As filed with the Securities and Exchange Commission on May 26, 1995.
Registration No. 33-57923
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 248
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
NIKE SECURITIES L.P.
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agent for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
E. Title and Amount of Securities Being Registered:
An indefinite number of Units pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended
F. Proposed Maximum Aggregate Offering Price to the Public of
the Securities Being Registered:
Indefinite
G. Amount of Filing Fee (as required by Rule 24f-2): $500.00
H. Approximate date of proposed sale to public:
As soon as practicable after the effective date of the
Registration Statement.
_________________________
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
THE FIRST TRUST COMBINED
SERIES 248
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; Infor-
mation as to Sponsor,
Trustee and Evaluator
3. Name and address of Trustee Summary of Essential
Information; Infor-
mation 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 Infor-
mation; 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 to
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 AFFILICATED 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. *
57. Certain information regarding
periodic payment certificates
58.
59 Financial statements Report of Independent
(Instruction 1(c) to Form S-6) Auditors
Statement of Net
Assets
* Inapplicable, omitted, answer negative or not required.
SUBJECT TO COMPLETION DATED MAY 26, 1995
The First Trust (registered trademark) of Insured Municipal Bonds,
Series 234
The First Trust of Insured Municipal Bonds-Multi-State:
New York Trust, Series 60 Pennsylvania Trust, Series 66
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 248 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"). 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 RATINGS GROUP, A DIVISION OF MCGRAW-HILL,
INC. ("STANDARD & POOR'S"). 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
The date of this Prospectus is , 1995
Page 1
For convenience the Prospectus is divided into sections which
give general information about the Fund and specific information
such as the public offering price, distributions and tax status
for each Trust.
The Objectives of the Fund are conservation of capital through
investment in portfolios of tax-exempt bonds and income exempt
from Federal and applicable state and local income taxes. The
payment of interest and the preservation of principal are, of
course, dependent upon the continuing ability of the issuers,
obligors and/or insurers to meet their respective obligations.
Distributions to Unit holders may be reinvested as described herein.
See "How Can Distributions to Unit Holders be Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain
a market for the Units at prices based upon the aggregate bid
price of the Bonds in the portfolio of each Trust. In the absence
of such a market, a Unit holder will nonetheless be able to dispose
of the Units through redemption at prices based upon the bid prices
of the underlying Bonds. See "How May Units be Redeemed?" With
respect to each Insured Trust, neither the bid nor offering prices
of the underlying Bonds or of the Units, absent situations in
which Bonds are in default in payment of principal or interest
or in significant risk of such default, include value attributable
to the portfolio insurance obtained by such Trust. See "Why and
How are the Insured Trusts Insured?"
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- , 1995
Sponsor: Nike Securities L.P.
Trustee: United States Trust Company of New York
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
National New York Pennsylvania
Insured Insured Insured
Trust, Trust, Trust,
Series 234 Series 60 Series 66
__________ __________ __________
<S> <C> <C> <C>
General Information
Principal Amount of Bonds in the Trusts $ $ $
Number of Units
Fractional Undivided Interest in the
Trust per Unit 1/ 1/ 1/
Principal Amount (Par Value) of
Bonds per Unit (1) $ $ $
Public Offering Price
Aggregate Offering Price Evaluation of
Bonds in the Portfolio $ $ $
Aggregate Offering Price Evaluation per Unit $ $ $
Sales Charge (2) $ 49.00 $ 49.00 $ 49.00
Public Offering Price per Unit (3) $ 1,000.00 $ 1,000.00 $ 1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 951.00 $ 951.00 $ 951.00
Redemption Price per Unit (4) $ $ $
Excess of Public Offering Price per Unit Over
Redemption Price per Unit $ $ $
Excess of Sponsor's Initial Repurchase Price per
Unit Over Redemption Price per Unit $ $ $
Estimated Annual Organizational
Expenses per Unit (5) $ $ $
</TABLE>
First Settlement Date
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, 2044
Supervisory Fee (6) Maximum of $0.35 per Unit annually (7)
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 standard time) on the New York Stock Exchange
on each day on which it is open.
