust for the insurance obtained by such
Trust, which is payable from the interest income received by such
Trust. In the case of Preinsured Bonds, no premiums for insurance
are paid by the Insured Trust.
Page A-12
Financial Guaranty Insurance Company. Under the provisions of
the aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay
to Citibank, N.A., or its successor, as its agent (the "Fiscal
Agent"), that portion of the principal of and interest on the
Bonds covered by the policy which shall become due for payment
but shall be unpaid by reason of nonpayment by the issuer of the
Bonds. The term "due for payment" means, when referring to the
principal of a Bond, its stated maturity date or the date on which
it shall have been called for mandatory sinking fund redemption
and does not refer to any earlier date on which payment is due
by reason of call for redemption (other than by mandatory sinking
fund redemption), acceleration or other advancement of maturity
and means, when referring to interest on a Bond, the stated date
for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation,
"due for payment" also means, when referring to the principal
of such Bond, the date on which such Bond has been called for
mandatory redemption as a result of such determination of taxability,
and when referring to interest on such Bond, the accrued interest
at the rate provided in such documentation to the date on which
such Bond has been called for such mandatory redemption, together
with any applicable redemption premium. The term "due for payment"
will not include, when referring to 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 based upon
the insurability of each Bond as of the Initial Date of Deposit
and will not be increased or decreased for any change in the creditworthiness
of such Bond.
Financial Guaranty is a wholly owned subsidiary of FGIC Corporation
(the "Corporation"), a Delaware holding company. The Corporation
is a wholly owned subsidiary of General Electric Capital Corporation
("GECC"). Neither the Corporation nor GECC is obligated to pay
the debts of or the claims against Financial Guaranty. Financial
Guaranty is domiciled in the State of New York and is subject
to regulation by the State of New York Insurance Department. As
of September 30, 1994, the total capital and surplus of Financial Guaranty
was approximately $871,000,000. 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) 621-0389).
Page A-13
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 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 $1,988,000,000 (unaudited)
and statutory capital of approximately $1,148,000,000 (unaudited)
as of March 31, 1994. Statutory capital consists of AMBAC Indemnity's
policyholders' surplus and statutory contingency reserve. AMBAC
Indemnity is a wholly owned subsidiary of AMBAC Inc., a 100% publicly-held
company. Moody's Investors Service, Inc. and Standard & Poor's
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
Page A-14
its telephone number are One State Street Plaza, 17th Floor, New
York, New York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has
been furnished by AMBAC Indemnity. No representation is made herein
as to the accuracy or adequacy of such information, or as to the
existence of any adverse changes in such information, subsequent
to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or
AMBAC Indemnity has applied its own standards which are not necessarily
the same as the criteria used in regard to the selection of bonds
by the Sponsor. This decision is made prior to the Initial Date
of Deposit, as bonds not covered by such insurance are not deposited
in an Insured Trust, unless such bonds are Preinsured Bonds. The
insurance obtained by an Insured Trust covers Bonds deposited
in such Trust and physically delivered to the Trustee in the case
of bearer bonds or registered in the name of the Trustee or its
nominee or delivered along with an assignment in the case of registered
bonds or registered in the name of the Trustee or its nominee
in the case of Bonds held in book-entry form. Contracts to purchase
Bonds are not covered by the insurance obtained by an Insured
Trust although Bonds underlying such contracts are covered by
insurance upon physical delivery to the Trustee.
Insurance obtained by each Insured Trust or by the Bond issuer,
the underwriters, the Sponsor or others does not guarantee the
market value of the Bonds or the value of the Units of such Trust.
The insurance obtained by an Insured Trust is effective only as
to Bonds owned by and held in such Trust. In the event of a sale
of any such Bond by the Trustee, the insurance terminates as to
such Bond on the date of sale. In the event of a sale of a Bond
insured by an Insured Trust, the Trustee has the right to obtain
Permanent Insurance upon the payment of an insurance premium from
the proceeds of the sale of such Bond. Except as indicated below,
insurance obtained by an Insured Trust has no effect on the price
or redemption value of Units. It is the present intention of the
Evaluator to attribute a value to such insurance obtained by an
Insured Trust (including the right to obtain Permanent Insurance)
for the purpose of computing the price or redemption value of
Units only if the Bonds covered by such insurance are in default
in payment of principal or interest or, in the Sponsor's opinion,
in significant risk of such default. The value of the insurance
will be equal to the difference between (i) the market value of
a Bond which is in default in payment of principal or interest
or in significant risk of such default assuming the exercise of
the right to obtain Permanent Insurance (less the insurance premium
attributable to the purchase of Permanent Insurance) and (ii)
the market value of such Bonds not covered by Permanent Insurance.
See "Public Offering-How is the Public Offering Price Determined?"
herein for a more complete description of the Evaluator's method
of valuing defaulted Bonds and Bonds which have a significant
risk of default. Insurance on a Preinsured Bond is effective as
long as such Bond is outstanding. Therefore, any such insurance
may be considered to represent an element of market value in regard
to the Bonds thus insured, but the exact effect, if any, of this
insurance on such market value cannot be predicted.
A contract of insurance obtained by an Insured Trust and the negotiations
in respect thereof represent the only relationship between Financial
Guaranty and/or AMBAC Indemnity and the Fund. Otherwise neither
Financial Guaranty nor its parent, FGIC Corporation, or any affiliate
thereof, nor AMBAC Indemnity nor its parent, AMBAC, Inc., or any
affiliate thereof has any significant relationship, direct or
indirect, with the Fund or the Sponsor, except that the Sponsor
has in the past and may from time to time in the future, in the
normal course of its business, participate as sole underwriter
or as manager or as a member of underwriting syndicates in the
distribution of new issues of municipal bonds in which the investors
or the affiliates of FGIC Corporation and/or AMBAC Inc. have or
will be participants or for which a policy of insurance guaranteeing
the scheduled payment of interest and principal has been obtained
from Financial Guaranty and/or AMBAC Indemnity. Neither the Fund
nor the Units of a Trust nor the portfolio of such Trust is insured
directly or indirectly by FGIC Corporation and/or AMBAC Inc.
Municipal Bond Investors Assurance Corporation. Municipal Bond
Investors Assurance Corporation ("MBIA Corporation" or "MBIA")
is the principal operating subsidiary of MBIA, Inc., a New York
Stock Exchange listed company. MBIA, Inc. is not obligated to
pay the debts of or claims against MBIA Corporation.
Page A-15
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, 1993, MBIA had admitted assets of $3.1 billion
(audited), total liabilities of $2.1 billion (audited), and total
capital and surplus of $978 million (audited) determined in accordance
with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of June 30, 1994, MBIA had
admitted assets of $3.3 billion (unaudited), total liabilities
of $2.2 billion (unaudited), and total capital and surplus of
$1.1 billion (unaudited), determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. Copies of MBIA's financial statements prepared in
accordance with statutory accounting practices are available from
MBIA. The address of MBIA 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") is a "Aaa/AAA" rated monoline stock
insurance company incorporated in the State of Maryland, and is
a wholly owned subsidiary of Capital Guaranty Corporation, a Maryland
insurance holding company. Capital Guaranty Corporation is a publicly
owned company whose shares are traded on the New York Stock Exchange.
Capital Guaranty is authorized to provide insurance in all fifty states,
the District of Columbia and three U.S. territories. Capital Guaranty
focuses on insuring municipal securities, and its policies guaranty
the timely payment of principal and interest when due for payment
on new issue and secondary market issue municipal bond transactions.
Capital Guaranty's claims-paying ability is rated "Triple-A" by
both Moody's Investors Service, Inc. and Standard & Poor's Corporation.
As of September 30, 1994, Capital Guaranty had more than $14.6 billion
in net exposure outstanding (excluding defeased issues). The total
statutory policyholders' surplus and contingency reserve of Capital
Guaranty was $193,194,000 (unaudited) and the total admitted assets
were $293,036,690 (unaudited) as reported to the Insurance Department
of the State of Maryland as of September 30, 1994. The address of Capital
Guaranty's headquarters and its telephone number are Steuart Tower,
22nd Floor, One Market Plaza, San Francisco, CA 94105-1413 and
(415) 995-8000.
CapMAC. CapMAC is a New York-domiciled monoline stock insurance
company which engages only in the business of financial guarantee
and surety insurance. CapMAC is licensed in 49 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and
the territory of Guam. CapMAC insures structured asset-backed,
corporate and other financial obligations in the domestic and
foreign capital markets. CapMAC may also provide financial guarantee
reinsurance for structured asset-backed, corporate and municipal
obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's 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
Page A-16
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 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,
Page A-17
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 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
Page A-18
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, 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
(with respect to insured Bonds) to the effect that the payment
of insurance proceeds representing maturing interest on defaulted
municipal obligations paid by Financial Guaranty or another insurer
would be excludable from Federal gross income if, and to the same
extent as, such interest would have been so excludable if paid
by the issuer of the defaulted obligations provided that, at the
time such policies are purchased, the amounts paid for such policies
are reasonable, customary and consistent with the reasonable expectation
that the issuer of the obligations, rather than the insurer, will
pay debt service on the obligations. See "What is the Federal
Tax Status of Unit Holders?"
PUBLIC OFFERING
How is the Public Offering Price Determined?
Page A-19
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 certain
State Trusts 4.9% 5.152%
Other State Trusts 5.5 5.820
Long Intermediate Trust 4.4 4.603
Intermediate Trust 3.9 4.058
Short Intermediate Trust 3.0 3.093
</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 "General Trust Information-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
of Transaction Intermediate Discount Trusts
at Public and Long 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 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:
Page A-20
<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. The
purchaser must inform the Underwriter or dealer of any such combined
purchase prior to the sale in order to obtain the indicated discount.
In addition, with respect to the employees, officers and directors
(including their immediate family members, defined as spouses,
children, grandchildren, parents, grandparents, mothers-in-law,
fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of
the Sponsor and the Underwriters and their subsidiaries, the sales
charge is reduced by 2.0% of the Public Offering Price for purchases
of Units during the primary and secondary public 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.
On the Initial 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
Page A-21
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. A person will
become owner of Units on the date of settlement provided payment has
been received. Cash, if any, made available to the Sponsor prior to
the date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934.
Delivery of Certificates representing Units so ordered will be made
five business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units Be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
Until the primary distribution of the Units offered by this Prospectus
is completed, (i) for Units issued on the Initial Date of Deposit
and (ii) for additional Units issued after such date as additional
Bonds are deposited by the Sponsor, Units will be offered to the
public at the Public Offering Price, computed as described above,
by the Underwriters, including the Sponsor (see "What are the
Underwriting Concessions?") and through dealers and others. The
initial offering period may be up to approximately 360 days. During
this period, the Sponsor may deposit additional Bonds in each
Trust and create additional Units. Upon completion of the initial
offering, Units repurchased in the secondary market (see "Public
Offering-Will There be a Secondary Market?") may be offered by
this Prospectus at the secondary market public offering price
determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Fund
for sale in a number of states. Sales initially will be made to
dealers and others at prices which represent a concession or agency
commission of $32 per Unit
Page A-22
for a National Trust and certain State Trusts, $32 per Unit for
a New York Trust, $33 per Unit for other State Trusts, $28 per
Unit for a Long Intermediate Trust, $25 per Unit for an Intermediate
Trust and $18 per Unit for a Short Intermediate 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 Trusts 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 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 Initial
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 or more
Units Units Units
Series of the Fund Purchased Purchased Purchased
________________ ________ ________ ________
<S> <C> <C> <C>
National Trust and a State Trust
with a 4.9% sales charge $35.00 $37.00 $38.00
State Trust with a 5.5% sales charge $36.00 $38.00 $39.00
Long Intermediate Trust $31.00 $32.00 $33.00
Intermediate Trust $26.00 $27.00 $28.00
Short Intermediate Trust $21.00 $22.00 $22.00
</TABLE>
[FN]
(1) The applicable concession will be allotted to broker/dealers
or banks who purchase Units from the Sponsor only on the Initial
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 certain State Trusts
(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), 4.4% of the Public Offering
Price of the Units for a Long Intermediate Trust (equivalent to
4.603% of the net amount invested), 3.9% of the Public Offering
Price of the Units for an Intermediate Trust (equivalent to 4.058%
of the net amount invested) and 3.0% of the Public Offering Price
of the Units for a Short Intermediate Trust (equivalent to 3.093%
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 "What are the Underwriting
Concessions?" 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 Initial Date of Deposit as well as
subsequent deposits) and the cost of such Bonds of such Trust
to the Sponsor (including the cost of insurance obtained by the
Sponsor prior to the Initial Date of Deposit for individual Bonds).
See "What are the Underwriting Concessions?" 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 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 Initial Date of Deposit
or subsequent dates of deposit
Page A-23
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 National or Discount
Trust, 5.8% for a State 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.
What are the Underwriting Concessions?
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 A-22.
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 State Trust
with a 4.9% sales charge $35.00 $37.00 $38.00 $38.00
New York Trust $36.00 $38.00 $39.00 $39.00
State Trust with a 5.5% sales charge $36.00 $38.00 $39.00 $41.00
Long Intermediate Trust $30.00 $32.00 $33.00 $34.00
Intermediate Trust $26.00 $28.00 $28.00 $29.00
Short Intermediate Trust $20.00 $22.00 $22.00 $22.00
</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 (with the exception of Short Intermediate Trusts), 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, may 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 A-24
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 Initial
Date of Deposit for individual Bonds and including the effects
of portfolio hedging gains and losses and portfolio hedging transaction
costs) and the Aggregate Offering Price thereof on the Initial
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 or New York Trust will
receive an additional $2.00 per Unit sold. However, such sales will
not qualify for the Aggregate Monthly Sales Program. See "Public
Offering-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.
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
Page A-25
of transfer. Certificates to be redeemed must be properly endorsed
or accompanied by a written instrument or instruments of transfer.
A Unit holder must sign exactly as his name appears on the face
of the certificate with the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP")
or such other signature guaranty program in addition to, or in
substitution for, STAMP, as may be accepted by the Trustee. In
certain instances the Trustee may require additional documents
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Certificates for Units will bear an appropriate notation on their
face indicating which plan of distribution has been selected in
respect thereof. When a change is made, the existing certificate
must be surrendered to the Trustee and a new certificate issued
to reflect the then currently effective plan of distribution.
There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder
may be required to pay $2.00 to the Trustee per certificate reissued
or transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued
to replace destroyed, stolen or lost certificates, the Unit holder
may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
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 who are entitled to distributions at that
time under the plan of distribution chosen. All distributions
for a Trust will be net of applicable expenses for such Trust.
The pro rata share of cash in the Principal Account of each Trust
will be computed as of the fifteenth day of each month, and distributions
to the Unit holders of such Trust as of such Record Date will
be made on 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 under the applicable plan of distribution.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Account of a Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct
from the Interest Account of each Trust and, to the extent funds
are not sufficient therein, from the Principal Account of each
Trust, amounts necessary
Page A-26
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.
PURCHASERS OF UNITS WHO DESIRE TO RECEIVE DISTRIBUTIONS ON A SEMI-ANNUAL
BASIS MAY ELECT TO DO SO AT THE TIME OF PURCHASE DURING THE INITIAL
PUBLIC OFFERING PERIOD. THOSE NOT SO INDICATING WILL BE DEEMED
TO HAVE CHOSEN THE MONTHLY DISTRIBUTION PLAN. However, all Unit
holders purchasing Units during the initial public offering period
and prior to the first Record Date will receive the first distribution
of interest. Thereafter, Record Dates for monthly distributions
will be the fifteenth day of each month and Record Dates for semi-annual
distributions will be the fifteenth day of June and December.
Distributions will be made on the last day of the month of the
respective Record Date.
The plan of distribution selected by a Unit holder will remain
in effect until changed. Unit holders purchasing Units in the
secondary market will initially receive distributions in accordance
with the election of the prior owner. Each year, approximately
six weeks prior to the end of May, the Trustee will furnish each
Unit holder a card to be returned to the Trustee not more than
thirty nor less than ten days before the end of such month. Unit
holders desiring to change the plan of distribution in which they
are participating may so indicate on the card and return same,
together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate
are not returned to the Trustee, the Unit holder will be deemed
to have elected to continue with the same plan for the following
twelve months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income or principal on the participant's
Units to, among other investment vehicles, a Unit holder's checking,
bank savings, money market, insurance, reinvestment or any other
account. All such distributions, of course, are subject to the
minimum investment and sales charges, if any, of the particular
investment vehicle to which distributions are directed. The Trustee
will notify the participant of each distribution pursuant to the
Universal Distribution Option. The Trustee will distribute directly
to the Unit holder any distributions which are not accepted by
the specified investment vehicle. A participant may at any time,
by so notifying the Trustee in writing, elect to terminate his
participation in the Universal Distribution Option and receive
directly future distributions on his Units.