[FN]
_______________________
(1) Many unit investment trusts comprised of municipal securities
issue a number of Units such that each Unit represents approximately
$1,000 principal amount of underlying securities. The Sponsor,
on the other hand, in determining the number of Units for each
Trust, other than Discount Trusts, has elected not to follow this
format but rather to provide that number of Units which will establish
as close as possible as of the opening of business on the 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) Each Trust (and therefore Unit holders) will bear all or
a portion of its organizational costs (including costs of preparing
the registration statement, the trust indenture and other closing
documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of each Trust portfolio
and the initial fees and expenses of the Trustee but not including
the expenses incurred in the printing of preliminary prospectuses,
and expenses incurred in the preparation and printing of brochures
and other advertising materials and any other selling expenses)
as is common for mutual funds. Total organizational expenses will
be amortized over a five year period. See "What are the Expenses
and Charges?" and "Statements of Net Assets." Historically, the
sponsors of unit investment trusts have paid all the costs of
establishing such trusts.
(6) The Sponsor will also be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of
$0.10 per Unit.
(7) 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 248 is one of a series of investment
companies created by the Sponsor under the name of The First Trust
Combined Series, all of which are generally similar but each of
which is separate and is designated by a different series number.
This Series consists of underlying separate unit investment trusts
designated as: The First Trust of Insured Municipal Bonds, Series
234; The First Trust of Insured Municipal Bonds-Multi-State: New
York Trust, Series 60 and Pennsylvania Trust, Series 66 (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. Only Units of the National Insured Trust are offered
for sale to residents of the States of Illinois Indiana, Virginia
and Washington. On the Initial Date of Deposit, the Sponsor deposited
with the Trustee interest-bearing obligations, including delivery
statements relating to contracts for the purchase of certain such
obligations and an irrevocable letter of credit issued by a financial
institution in the amount required for such purchases (the "Bonds").
The Trustee thereafter credited the account of the Sponsor for
Units of each Trust representing the entire ownership of the Fund
which Units are being offered hereby.
The objectives of the Fund are Federal tax-exempt income and state
and local tax-exempt income and conservation of capital through
investment in portfolios of interest-bearing obligations issued
by or on behalf of the state for which such Trust is named (collectively,
the "State Trusts"), and counties, municipalities, authorities
and political subdivisions thereof, the Commonwealth of Puerto
Rico and other territories or municipalities of the United States,
or authorities or political subdivisions thereof, the interest
on which obligations is, in the opinion of recognized bond counsel
to the issuing governmental authorities, exempt from all Federal
income tax and, where applicable, state and local taxes under
existing law. The current market value 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 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>
National Insured Trust, Series 234
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532
Underwriters
________
========
</TABLE>
<TABLE>
<CAPTION>
New York Insured Trust, Series 60
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532
Underwriters
________
========
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Insured Trust, Series 66
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532
Underwriters
________
========
</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 6
National Insured Trust, Series 234
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ $
Less: Estimated Annual Expense per Unit $ $
Estimated Net Annual Interest Income per Unit $ $
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ $
Divided by 12 and 2, respectively $ $
Estimated Daily Rate of Net Interest Accrual per Unit $ $
Initial Distribution - (1) $ $
Partial Distribution - (1) $ - $
Regular Distribution (1) $ $
(Commencing)
Estimated Current Return Based on Public Offering Price (2) % %
Estimated Long-Term Return Based on Public Offering Price (2) % %
CUSIP
</TABLE>
Trustee's Annual Fee $ and $ per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing , 1995.