Distribution Reinvestment Option. The Sponsor has entered into
an arrangement with Oppenheimer Management Corporation which permits
any Unit holder of a Trust to elect to have each distribution
of interest income or principal on his Units automatically reinvested
in shares of either the Oppenheimer Intermediate Tax-Exempt Bond Fund
(the "Intermediate Series") or the Oppenheimer Insured Tax-Exempt Bond
Fund (the "Insured Series"). Oppenheimer Management Corporation
is the investment adviser of each Series which are open-end,
diversified management investment companies. The investment objective
of the Intermediate Series is to provide a high level of current interest
income exempt from Federal income tax through the purchase of investment
grade securities. The investment objective of the Insured Series is
to provide as high a level of current interest income exempt from
Federal income tax as is consistent with the assurance of the
scheduled receipt of interest and principal through insurance
and the preservation of capital (the income of either Series may
constitute an item of preference for determining the Federal alternative
minimum tax). The objectives and policies of each Series are presented
in more detail in the prospectus for each Series.
Page A-27
Each person who purchases Units of a Trust may use the card attached
to this prospectus to request a prospectus describing each Series
and a form by which such person may elect to become a participant
in a Distribution Reinvestment Option with respect to a Series.
Each distribution of interest income or principal, 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 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 provisions of
the Revenue Reconciliation Act of 1993 (the "Tax Act") described
below that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units.
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 (i) interest income on
certain Bonds in certain Trusts may be included as an item of
tax preference in calculating the Alternative Minimum Tax applicable
to both individuals and corporations (see "Portfolio" for each
Trust to determine whether the Trust contains Bonds that generate
this type of interest income) and (ii) the alternative minimum
tax and the environmental tax (the "Superfund Tax") applicable
to corporate Unit holders may, in certain circumstances, include
in the amount on which such tax is calculated, 75% of the interest
income received by the Trust. See "Certain Tax Matters Applicable
to Corporate Unit Holders;"
(2) exemption of interest and accrued original issue discount
on any Bonds for Federal income tax purposes does not necessarily
result in tax exemption under the laws of the several states as
such laws vary with respect to the taxation of such securities
and in many states all or a part of such interest and accrued
original issue discount may be subject to tax;
(3) each Unit holder of a Trust is considered to be the owner
of a pro rata portion of such Trust under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter
the "Code") and will have a taxable event when the Trust disposes
of a Bond, or when the Unit holder redeems or sells
Page A-28
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 must be reduced by the annual amortization
of Bond premium. The tax cost reduction requirements of said Code
relating to amortization of bond premium may, under some circumstances,
result in the Unit holder realizing a taxable gain when his Units
are sold or redeemed for an amount equal to or less than his original
cost; and
(4) any insurance proceeds which represent maturing interest
on defaulted obligations held by the Trustee will be excludable
from Federal gross income if, and to the same extent as, such
interest would have been so excludable if paid by the issuer of
the defaulted obligations provided that, at the time such policies
are purchased, the amounts paid for such policies are reasonable,
customary and consistent with the reasonable expectation that
the issuer of the obligations, rather than the insurer, will pay
debt service on the obligations.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules
provide that original issue discount accrues either on the basis
of a constant compounded interest rate or ratably over the term
of the Bond, depending on the date the Bond was issued. In addition,
special rules apply if the purchase price of a Bond exceeds the
original issue price plus the amount of original issue discount
which would have accrued to prior owners. The application of these
rules will also vary depending on the value of the Bond on the
date a Unit holder acquires his Unit, and the price the Unit holder
pays for his Unit. Because of the complexity of these rules relating
to the accrual of original issue discount, Unit holders should
consult their tax advisers as to how these rules apply. See "Portfolio"
for information relating to Bonds, if any, issued at an original
issue discount.
The Tax Act subjects tax-exempt bonds to the market discount rules
of the Code effective for bonds purchased after April 30, 1993.
In general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's purchase
price (except to the extent that such difference, if any, is attributable
to original issue discount not yet accrued), subject to de minimis rule.
Under the Tax Act, accretion of market discount is taxable as ordinary
income; under prior law the accretion had been treated as capital gain.
Market discount that accretes while a Trust holds a Bond would be
recognized as ordinary income by the Unit holders when principal
payments are received on the Bond, upon sale or at redemption
(including early redemption) or upon the sale or redemption of the
Units, unless a Unit holder elects to include market discount in
taxable income as it accrues. The market discount rules are complex
and Unit holders should consult their tax advisers regarding these
rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense
Page A-29
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. 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. See "Portfolio" for each
Trust to determine whether the Trust includes any such private
activity bonds issued on or after that date. SEE "PORTFOLIO" FOR
EACH TRUST TO DETERMINE WHETHER THE TRUST INCLUDES 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
Page A-30
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 Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection
with each distribution a statement of the amount of interest,
if any, and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
Within a reasonable time after the last business day of each calendar
year, the Trustee will furnish to each person who at any time
during the calendar year was a Unit holder of a Trust of record,
a statement as to (1) the Interest Account: interest received
by such Trust (including amounts representing interest received
upon any disposition of Bonds of such Trust), the amount of such
interest representing insurance proceeds (if applicable), deductions
for payment of applicable taxes and for fees and expenses of the
Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share
of each Unit outstanding on the last business day of such calendar
year; (2) the Principal Account: the dates of disposition of any
Bonds of such Trust and the net proceeds received therefrom (excluding
any portion representing interest and the premium attributable
to the exercise of the right, if applicable, to obtain Permanent
Insurance), deduction for payment of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, and the
balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing
the pro rata share of each Unit outstanding on the last business
day of such calendar year; (3) the Bonds held and the number of
Units of such Trust outstanding on the last business day of such
calendar year; (4) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (5)
the amounts actually distributed during such calendar year from
the Interest Account and from the Principal Account of such Trust,
separately stated, expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the Record Date for
such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
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
Page A-31
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 Initial 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 "General Trust Information-Why
and How are the Insured Trusts Insured?" For a description of
the situations in which the evaluator may value the insurance
obtained by an Insured Trust, see "Public Offering-How is the
Public Offering Price Determined?"
The difference between the bid and offering prices of such Bonds
may be expected to average 1-2% of the principal amount. In the
case of actively traded bonds, the difference may be as little
as 1/2 of 1% and, in the case of inactively traded bonds, such
difference usually will not exceed 3%. Therefore, the price at
which Units may be redeemed could be less than the price paid
by the Unit holder and may be less than the par value of the Securities
represented by the Units so redeemed. At the opening of business
on the Initial 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
Page A-32
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 by 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.
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 are Certain General Matters Relating to the Trusts?" 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
Page A-33
trust in 1974 and to date more than $8 billion in First Trust
unit investment trusts have been deposited. The Sponsor's employees
include a team of professionals with many years of experience
in the unit investment trust industry. The Sponsor is a member
of the National Association of Securities Dealers, Inc. and Securities
Investor Protection Corporation and has its principal offices
at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(708) 241-4141. As of December 31, 1993, the total partners' capital
of Nike Securities L.P. was $12,743,032 (audited). (This paragraph
relates only to the Sponsor and not to the Trust or to any series
thereof or to any other Underwriter. The information is included
herein only for the purpose of informing investors as to the financial
responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will
be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Fund may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Fund which the Trustee may be required to pay under
any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the
Indenture contains other customary provisions limiting the liability
of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor
Page A-34
Sponsor at rates of compensation deemed by the Trustee to be reasonable
and not exceeding amounts prescribed by the Securities and Exchange
Commission, or (b) terminate the Indenture and liquidate the Trusts
as provided herein, or (c) continue to act as Trustee without
terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor and the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee),
provided that the Indenture is not amended to increase the number
of Units of any Trust issuable thereunder or to permit the deposit
or acquisition of securities either in addition to or in substitution
for any of the Bonds of any Trust initially deposited in a Trust,
except for the substitution of certain refunding securities for
Bonds or New Bonds for Failed Bonds. In the event of any amendment,
the Trustee is obligated to notify promptly all Unit holders of
the substance of such amendment.
Each Trust may be liquidated at any time by consent of 100% of
the Unit holders of such Trust or by the Trustee when the value
of such Trust, as shown by any evaluation, is less than 20% of
the aggregate principal amount of the Bonds deposited in the Trust
during the primary offering period 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,
Page A-35
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 Initial Date of Deposit appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young
LLP, 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.
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:
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other 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
Page A-36
project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should
exercise his/her own judgment with respect to such likelihood
and risk.
Credit Watch: Credit Watch highlights potential changes in ratings
of bonds and other fixed income securities. It focuses on events
and trends which place companies and government units under special
surveillance by S&P's 180-member analytical staff. These may include
mergers, voter referendums, actions by regulatory authorities,
or developments gleaned from analytical reviews. Unless otherwise
noted, a rating decision will be made within 90 days. Issues appear
on Credit Watch where an event, situation, or deviation from trends
occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is
inevitable. Since S&P continuously monitors all of its ratings,
Credit Watch is not intended to include all issues under review.
Thus, rating changes will occur without issues appearing on Credit
Watch.
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 A-37
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
Summary of Essential Information 3
The First Trust Combined Series:
What is the First Trust Combined Series? 4
Underwriters 6
The Separate Trusts:
Missouri Insured Trust, Series 26 8
New York Insured Trust, Series 56 14
Maine Advantage Trust, Series 15 25
Report of Independent Auditors 31
Statements of Net Assets 32
Notes to Statements of Net Assets 32
Notes to Portfolios 33
Estimated Cash Flows to Unit Holders 35
General Trust Information:
What are Certain General Matters Relating
to the Trusts? A-1
Risk Factors A-1
What are Estimated Long-Term Return and
Estimated Current Return? A-9
How is Accrued Interest Treated? A-10
What are the Expenses and Charges? A-11
Why and How are the Insured Trusts Insured? A-12
Public Offering:
How is the Public Offering Price Determined? A-20
How are Units Distributed? A-22
What are the Sponsor's Profits? A-23
What are the Underwriting Concessions? A-24
Will There be a Secondary Market? A-25
Rights of Unit Holders:
How are Certificates Issued and Transferred? A-25
How are Interest and Principal Distributed? A-26
How Can Distributions to Unit Holders be
Reinvested? A-27
What is the Federal Tax Status of Unit Holders? A-28
What Reports will Unit Holders Receive? A-31
How May Units be Redeemed? A-31
How May Units be Purchased by the Sponsor? A-33
How May Bonds be Removed from the Fund? A-33
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? A-33
Who is the Trustee? A-34
Limitations on Liabilities of Sponsor and Trustee A-34
Who is the Evaluator? A-35
Other Information:
How May the Indenture be Amended or
Terminated? A-35
Legal Opinions A-35
Experts A-36
Description of Bond Ratings A-36
</TABLE>
___________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
THE FIRST TRUST COMBINED SERIES 236
The First Trust of Insured
Municipal Bonds-Multi-State:
Missouri Trust, Series 26
New York Trust, Series 56
The First Trust Advantage:
Maine Trust, Series 15
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
United States Trust Company
of New York
770 Broadway
New York, New York 10003
1-800-682-7520
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
December 8, 1994
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
Financial Data Schedules
S-1
SIGNATURES
The Registrant, The First Trust Combined Series 236, 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 236, 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 December 8, 1994.
THE FIRST TRUST COMBINED SERIES 236
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 ) December 8, 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 December 8, 1994, in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 33-56741) and related Prospectus of The First Trust Combined
Series 236.
ERNST & YOUNG LLP
Chicago, Illinois
December 8, 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 236 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).
1.7 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).
S-5
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).
EX-27 Financial Data Schedules.
S-6
EXHIBIT 1.1.1
THE FIRST TRUST COMBINED SERIES 236
TRUST AGREEMENT
Dated: December 8, 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 on the
Initial Date of Deposit 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 on the Initial Date of
Deposit 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 "Special Trust 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 "Special Trust Information-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 in their entirety 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 and shall be calculated on the largest number
of Units outstanding during each period in respect of which
payment is made pursuant to Section 3.05. 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.
(i) The Trustee's annual fee referred to in Section 6.04 is
set forth for each Trust under "Special Trust Information" for
such Trust in the Prospectus.
(j) 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. 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 and Trust expenses assumed by the Trustee 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."
(k) Section 2.01 of Article II of the Standard Terms and
Conditions of Trust is hereby amended by inserting "(a)" prior to
the beginning of the text of the paragraph and adding the
following additional paragraphs:
"(b) From time to time following the Initial Date of
Deposit, the Depositor is hereby authorized, in its
discretion, to assign, convey to and deposit with the
Trustee additional Bonds, in bearer form or duly endorsed in
blank or accompanied by all necessary instruments of
assignment and transfer in proper form (or Contract
Obligations relating to such Bonds), to be held, managed and
applied by the Trustee as herein provided. Such deposit of
additional Bonds shall be made, in each case, pursuant to a
Notice of Deposit of Additional Bonds from the Depositor to
the Trustee. The Depositor, in each case, shall ensure that
each deposit of additional Bonds pursuant to this Section
shall be, as nearly as is practicable, in the identical
ratio as the Percentage Ratio for such Bonds as is specified
in the Prospectus for each Trust and the Depositor shall
ensure that such Bonds are identical to those deposited on
the Initial Date of Deposit. The Depositor shall deliver
the additional Bonds which were not delivered concurrently
with the deposit of additional Bonds and which were
represented by Contract Obligations within 10 calendar days
after such deposit of additional Bonds (the "Additional
Bonds Delivery Period"). If a contract to buy such Bonds
between the Depositor and seller is terminated by the seller
thereof for any reason beyond the control of the Depositor
or if for any other reason the Bonds are not delivered to
the Trust by the end of the Additional Bonds Delivery Period
for such deposit, the Trustee shall immediately draw on the
Letter of Credit, if any, in its entirety, apply the monies
in accordance with Section 2.01(d), and the Depositor shall
forthwith take the remedial action specified in
Section 3.14.
(c) In connection with the deposits described in
Section 2.01 (a) and (b), the Depositor has, in the case of
Section 2.01(a) deposits, and, prior to the Trustee
accepting a Section 2.01(b) deposit, will, deposit cash
and/or Letter(s) of Credit (meeting the conditions set forth
in Section 2.07) in an amount sufficient to purchase the
Contract Obligations (the "Purchase Amount") relating to
Bonds which are not actually delivered to the Trustee at the
time of such deposit, the terms of which unconditionally
allow the Trustee to draw on the full amount of the
available Letter of Credit. The Trustee may deposit such
cash or cash drawn on the Letter of Credit in a non-interest
bearing account for the Trust.
(d) In the event that the purchase of Contract
Obligations pursuant to any contract shall not be
consummated in accordance with said contract or if the Bonds
represented by Contract Obligations are not delivered to the
Trust in accordance with Section 2.01(a) or 2.01(b) and the
monies, or, if applicable, the monies drawn on the Letter of
Credit, deposited by the Depositor are not utilized for
Section 3.14 purchases of New Bonds, such funds, to the
extent of the purchase price of Special Bonds for which no
New Bond was acquired pursuant to Section 3.14, plus all
amounts described in the next succeeding two sentences,
shall be credited to the Principal Account and distributed
pursuant to Section 3.05 to Unit holders of record as of the
Record Date next following the failure of consummation of
such purchase. The Depositor shall cause to be refunded to
each Unit holder his pro rata portion of the sales charge
levied on the sale of Units to such Unit holder attributable
to such Failed Contract Obligation. The Depositor shall
also pay to the Trustee, for distribution to the Unit
holders, interest on the amount of the purchase price to the
Trust of the Special Bonds, at the rate of 5% per annum to
the date the Depositor notifies the Trustee that no New Bond
will be purchased or, in the absence of such notification,
to the expiration date for purchase of a New Bond specified
in Section 3.14. Any amounts remaining from monies drawn on
the Letter of Credit which are not used to purchase New
Bonds or are not used to provide refunds to Unit holders
shall be paid to the Depositor.
(e) The Trustee is hereby irrevocably authorized to
effect registration or transfer of the Bonds in fully
registered form to the name of the Trustee or to the name of
its nominee.