[FN]
____________________
(1) The Trust's initial distribution per Unit will be made on
to monthly and semi-annual Unit holders of record on . The Trust
will make a partial distribution on to semi-annual Unit holders
of record on . Regular distributions to monthly Unit holders will
be paid the last day of each month commencing on to Unit holders
of record on the fifteenth day of such month commencing . Regular
distributions to semi-annual Unit holders will be paid the last
day of June and December commencing to Unit holders of record
on the fifteenth day of June and December commencing .
(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 7
National Insured Trust Summary
The National Insured Trust consists of obligations
of issuers located in . 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:
Number of Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
General Obligation %
Airport %
Electric %
Health Care %
Other Housing %
Resource Recovery %
Sewer %
Single Family Housing %
Multi-family Housing %
Transportation %
University and School %
Utility %
Water %
Water and Sewer %
Miscellaneous %
Each of Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust or a total
of approximately %. The largest such issue represents
approximately %. 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 % of the aggregate principal amount of
the Bonds in the Trust are subject to call within five years of
the Initial Date of Deposit and certain Bonds may be subject to
an extraordinary call.
Approximately % of the aggregate principal amount (approximately
% 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
years after the Initial Date of Deposit. See "What Is the First
Trust Combined Series?," "National Insured Trust, Series 234-Portfolio"
and "Description of Bond Ratings."
Tax-Exempt vs. Taxable Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
published Federal tax rates scheduled to be in effect in 1995.
The table incorporates increased tax rates for higher-income taxpayers
that were included in the Revenue Reconciliation Act of 1993.
The table illustrates what you would have to earn on taxable investments
to equal the tax-exempt yield for your income tax bracket. The
taxable equivalent yields may be somewhat higher than the equivalent
yields indicated in the following table for those individuals
who have adjusted gross incomes in excess of $114,700. 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 8
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________ _____________________________________
Single Joint Tax 5.50% 6.00% 6.50%
Return Return Rate Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 23.4 $ 0 - 39.0 15.0% 6.47 7.06 7.65
23.4 - 56.6 39.0 - 94.3 28.0 7.64 8.33 9.03
56.6 - 118.0 94.3 - 143.6 31.0 7.97 8.70 9.42
118.0 - 256.5 143.6 - 256.5 36.0 8.59 9.38 10.16
Over 256.5 Over 256.5 39.6 9.11 9.93 10.76
</TABLE>
Tax Status
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Page 9
National Insured Trust, Series 234
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Initial Date of Deposit of the Bonds- , 1995
<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>
$ $
__________ __________
$ $
========== ==========
</TABLE>
[FN]
__________________
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
{ These Bonds have no stated interest rate ("zero coupon bonds")
and, accordingly, will have no periodic interest payments to the
Trust. Upon maturity, the holders of these Bonds are entitled
to receive 100% of the stated principal amount. The Bonds were
issued at an original issue discount on VAR at a price of VAR%
of their original principal amount.
These Bonds were issued at an original issue discount on VAR
at a price of VAR% of their original principal amount.
[] These Bonds are of the same issue as another Bond in the Trust.
{{ This issue of Bonds is secured by and payable from, escrowed
U.S. Government securities.
For industry concentrations of the Bonds in the Trust, see
"National Insured Trust Summary."
See "Notes to Portfolios" on page 33.
Page 10
New York Insured Trust, Series 60
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ $
Less: Estimated Annual Expense per Unit $ $
Estimated Net Annual Interest Income per Unit $ $
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ $
Divided by 12 and 2, respectively $ $
Estimated Daily Rate of Net Interest Accrual per Unit $ $
Initial Distribution - (1) $ $
Partial Distribution - (1) $ - $
Regular Distribution (1) $ $
(Commencing)
Estimated Current Return Based on Public Offering Price (2) % %
Estimated Long-Term Return Based on Public Offering Price (2) % %
CUSIP
</TABLE>
Trustee's Annual Fee $ and $ per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing , 1995.