(f) In connection with and at the time of any deposit
of additional Bonds pursuant to Section 2.01(b), the
Depositor shall exactly replicate Cash (as defined below)
received or receivable by the Trust as of the date of such
deposit. For purposes of this paragraph, "Cash" means, as
to the Principal Account, cash or other property (other than
Bonds) on hand in the Principal Account or receivable and to
be credited to the Principal Account as of the date of the
deposit (other than amounts to be distributed solely to
persons other than holders of Units created by the deposit)
and, as to the Income Account, cash or other property (other
than Bonds) received by the Trust as of the date of the
deposit or receivable by the Trust in respect of a coupon
date which has accurred or will accur before the Trust will
be the holder of record of a Bond, reduced by the amount of
any cash or other property received or receivable on any
Bonds allocable (in accordance with the Trustee's
calculation of the monthly distribution from the Income
Account pursuant to Section 3.05) to a distribution made or
to be made in respect of a Record Date occurring prior to
the deposit. Such replication will be made on the basis of
a fraction, the numerator of which is the number of Units
created by the deposit and the denominator of which is the
number of Units which are outstanding immediately prior to
the deposit."
(l) Article II of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraph
which shall be entitled Section 2.07.:
"Section 2.07. Letter of Credit. The Trustee shall not
accept any Letter of Credit under this Indenture unless the
stated expiration date of the Letter of Credit is at least
thirty days from the respective date of deposit of Contract
Obligations pursuant to Section 2.01(a) or 2.01(b). The
Trustee is authorized to downpost the amount available under
the Letter of Credit, if any, deposited by the Depositor by
an amount equal to the purchase price of Contract
Obligations representing Bonds delivered to the Trust on the
date of delivery of such Bonds."
(m) Section 3.05 of Article III of the Standard Terms and
Conditions of Trust is hereby amended to include the following
subsection:
"Section 3.05(e) deduct from the Interest Account
or, to the extent funds are not available in such Account,
from the Principal Account and pay to the Depositor the
amount that it is entitled to receive pursuant to Section
3.16.
(n) Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following paragraphs
which shall be entitled Section 3.16.:
"Section 3.16. Bookkeeping and Administrative Expenses.
As compensation for providing bookkeeping or other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount which shall not exceed $0.10 times the number
of Units outstanding as of January 1 of such year except for
a year or years in which an initial offering period as
determined by Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Depositor
provides service during less than the whole of such year),
but in no event shall such compensation when combined with
all compensation received from other unit investment trusts
for which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
of providing such services to such unit investment trusts.
Such compensation may, from time to time, be adjusted
provided that the total adjustment upward does not, at the
time of such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Interest and Principal Accounts on or
before the Distribution Date following the Monthly Record
Date on which such period terminates. The Trustee shall
have no liability to any Certificateholder or other person
for any payment made in good faith pursuant to this Section.
If the cash balance in the Interest and Principal
Accounts shall be insufficient to provide for amounts
payable pursuant to this Section 3.16, the Trustee shall
have the power to sell (i) Bonds from the current list of
Bonds designated to be sold pursuant to Section 5.02 hereof,
or (ii) if no such Bonds have been so designated, such Bonds
as the Trustee may see fit to sell in its own discretion,
and to apply the proceeds of any such sale in payment of the
amounts payable pursuant to this Section 3.16.
Any moneys payable to the Depositor pursuant to this
Section 3.16 shall be secured by a prior lien on the Trust
Fund except that no such lien shall be prior to any lien in
favor of the Trustee under the provisions of Section 6.04
herein.
(o) All provisions regarding the Distribution Date included
in Section 3.05 of Article III of the Standard Terms and
Conditions of Trust are hereby amended to change the Distribution
Date from the first day of the month following the Record Date to
the last day of the month in which the Record Date occurs.
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 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.
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 Vice President
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
SCHEDULE A TO TRUST AGREEMENT
SECURITIES INITIALLY DEPOSITED
IN
THE FIRST TRUST COMBINED SERIES 236
(Note: Incorporated herein and made a part hereof is the
"Portfolio" as set forth for each Trust in the
Prospectus.)
EXHIBIT 3.1
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
December 8, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 236
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Combined Series 236, in
connection with the preparation, execution and delivery of a
Trust Agreement dated December 8, 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. 33-56741)
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, IL 60603
December 8, 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
Re: The First Trust Combined Series 236
Gentlemen:
We have served as counsel for Nike Securities L.P.,
Depositor of The First Trust Combined Series 236 (the "Fund") in
connection with the issuance of Units of fractional undivided
interest in said Fund under a Trust Agreement dated December 8,
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 of the 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) 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 provided that, at the time such policies are
purchased, the amounts paid for such policies are
reasonable, customary and consistent with the reasonable
expectation that the issuer of the bonds, rather than the
insurer will pay debt service on the bonds. 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")
subjects tax-exempt bonds to the market discount rules of the
Code effective for bonds purchased after April 30, 1993. In
general, market discount is the amount (if any) by which the
stated redemption price at maturity exceeds an investor's
purchase price (except to the extent that such difference, if
any, is attributable to original issue discount not yet accrued)
subject to a statutory de minimis rule. Market discount can
arise based on the price a Trust pays for Bonds or the price a
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. 33-56741)
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/jln
CARTER, LEDYARD & MILBURN
2 WALL STREET
NEW YORK, NEW YORK 10003
December 8, 1994
The First Trust Combined Series 236
c/o United States Trust Company
of New York
770 Broadway
New York, New York 10003
Dear Sirs:
We have acted as special counsel for The First Trust
Combined Series 236 (the "Fund") consisting of several separate
trusts including The First Trust of Insured Municipal Bonds--
Multi-State: New York Trust, Series 56 (the "Insured New York
Trust") for purposes of determining the applicability of certain
New York State and New York City taxes under the circumstances
hereinafter described. We have not examined any of the
obligations to be deposited into the Fund and express no opinion
herein as to whether the interest on any such obligations would
in fact be exempt from Federal, New York State and New York City
income taxes if directly received by a Unit holder, nor have we
made any review of the proceedings relating to the issuance of
such obligations or the basis for bond counsel opinion as to the
tax-exempt character of the interest thereon.
As a basis for rendering our opinion, we have reviewed the
Trust Agreement for the Fund (the "Indenture"), dated as of today
(the "Date of Deposit"), among Nike Securities L.P. (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"), and the prospectus dated today to be filed as an
amendment to a registration statement relating to the Fund
previously filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (respectively, the
"Prospectus" and the "Registration Statement").
The Fund is created pursuant to the Indenture and its
objectives are to produce income exempt from Federal, State and
local income and property taxation, and to conserve capital
through investment in portfolios of tax-exempt bonds.
As more fully set forth in the Indenture and in the
Prospectus, the activities of the Trustee will include the
following:
On the Date of Deposit, the Depositor will deposit with the
Trustee with respect to the Fund the total principal amount of
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. In addition, obligations in the separate trust identified
as "Insured," including the Insured New York Trust have the
timely payment of principal and interest guaranteed by insurance
policies purchased by the issuers, the underwriters, the
Depositor or others as more fully set forth in the Prospectus and
the Registration Statement with respect to the Fund.
We understand that all of the insurance policies described
in the preceding paragraph provide or will provide that the
insurer will pay the amount of principal and interest due but not
paid on any obligation and such payment will in no event relieve
the issuer from its continuing obligation to pay such defaulted
principal and interest in accordance with the terms of the
obligation.
The Trustee will not participate in the selection of the
obligations to be deposited in the Fund, and, upon the receipt
thereof, will deliver to the Depositor certificates for the
number of units of fractional undivided interest (the "Units")
representing the entire capital of the Fund as more fully set
forth in the Prospectus and the Registration Statement. The
Units, which are represented by certificates (the
"Certificates"), will be offered to the public by the Prospectus
when the Registration Statement becomes effective.
The duties of the Trustee are ministerial in nature, and
consist primarily of crediting the appropriate accounts with
interest received by, and with the proceeds from the disposition
of obligations held in, the Fund and the distribution of such
interest and proceeds to the Unit holders thereof. The Trustee
will also maintain records of the registered holders of
certificates representing an interest in the Fund and administer
the redemption of Units by such certificateholders, and may
perform certain administrative functions with respect to an
automatic reinvestment option.
Generally, obligations held in the Fund may be removed
therefrom by the Trustee only upon redemption prior to their
stated maturity, at the direction of the Depositor in the event
of an advance refunding or upon the occurrence of certain other
specified events which adversely affect the sound investment
character of the Fund, such as default by the issuer in payment
of interest or principal on the obligations, where no provision
for payment is made therefor within thirty (30) days either
pursuant to the portfolio insurance, where such is part of a
trust identified as Insured, or otherwise, and the Depositor
fails to instruct the Trustee, within thirty (30) days after
notification by the Trustee, to hold such obligation.
Except as described in the preceding paragraph, prior to the
termination of the Fund the Trustee is empowered to sell
obligations designated for such purposes by the Depositor only to
redeem Units tendered to it and to pay expenses for which funds
are not available. The Trustee does not have the power to vary
the investment of any Unit holder in the Fund, and under no
circumstances may the proceeds of sale of any obligations held by
the Fund be used to purchase new obligations to be held therein.
The Trustee will receive an annual fee for its services
based upon the principal amount of the underlying obligations,
plus reimbursement of its reasonably incurred expenses.
NEW YORK STATE FRANCHISE TAX
Article 9-A of the New York State Tax Law imposes a
franchise tax on business corporations, and, for purposes of that
Article, Section 208(l) defines the term "corporation" to
include, among other things, "any business conducted by a trustee
or trustees wherein interest or ownership is evidenced by
certificate or other written instrument."
The Regulations promulgated under Section 208 provide as
follows:
"The term 'corporation' includes . . . (2) any business conducted
by a trustee or trustees in which interest or ownership is
evidenced by certificate or other written instrument... but is
not limited to, an association commonly referred to as a business
trust or Massachusetts trust. In determining whether a trustee
or trustees are conducting a business, the form of the agreement
is of significance but is not controlling. The actual activities
of the trustee or trustees, not their purposes and powers, will
be regarded as decisive factors in determining whether a trust is
subject to tax under Article 9-A of the Tax Law. The mere
investment of funds and the collection of income therefrom, with
incidental replacement of securities and reinvestment of funds,
does not constitute the conduct of a business in the case of a
business conducted by a trustee or trustees." 20 NYCRR 1-
2.3(b)(2) (Amended July 11, 1990).
New York cases dealing with the question of whether a trust
will be subject to the franchise tax have also set out the
general rule that where a trustee merely invests funds and
collects and distributes the income therefrom, the trust is not
engaged in business and is not subject to the franchise tax.
Burrell v. Lynch, 274 App. Div. 347, 84 N.Y.S.2d 171 (3rd Dept.
1948).
In an Opinion of the Attorney General of the State of New
York, 47 N.Y. Att'y. Gen. Rep. 213 (Nov. 24, 1942), it was held
that where the trustee of an unincorporated investment trust was
without authority to reinvest amounts received upon the sales of
securities and could dispose of securities making up the trust
only upon the happening of certain specified events or the
existence of certain specified conditions, the trust was not
subject to the franchise tax.
In an Advisory Opinion of the Commissioner of Taxation and
Finance, CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., TSB-A-
90(24)C (November 30, 1990), it was held that a trust established
as a nuclear decommissioning fund under Section 468A of the
Internal Revenue Code of 1986, as amended (the "Code"), for the
sole purpose of accumulating funds for the eventual
decommissioning of nuclear plants, was not subject to the
business corporation franchise tax. The trustee was only
responsible for the investment of funds in government debt
securities and bank time or demand deposits and for the
collection of income from the trust and the incidental
replacement and reinvestment of funds in the trust.
In the instant situation, the Trustee is not empowered to
sell obligations contained in the corpus of the Fund and reinvest
the proceeds therefrom. Further, the power to sell such
obligations is limited to circumstances in which the
creditworthiness or soundness of the obligation is in question or
in which cash is needed to pay redeeming Unit holders or to pay
expenses, or where the Fund is liquidated pursuant to the
termination of the Indenture. Only in circumstances in which the
issuer of an obligation attempts to refinance it can the Trustee
exchange an obligation for a new security. In substance, the
Trustee will merely collect and distribute income and will not
reinvest any income or proceeds, and the Trustee has no power to
vary the investment of any Unit holder in the Fund.
NEW YORK CITY GENERAL CORPORATION TAX
Section 11-603(1) of the Administrative Code of the City of
New York (the "Administrative Code") imposes a general
corporation tax on domestic and foreign corporations for the
privilege of doing business, employing capital or owning or
leasing property within the City of New York. For this purpose,
Section 11-602(l) of the Administrative Code defines the term
"corporation" to include, among other things, "any business
conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument".
The Rules promulgated under Section 11-602 provide that:
"The term 'corporation' includes . . . (2)(ii) any business
conducted by a trustee or trustees wherein interest or ownership
is evidenced by certificate or other written instrument, such as
a Massachusetts or business trust, an investment trust and an
entity treated as a real estate investment trust for Federal tax
purposes . . ." Rule Sec. 11-02 (2) (ii) .
A New York City Department of Finance letter ruling
discussed the application of the General Corporation Tax (and the
Unincorporated Business Tax) to trusts formed in connection with
net long-term lease agreements. Finance Letter Ruling (93)-GC &
UB (August 6, 1984). The Department of Finance took the position
that since the trustee's duties were "passive" and "ministerial
in nature," the trusts were not taxable as corporations. The
Department specifically described the trustee's duties as
follows:
"Under the Trust Agreement, A [the trustee] will have no power or
discretion to manage, control, use, sell or otherwise transfer
title to or dispose of or otherwise deal with the Vessels or
otherwise take or refrain from taking any action under or in
connection with the transaction, except as expressly required by
the terms of the various agreements.
The duties that A will perform under each Trust Agreement are
ministerial in nature. At the closing, in its capacity as owner
trustee, A will accept the investments of the owner participants
and record such in the records of each Vessel Trust. It will
also execute the documents that are necessary to effectuate the
purchase, and accept title with respect to the related Vessels .
. . . Once the transaction has closed, A will only be required to
perform specific duties, which are basically limited to the
keeping of appropriate books and records relating to each Vessel
Trust and forwarding or executing various documents including tax
returns, notices, requests, demands, certificates and the like."
In reaching its decision, the Department of Finance relied
on analogous rulings interpreting Article 9-A of the New York
State Tax Law and pointed out the identicality of language
between the two statutes. Finance Letter Ruling (93)-GC & UB
(August 6, 1984), citing Matter of City Bank Farmers Trust Co. v.
Graves, 272 N.Y. 1 (1936); Matter of Smadbeck v. State Tax
Commission, 33 N.Y. 2d 930 (1973); and Burrell v. Lynch, 274 App.
Div. 347, 84 N.Y.S.2d 171 (3d Dept. 1948).
NEW YORK CITY UNINCORPORATED BUSINESS TAX
Section 11-503(a) of the Administrative Code imposes an
unincorporated business tax on the unincorporated business
taxable income of every unincorporated business carried on within
New York City. For purposes of the unincorporated business tax,
section 11-502(a) of the Administrative Code defines the term
"unincorporated business" to mean ". . . any trade, business,
profession or occupation conducted, engaged in or being
liquidated by an individual or unincorporated entity, including a
. . . fiduciary . . . ."
Section 11-502(b) of the Administrative Code excludes
certain transactions from the applicability of the unincorporated
business tax and provides as follows: "[ t]he performance of
services by an individual . . . as a fiduciary, shall not be
deemed an unincorporated business, unless such services
constitute part of a business regularly carried on by such
individual."
Department of Finance Letter Ruling 93 relied on People ex
rel. Nauss V. Graves, 283 N.Y. 383 (1940), in which the Court
interpreted language under the former New York State
Unincorporated Business Tax, imposed by Article 16-A of the Tax
Law, similar to the New York City statutory language. The
Finance Letter Ruling quoted from Nauss as follows:
"When used in tax statutes similar to that involved in the case
at bar, 'business' or 'doing business' connotes something more
than the ownership of property and the receipt of income derived
from property . . . Although the very nature of the case does not
permit an exact formula by which to determine when the activities
of a property owner amount to the doing of business, there has
been evolved the principle which distinguishes between a passive
and an active owner or investor. One who allocates the active
administration of the properties to others and himself performs
only such acts as are appropriate to safeguard his ownership, is
to be distinguished from one who himself actively participates in
administering the management of the properties . . . Nauss at
386-387."
Finance Letter Ruling 93 concluded that:
"[I]t does not appear that any individual equipment trust is
carrying on an unincorporated business. The activities of the
trustee are passive in nature involving no discretionary
authority nor any responsibility regarding the operation,
maintenance or management of the equipment. The equipment trust,
therefore, will not be subject to the Unincorporated Business
Tax."
Finance Letter Ruling (93)-GC & UB (August 6, 1984).
The Department of Finance, Bureau of Hearings decided in In
the Matter of the Petition of KAL 727/707 1978 Equipment Trust,
et al. (Revised decision, August 1, 1985) that where the
activities of the trustee were passive acts without the trustee
having discretionary authority to manage, control, use, sell,
dispose or otherwise deal with the trust corpus, the trust did
not carry on a taxable unincorporated business as the activities
did not constitute part of a business regularly carried on within
the purview of section S46-2.0(b) (currently Section 11-502(b))
of the Administrative Code, citing Nauss.