[FN]
_________________
(1) The Trust's initial distribution per Unit will be made on
to monthly and semi-annual Unit holders of record on . The Trust
will make a partial distribution on to semi-annual Unit holders
of record on . Regular distributions to monthly Unit holders will
be paid the last day of each month commencing on to Unit holders
of record on the fifteenth day of such month commencing . Regular
distributions to semi-annual Unit holders will be paid the last
day of June and December commencing to Unit holders of record
on the fifteenth day of June and December commencing .
(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 11
New York Insured Trust Summary
The New York Insured Trust consists of 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:
Number of Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
General Obligation %
Airport %
Electric %
Health Care %
Other Housing %
Resource Recovery %
Sewer %
Single Family Housing %
Multi-family Housing %
Transportation %
University and School %
Utility %
Water %
Water and Sewer %
Miscellaneous %
Each of Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust or a total
of approximately %. The largest such issue represents
approximately %. 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 % of the aggregate principal amount of
the Bonds in the Trust are subject to call within five years of
the Initial Date of Deposit and certain Bonds may be subject to
an extraordinary call.
Approximately % of the aggregate principal amount (approximately
% 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
years after the Initial Date of Deposit. See "What Is the First
Trust Combined Series?," "New York Insured Trust, Series 60-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 1995. 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 $114,700. 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
Page 12
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.
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
_________________________ _____________________________________
Single Joint Tax 5.00% 5.50% 6.00%
Return Return Rate* Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 23.4 $ 0 - 39.0 21.5% 6.37 7.01 7.64
23.4 - 56.6 39.0 - 94.3 33.5 7.52 8.27 9.02
56.6 - 118.0 94.3 - 143.6 36.2 7.84 8.62 9.40
118.0 - 256.5 143.6 - 256.5 40.9 8.46 9.31 10.15
Over 256.5 Over 256.5 44.2 8.96 9.86 10.75
</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.
Page 13
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 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.
Page 14
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 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
Page 15
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.
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
Page 16
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 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.
Page 17
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.
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, 1993, 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
Page 18
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 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.
Page 19
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 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 20
New York Insured Trust, Series 60
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Initial Date of Deposit of the Bonds- , 1995
<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>
$ $
__________ __________
$ $
========== ==========
</TABLE>
[FN]
__________________
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
{ These Bonds have no stated interest rate ("zero coupon bonds")
and, accordingly, will have no periodic interest payments to the
Trust. Upon maturity, the holders of these Bonds are entitled
to receive 100% of the stated principal amount. The Bonds were
issued at an original issue discount on VAR at a price of VAR%
of their original principal amount.
These Bonds were issued at an original issue discount on VAR
at a price of VAR% of their original principal amount.
[] These Bonds are of the same issue as another Bond in the Trust.
{{ This issue of Bonds is secured by and payable from, escrowed
U.S. Government securities.
For industry concentrations of the Bonds in the Trust, see
"New York Insured Trust Summary."
See "Notes to Portfolios" on page 33.
Page 21
Pennsylvania Insured Trust, Series 66
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ $
Less: Estimated Annual Expense per Unit $ $
Estimated Net Annual Interest Income per Unit $ $
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ $
Divided by 12 and 2, respectively $ $
Estimated Daily Rate of Net Interest Accrual per Unit $ $
Initial Distribution - (1) $ $
Partial Distribution - (1) $ - $
Regular Distribution (1) $ $
(Commencing)
Estimated Current Return Based on Public Offering Price (2) % %
Estimated Long-Term Return Based on Public Offering Price (2) % %
CUSIP
</TABLE>
Trustee's Annual Fee $ and $ per Unit, exclusive of expenses
of the Trust, for those portions of the
Trust under the monthly and semi-annual
plans, respectively, commencing , 1995.
[FN]
__________________
(1) The Trust's initial distribution per Unit will be made on
to monthly and semi-annual Unit holders of record on . The Trust
will make a partial distribution on to semi-annual Unit holders
of record on . Regular distributions to monthly Unit holders will
be paid the last day of each month commencing on to Unit holders
of record on the fifteenth day of such month commencing . Regular
distributions to semi-annual Unit holders will be paid the last
day of June and December commencing to Unit holders of record
on the fifteenth day of June and December commencing .
(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 22
Pennsylvania Insured Trust Summary
The Pennsylvania Insured Trust consists of obligations
of issuers located in Pennsylvania. 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:
Number of Portfolio
Issues Purpose of Issue Percentage
_________ __________________ __________
General Obligation %
Airport %
Electric %
Health Care %
Other Housing %
Resource Recovery %
Sewer %
Single Family Housing %
Multi-family Housing %
Transportation %
University and School %
Utility %
Water %
Water and Sewer %
Miscellaneous %
Each of Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust or a total
of approximately %. The largest such issue represents
approximately %. 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 % of the aggregate principal amount of
the Bonds in the Trust are subject to call within five years of
the Initial Date of Deposit and certain Bonds may be subject to
an extraordinary call.
Approximately % of the aggregate principal amount (approximately
% 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
years after the Initial Date of Deposit. See "What Is the First
Trust Combined Series?," "Pennsylvania Insured Trust, Series 66-Portfolio"
and "Description of Bond Ratings."
Federal and Pennsylvania 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 1995. 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 $114,700. 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
Page 23
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.
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD
Taxable Income ($1,000's) Tax-Exempt Yield
________________________ _____________________________________
Single Joint Tax 5.00% 5.50% 6.00%
Return Return Rate* Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 23.4 $ 0 - 39.0 17.4% 6.05 6.66 7.26
23.4 - 56.6 39.0 - 94.3 30.0 7.14 7.86 8.57
56.6 - 118.0 94.3 - 43.6 32.9 7.45 8.20 8.94
118.0 - 256.5 143.6 - 256.5 37.8 8.04 8.84 9.65
Over 256.5 Over 256.5 41.3 8.52 9.37 10.22
</TABLE>
[FN]
* The table does not reflect the effect of the exemption of the
Trust from local personal property taxes and from the Philadelphia
School District Investment Net Income Tax, accordingly; residents
of Pennsylvania subject to such taxes would need a higher taxable
estimated current return than those shown to equal the tax-exempt
estimated current return of the Trust.
Risk Factors
Investors should be aware of certain factors that might affect
the financial conditions of the Commonwealth of Pennsylvania.
Pennsylvania historically has been identified as a heavy industry
state although that reputation has changed recently as the industrial
composition of the Commonwealth diversified when the coal, steel
and railroad industries began to decline. A more diversified economy
was necessary as the traditionally strong industries in the Commonwealth
declined due to a long-term shift in jobs, investment and workers
away from the northeast part of the nation. The major sources
of growth in Pennsylvania are in the service sector, including
trade, medical and the health services, education and financial
institutions. Pennsylvania's agricultural industries are also
an important component of the Commonwealth's economic structure,
accounting for more than $3.6 billion in crop and livestock products
annually, while agribusiness and food related industries support
$39 billion in economic activity annually.
Non-agricultural employment in the Commonwealth declined by 5.1
percent during the recessionary period from 1980 to 1983. In 1984,
the declining trend was reversed as employment grew by 2.9 percent
over 1983 levels. From 1983 to 1990, Commonwealth employment continued
to grow each year, increasing an additional 14.3 percent. For
the last three years, unemployment in the Commonwealth has declined
1.2 percent. The growth in employment experienced in Pennsylvania
is comparable to the growth in employment in the Middle Atlantic
Region which has occurred during this period.
Back-to-back recessions in the early 1980s reduced the manufacturing
sector's employment levels moderately during 1980 and 1981, sharply
during 1982, and even further in 1983. Non-manufacturing employment
has increased steadily since 1980 to its 1993 level of 81.6 percent
of total Commonwealth employment. Consequently, manufacturing
employment constitutes a diminished share of total employment
within the Commonwealth. Manufacturing, contributing 18.4 percent
of 1993 non-agricultural employment, has fallen behind both the
services sector and the trade sector as the largest single source
of employment within the Commonwealth. In 1993 the services sector
accounted for 29.9 percent of all non-agricultural employment
while the trade sector accounted for 22.4 percent.