Section 11-502(c) of the Administrative Code provides:
"(c) Purchase and sale for own account. An individual or other
unincorporated entity, except a dealer holding property primarily
for sale to customers in the ordinary course of his or her trade
or business, shall not be deemed engaged in an unincorporated
business solely by reason of the purchase and sale of property or
the purchase, sale or writing of stock option contracts, or both,
for his or her own account, but this subdivision shall not apply
if the unincorporated entity is taxable as a corporation for
Federal income tax purposes."
The above quoted section appears to exclude from the
unincorporated business tax entities whose principal activity is
investing, so long as the investment activities are for the
account of the entity.
NEW YORK STATE AND CITY INDIVIDUAL INCOME TAX
Under Subpart E of Part I, Subchapter J of Chapter 1 of the
Code, the grantor of a trust will be deemed to be the owner of
the trust under certain circumstances, and therefore taxable on
his proportionate interest in the income thereof. Where this
Federal tax rule applies, the income attributed to the grantor
will also be income to him for New York income tax purposes.
Ruling, Department of Taxation and Finance, dated October 22,
1936.
Article 22 (Personal Income Tax) of the New York State Tax
Law imposes a tax on a New York State resident individual's State
adjusted gross income. Such amount is defined by Section 612(a)
as his Federal adjusted gross income, with certain modifications.
One of such modifications is the addition of interest income on
the obligations of a state or political subdivision of a state
other than New York, if excluded from his Federal adjusted gross
income. Title 11, Chapter 17 imposes a personal income tax on a
New York City resident individual's City adjusted gross income.
Such amount is defined by Section 11-1712(a) of the
Administrative Code of the City of New York as his Federal
adjusted gross income, with certain modifications. One of such
modifications is the addition of interest income on the
obligations of a state or political subdivision thereof of a
state other than New York, if excluded from his Federal adjusted
gross income. 48 U.S.C. Section 745 exempts interest of a bond
issued by the Government of Puerto Rico or by its authority from
tax of the United States, of any State, of the District of
Columbia and of any state's county, municipality, or municipal
subdivision thereof. 48 U.S.C. Section 1423a exempts interest on
a bond issued by the Government of Guam or by its authority from
taxation by the United States, by any State or political
subdivision thereof. The Insured New York Trust will hold only
obligations issued by New York State or a political subdivision
thereof or by the Government of Puerto Rico or a political
subdivision thereof, or by the Government of Guam or by its
authority or a combination of two or more of the above.
Therefore, to the extent that the income of the Insured New York
Trust consists of interest and original issue discount excludable
from gross income under Section 103 of the Code, a resident
individual of New York State or City who is a certificateholder
of such Trust will not be subject to the State or City personal
income tax on his proportionate share of interest income of such
Trust. These exemptions do not apply to gains on the transfer of
the obligations in the Fund. Therefore, such certificateholders
will be subject to such taxes on gains realized, if any, when the
Fund's obligations are sold, redeemed, or paid at maturity or
when Units are sold or redeemed.
NEW YORK STATE STOCK TRANSFER TAX
Section 270(l) of Article 12 of the New York State Tax Law
imposes a transfer tax on, among other things, the sale, or
agreement to sell, and deliveries or transfers of shares or
certificates of interest in any business conducted by a trustee
or trustees. Section 270(8)(a) of the Tax Law, however,
specifically excludes from the stock transfer tax "sales,
agreements to sell, memoranda of sales, deliveries or transfers
of shares or certificates (a) issued under a noncorporate
investment trust agreement of the fixed type and no such sale,
agreement to sell, memorandum of sale, delivery or transfer shall
result in imposing a tax under this section on the securities
held in such an investment trust. . . ."
Based on the foregoing and on the opinion, dated today, of
Messrs. Chapman and Cutler, counsel for the Depositor, as to
certain Federal income tax matters, upon which we specifically
rely, we are of the opinion that under existing laws, rulings,
and court decisions interpreting the laws of the State and City
of New York:
1. Each of the separate trusts included in the Fund will
not constitute an association taxable as a corporation or as an
unincorporated business under New York State and City law, and,
accordingly, each such Trust will not be subject to tax on its
income under the New York State franchise tax, the New York City
general corporation tax or the New York City unincorporated
business tax.
2. The income of each of the separate trusts included in
the Fund will be treated as the income of the Unit holders of
that Trust under the income tax laws of the State and City of New
York in the same manner as for Federal income tax purposes
(subject to differences in accounting for discount and premium to
the extent that the income tax laws of the State and/or City of
New York do not conform to current Federal law).
3. Resident individuals of New York State and City who
hold Units of the Insured New York Trust will not be subject to
the State or City personal income taxes on (a) interest income on
their proportionate shares of interest income earned by the
Insured New York Trust on any obligation of New York State or a
political subdivision thereof or of the Government of Puerto Rico
or a political subdivision thereof or of the Government of Guam
or by its authority, to the extent such income is excludable from
Federal gross income under Code Section 103, or (b) any proceeds
paid under the applicable insurance policies to the Trustee which
represent maturing interest on defaulted obligations held by the
Trustee if, and to the same extent as, such interest would not
have been subject to New York State or City personal income tax
under clause (a) hereof if paid by the issuer of the defaulted
obligations.
4. Resident individuals of New York State and City who
hold Units of the Insured New York Trust will recognize gain or
loss, if any, under the State or City personal income tax law if
the Trustee disposes of an asset of such Trust. The amount of
such gain or loss is measured by comparing the Unit holder's
aliquot share of the total proceeds from the transaction with his
basis for his fractional interest in the asset disposed of.
5. Resident individuals of New York State and City who
hold Units of the Insured New York Trust will recognize gain or
loss, if any, under the State or City personal income tax law if
the Unit holder redeems or sells any Units. Such gain or loss is
measured by comparing the proceeds of such redemption or sale
with the adjusted basis of the Units redeemed or sold.
In addition, we are of the opinion that no New York State
stock transfer tax will be payable in respect of any transfer of
the Certificates by reason of the exemption in Section 270(8)(a)
of the New York State Tax Law.
This opinion is as of the date hereof and we undertake no,
and hereby disclaim any, obligation to advise you of any change
in any matter set forth herein.
We consent to the filing of this opinion as an exhibit to
the Registration Statement (No. 33-56741) 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 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
December 8, 1994
United States Trust Company
of New York, as Trustee of
The First Trust Combined
Series 236
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. C. William Steelman
Executive Vice President
Re: The First Trust Combined Series 236
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 236, 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.
United States Trust Company
of New York
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
December 8, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST COMBINED SERIES 236
Gentlemen:
We have examined the Registration Statement File No. 33-
56741 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
December 8, 1994
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Combined Series 236
Pursuant to your request for a Standard & Poor's rating on
the units of the above-captioned trust, SEC # 33-56741, 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
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, IL 60603
December 8, 1994
Nike Securities L.P.
Suite 300
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
236 containing The First Trust of Insured Municipal Bonds-Multi-
State: Missouri Trust, Series 26 (the "Missouri 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 (the
"Depositor"), 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.
The Units represent fractional undivided interests in the
principal of and net income on obligations deposited in one of
several separate trusts, including the Missouri Trust (the
"Trust"). Each separate trust will be administered as a distinct
entity with separate investments, expenses, books and records.
The assets of the Trust will consist of bonds, notes,
warrants, or other evidences of indebtedness issued by or on
behalf of the State of Missouri (the "State"), its counties,
townships, cities, incorporated towns, school corporations, state
educational institutions or state supported institutions of
higher learning, other political, municipal, public or quasi-
public corporations or bodies, special assessment or taxing
districts or authorized bodies of such corporations or districts
("Political Subdivisions") issued after March 11, 1959 (the
"Missouri Bonds"), 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 "Possession
Bonds") (collectively, the "Bonds"). Distributions of interest
on the Bonds received by the Trust will be made semi-annually
unless a Unit holder elects to receive them monthly.
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, (iii) interest on the Missouri Bonds, if
received directly by a Unit holder, would be exempt from the
income tax imposed by the State of Missouri that is applicable to
individuals and corporations (the "Missouri State Income Tax").
This opinion does not address the taxation of persons other than
full time residents of Missouri.