From 1983 to 1989, Pennsylvania's annual average unemployment
rate dropped from 11.8 percent to 4.5 percent, falling below the
national rate in 1986 for the first time in over a decade. Pennsylvania's
annual average unemployment rate remained below the national average
from 1986 until 1990. Slower economic growth caused the unemployment
rate in the Commonwealth to rise to 6.9 percent in 1991 and 7.5
percent in 1992. The resumption of faster economic growth resulted
in a decrease in the Commonwealth's unemployment
Page 24
rate to 7.1 percent in 1993. As of July 1994, the seasonally adjusted
unemployment rate for the Commonwealth was 6.5 percent compared
to 6.1 percent for the United States.
The five-year period from fiscal 1989 through fiscal 1993 was
marked by public health and welfare costs growing at a rate double
the growth rate for all the state expenditures. Rising caseloads,
increased utilization of services and rising prices joined to
produce the rapid rise of public health and welfare costs at a
time when a national recession caused tax revenues to stagnate
and even decline. During the period from fiscal 1989 through fiscal
1993, public health and welfare costs rose by an average annual
rate of 10.9 percent while tax revenues were growing at an average
annual rate of 5.5 percent. Consequently, spending on other budget
programs was restrained to a growth rate below 5.0 percent and
sources of revenues other than taxes became larger components
of fund revenues. Among those sources are transfers from other
funds and hospital and nursing home pooling of contributions to
use as federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession
in the economy. A $2.7 billion tax increase enacted for fiscal
1992 brought financial stability to the General Fund. That tax
increase included several taxes with retroactive effective dates
which generated some one-time revenues during fiscal 1992. The
absence of those revenues in fiscal 1993 contributed to the decline
in tax revenues shown for fiscal 1993.
It should be noted that the creditworthiness of obligations issued
by local Pennsylvania issuers may be unrelated to the creditworthiness
of obligations issued by the Commonwealth of Pennsylvania, and
there is no obligation on the part of the Commonwealth to make
payment on such local obligations in the event of default.
Financial information for the principal operating funds of the
Commonwealth is maintained on a budgetary basis of accounting.
A budgetary basis of accounting is used for the purpose of ensuring
compliance with the enacted operating budget and is governed by
applicable statutes of the Commonwealth and by administrative
procedures. The Commonwealth also prepares annual financial statements
in accordance with generally accepted accounting principles ("GAAP").
The budgetary basis financial information maintained by the Commonwealth
to monitor and enforce budgetary control is adjusted at fiscal
year-end to reflect appropriate accruals for financial reporting
in conformity with GAAP.
Fiscal 1991 Financial Results. GAAP Basis: During fiscal 1991
the General Fund experienced an $861.2 million operating deficit
resulting in a fund balance deficit of $980.9 million at June
30, 1991. The operating deficit was a consequence of the effect
of a national recession that restrained budget revenues and pushed
expenditures above budgeted levels. At June 30, 1991, a negative
unreserved-undesignated balance of $1,146.2 million was reported.
During fiscal 1991, the balance then available in the Tax Stabilization
Reserve Fund was used to maintain vital state spending.
Budgetary Basis: A deficit of $453.6 million was recorded by the
General Fund at June 30, 1991. The deficit was a consequence of
higher-than-budgeted expenditures and lower-than-estimated revenues
during the fiscal year brought about by the national economic
recession that began during the fiscal year. The budgetary basis
deficit at June 30, 1991 was carried into the 1992 fiscal year
and funded in the fiscal 1992 budget. A number of actions were
taken throughout the fiscal year by the Commonwealth to mitigate
the effects of the recession on budget revenues and expenditures.
Actions taken, together with normal appropriation lapses, produced
$871 million in expenditure reductions and increases in revenues
and other transfers for the fiscal year. The most significant
of these actions were a $214 million transfer from the Pennsylvania
Industrial Development Authority, a $134 million transfer from
the Tax Stabilization Reserve Fund, and a pooled financing program
to match federal Medicaid funds replacing $145 million of state funds.
Fiscal 1992 Financial Results. GAAP Basis: During fiscal 1992
the General Fund reported a $1.1 billion operating surplus. This
operating surplus was achieved through legislated tax rate increases
and tax base broadening measures enacted in August 1991 and by
controlling expenditures through numerous cost reduction measures
implemented throughout the fiscal year. As a result of the fiscal
1992 operating surplus, the fund balance increased to $87.5 million
and the unreserved-undesignated deficit dropped to $138.6 million
from its fiscal 1991 level of $1,146.2 million.
Page 25
Budgetary Basis: Eliminating the budget deficit carried into fiscal
1992 from fiscal 1991 and providing revenues for fiscal 1992 budgeted
expenditures required tax revisions that were estimated to have
increased receipts for the 1992 fiscal year by over $2.7 billion.
Total revenues for the fiscal year were $14,516.8 million, a $2,654.5
million increase over cash revenues during fiscal 1991. Originally
based on forecasts for an economic recovery, the budget revenue
estimates were revised downward during the fiscal year to reflect
continued recessionary economic activity. Largely due to the tax
revisions enacted for the budget, corporate tax receipts totalled
$3,761.2 million, up from $2,656.3 million in fiscal 1991, sales
tax receipts increased by $302 million to $4,499.7 million, and
personal income tax receipts totalled $4,807.4 million, an increase
of $1,443.8 million over receipts in fiscal 1991.
As a result of the lowered revenue estimate during the fiscal
year, increased emphasis was placed on restraining expenditure
growth that reducing expenditure levels. A number of cost reductions
were implemented during the fiscal year that contributed to $296.8
million of appropriation lapses. These appropriation lapses were
responsible for the $8.8 million surplus at fiscal year-end, after
accounting for the required ten percent transfer of the surplus
to the Tax Stabilization Reserve Fund.
Spending increases in the fiscal 1992 budget were largely accounted
for by increases for education, social services and corrections
programs. Commonwealth funds for the support of public schools
were increased by 9.8 percent to provide a $438 million increase
to $4.9 billion for fiscal 1992. The fiscal 1992 budget provided
additional funds for basic and special education and included
provisions designed to help restrain the annual increase of special
education costs, an area of recent rapid cost increases. Child
welfare appropriations supporting county operated child welfare
programs were increased $67 million, more than 31.5 percent over
fiscal 1991. Other social service areas such as medical and cash
assistance also received significant funding increases as costs
rose quickly as a result of the economic recession and high inflation
rates of medical care costs. The costs of corrections programs,
reflecting the marked increase in the prisoner population, increased
by 12 percent. Economic development efforts, largely funded from
bond proceeds in fiscal 1991, were continued with General Fund
appropriations for fiscal 1992.
The budget included the use of several Medicaid pooled financing
transactions. These pooling transactions replaced $135 million
of Commonwealth funds, allowing total spending under the budget
to increase by an equal amount.
Fiscal 1993 Financial Results. GAAP Basis: The fund balance of
the General Fund increased by $611.4 million during the fiscal
year, led by an increase in the unreserved balance of $576.8 million
over the prior fiscal year balance. At June 30, 1993, the fund
balance totaled $698.9 and the unreserved/undesignated balance
totaled $64.4 million. A continuing recovery of the Commonwealth's
financial condition from the effects of the national economic
recession of 1990 and 1991 is demonstrated by this increase in
the balance and a return to a positive unreserved/undesignated
balance. The previous positive unreserved/undesignated balance
was recorded in fiscal 1987. For the second consecutive fiscal
year the increase in the unreserved/undesignated balance exceeded
the increase recorded in the budgetary basis unappropriated surplus
during the fiscal year.