Based on the foregoing, and based on review and
consideration of existing laws of the State as of this date, it
is our opinion, and we herewith advise you, as follows:
(1) The Trust is not an association taxable as a
corporation for Missouri income tax purposes, and each Unit
holder of the Trust will be treated as the owner of a pro rata
portion of the Trust and the income of such portion of the Trust
will be treated as the income of the Unit holder for Missouri
State Income Tax purposes.
(2) Interest paid and original issue discount, if any, on
the Bonds which would be exempt from the Missouri State Income
Tax if received directly by a Unit holder will be exempt from the
Missouri State Income Tax when received by the Trust and
distributed to such Unit holder; however, no opinion is expressed
herein regarding taxation of interest paid and original issue
discount, if any, on the Bonds received by the Trust and
distributed to Unit holders under any other tax imposed pursuant
to Missouri law, including but not limited to the franchise tax
imposed on financial institutions pursuant to Chapter 148 of the
Missouri Statutes.
(3) To the extent that interest paid and original issue
discount, if any, derived from the Trust by a Unit holder with
respect to Possession Bonds is excludable from gross income for
Federal income tax purposes pursuant to 48 U.S.C. Section 745, 48
U.S.C. Section 1423a, and 48 U.S.C. Section 1403, such interest
paid and original issue discount, if any, will not be subject to
the Missouri State Income Tax; however, no opinion is expressed
herein regarding taxation of interest paid and original issue
discount, if any, on the Bonds received by the Trust and
distributed to Unit holders under any other tax imposed pursuant
to Missouri law, including but not limited to the franchise tax
imposed on financial institutions pursuant to Chapter 148 of the
Missouri Statutes.
(4) Each Unit holder of the Trust will recognize gain or
loss for Missouri State Income Tax purposes if the Trustee
disposes of a bond (whether by redemption, sale, or otherwise) or
if the Unit holder redeems or sells Units of the Trust to the
extent that such a transaction results in a recognized gain or
loss to such Unit holder for Federal income tax purposes. Due to
the amortization of bond premuim and other basis adjustments
required by the Internal Revenue Code, a Unit holder, under some
circumstances, may realize taxable gain when his or her Units are
sold or redeemed for an amount equal to their original cost.
(5) Any insurance proceeds paid under policies which
represent maturing interest on defaulted obligations which are
excludable from gross income for Federal income tax purposes will
be excludable from Missouri State Income Tax to the same extent
as such interest would have been paid by the issuer of such Bonds
held by the Trust; however, no opinion is expressed herein
regarding taxation of interest paid and original issue discount,
if any, on the Bonds received by the Trust and distributed to
Unit holders under any other tax imposed pursuant to Missouri
law, including but not limited to the franchise tax imposed on
financial institutions pursuant to Chapter 148 of the Missouri
Statutes.
(6) The Missouri State Income Tax does not permit a
deduction of interest paid or incurred on indebtedness incurred
or continued to purchase or carry Units in the Trust, the
interest on which is exempt from such Tax.
(7) The Trust will not be subject to the Kansas City,
Missouri Earnings and Profits Tax and each Unit holder's share of
income of the Bonds held by the Trust will not generally be
subject to the Kansas City, Missouri Earnings and Profits Tax or
the City of St. Louis Earnings Tax (except in the case of certain
Unit holders, including corporations, otherwise subject to the
St. Louis City Earnings Tax).
Units may be subject to the Missouri Estate Tax. We
have not examined any of the Bonds to be deposited and held in
the 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 the Missouri State
Income Tax of interest on the Missouri 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. 33-56741) 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 ther eby admit that we are persons whose consent is
required by Section 7 of the Act, or the rules and regulations
thereunder.
Respectfully submitted
CHAPMAN AND CUTLER
EFF/jlg
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, IL 60603
December 8, 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
236 containing The First Trust Advantage: Maine Trust, Series 15
(the "Maine 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 Maine Trust. Each separate trust will be
administered as a distinct entity with investments, expenses,
books and records.
The assets of the Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Maine (the
"State") or counties, municipalities, authorities or political
subdivisions thereof (the "Maine Bonds") or by the Commonwealth
of Puerto Rico, Guam and the United States Virgin Islands (the
"Possession Bonds") (collectively, the "Bonds").
Neither the Sponsor nor its counsel have independently
examined the Bonds to be deposited in and held in the Trust.
However, although no opinion is expressed herein regarding such
matters, it is assumed that: (i) the Bonds were validly issued,
(ii) the interest thereon is excludible from gross income for
federal income tax purposes, (iii) interest on the Maine Bonds,
if received directly by a Unitholder, would be exempt from the
Maine income tax applicable to individuals, trusts and estates
and corporations ("Maine Income Tax") and (iv) interest on the
Bonds will not be taken into account by individuals and
corporations in computing an additional tax ("Maine Minimum Tax")
imposed under the Maine Income Tax or in the case of
corporations, a surcharge ("Maine Corporate Income Tax
Surcharge") enacted in 1991 and scheduled to apply to tax years
beginning in 1991 and 1992. The opinion set forth below does not
address the taxation of persons other than full time residents of
Maine.
In the opinion of Chapman and Cutler, Special Counsel to the
Fund for Maine tax matters, under existing law as of the date of
this prospectus and based upon the assumptions set forth above:
(1) the Trust is not an association taxable as a
corporation, thus each Unitholder of the Trust will be
essentially treated as the owner of a pro rata portion of
the Trust and the income of such portion of the Trust will
be treated as the income of the Unitholder for Maine Income
Tax purposes;
(2) interest on the Bonds which is exempt from the
Maine Income Tax when received by the Trust, and which would
be exempt from the Maine Income Tax and the Maine Minimum
Tax if received directly by a Unitholder, will retain its
status as exempt from the Maine Income Tax and the Maine
Minimum Tax when received by the Trust and distributed to
the Unitholder;
(3) to the extent that interest derived from the Trust
by a Unitholder with respect to the Possession Bonds is
excludible from gross income for Federal income tax purposes
pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section 1423a
and 48 U.S.C. Section 1403, such interest will not be subject to the
Maine Income Tax;
(4) each Unitholder of the Trust will recognize gain
or loss for Maine Income Tax purposes if the Trustee
disposes of a bond (whether by redemption, sale or
otherwise) or if the Unitholder redeems or sells Units of
the Trust to the extent that such a transaction results in a
recognized gain or loss to such Unitholder for Federal
income tax purposes; and
(5) the Maine Income Tax does not permit a deduction
of interest paid or incurred on indebtedness incurred or
continued to purchase or carry Units in the Trust, the
interest on which is exempt from the Tax.
Prospective purchasers subject to the Maine Franchise Tax
should be advised that for purposes of the Maine Franchise Tax,
interest on the Bonds received by the Trust and distributed to a
Unitholder subject to such tax will be added to the Unitholder's
federal taxable income and therefore will be taxable.
We have not examined any of the Bonds to be deposited and
held in the Maine 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
Unitholder.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (No. 33-56741) 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
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
extracted from Amendment number 1 to form S-6 and is qualified
in its entirety by reference to such Amendment number 1 to form
S-6.
</LEGEND>
<SERIES>
<NUMBER> 26
<NAME> Missouri Insured
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> DEC-08-1994
<PERIOD-START> DEC-08-1994
<PERIOD-END> DEC-08-1994
<INVESTMENTS-AT-COST> 3,310,071
<INVESTMENTS-AT-VALUE> 3,310,071
<RECEIVABLES> 21,885
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
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<OTHER-ITEMS-LIABILITIES> 21,885
<TOTAL-LIABILITIES> 21,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,310,071
<SHARES-COMMON-STOCK> 3,500
<SHARES-COMMON-PRIOR> 3,500
<ACCUMULATED-NII-CURRENT> 0
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<NET-ASSETS> 3,310,071
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
extracted from Amendment number 1 to form S-6 and is qualified
in its entirety by reference to such Amendment number 1 to form
S-6.
</LEGEND>
<SERIES>
<NUMBER> 56
<NAME> New York Insured
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> DEC-08-1994
<PERIOD-START> DEC-08-1994
<PERIOD-END> DEC-08-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
extracted from Amendment number 1 to form S-6 and is qualified
in its entirety by reference to such Amendment number 1 to form
S-6.
</LEGEND>
<SERIES>
<NUMBER> 15
<NAME> Maine Advantage
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> DEC-08-1994
<PERIOD-START> DEC-08-1994
<PERIOD-END> DEC-08-1994
<INVESTMENTS-AT-COST> 2,780,733
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</TABLE>