Budgetary Basis: The 1993 fiscal year closed with revenues higher
than anticipated and expenditures about as projected, resulting
in an ending unappropriated balance surplus (prior to the ten
percent transfer to the Tax Stabilization Reserve Fund) of $242.3
million, slightly higher than estimated in May 1993. Cash revenues
were $41.5 million above the budget estimate and totaled $14.633
billion representing less than a one percent increase over revenues
for the 1992 fiscal year. A reduction in the personal income tax
rate in July 1992 and the one-time receipt of revenues from retroactive
corporate tax increases in fiscal 1992 were responsible, in part,
for the low revenue growth in fiscal 1993.
Appropriations less lapses totaled $13.870 billion representing
a 1.1 percent increase over expenditures during fiscal 1992. The
low growth in spending is a consequence of a low rate of revenue
growth, significant one-time expenses during fiscal 1992, increased
tax refund reserves to cushion against adverse decisions on pending
litigations, and the receipt of federal funds for expenditures
previously paid out of Commonwealth funds.
Page 26
By state statute, ten percent of the budgetary basis unappropriated
surplus at the end of a fiscal year is to be transferred to the
Tax Stabilization Reserve Fund. The transfer for the fiscal 1993
balance was $24.2 million. The remaining unappropriated surplus
of $218.0 million was carried forward into the 1994 fiscal year.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth
revenues during the fiscal year totaled $15,210.7 million, $38.6
million above the fiscal year estimate, and 3.9 percent over Commonwealth
revenues during the previous fiscal year. The sales tax was an
important contributor to the higher than estimated revenues. Collections
from the sales tax were $5.124 billion, a 6.1 percent increase
from the prior fiscal year and $81.3 million above estimate. The
strength of collections from the sales tax offset the lower than
budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the
personal income tax was largely due to shortfalls in income not
subject to withholding such as interest, dividends and other income.
Tax refunds in fiscal 1994 were reduced substantially below the
$530 million amount provided in fiscal 1993. The higher fiscal
1993 amount and the reduced fiscal 1994 amount occurred because
reserves of approximately $160 million were added to fiscal 1993
tax refunds to cover potential payments if the Commonwealth lost
litigation known as Philadelphia Suburban Corp. v. Commonwealth.
Those reserves were carried into fiscal 1994 until the litigation
was decided in the Commonwealth's favor in December 1993 and $147.3
million of reserves for tax refunds were released.
Expenditures, excluding pooled financing expenditures and net
of all fiscal 1994 appropriation lapses, totaled $14,934.4 million
representing a 7.2 percent increase over fiscal 1993 expenditures.
Medical assistance and corrections spending contributed to the
rate of spending growth for the fiscal year.
The Commonwealth maintained an operating balance on a budgetary
basis for fiscal 1994 producing a fiscal year ending unappropriated
surplus of $335.8 million. By state statute, ten percent ($33.6
million) of that surplus will be transferred to the Tax Stabilization
Reserve Fund and the remaining balance will be carried over into
the fiscal 1995 fiscal year.
Fiscal 1995 Budget. The fiscal 1995 budget was approved by the
Governor on June 16, 1994 and provided for $15,652.9 million of
appropriations from Commonwealth funds, an increase of 3.9 percent
over appropriations, including supplemental appropriations, for
fiscal 1994. Medical assistance expenditures represent the largest
single increase in the budget ($221 million) representing a nine
percent increase over the prior fiscal year. The budget includes
a reform of the state-funded public assistance program that added
certain categories of eligibility to the program but also limited
the availability of such assistance to other eligible persons.
Education subsidies to local school districts were increased by
$132.2 million to continue the increased funding for the poorest
school districts in the state.
The budget also includes tax reductions totaling an estimated
$166.4 million. Low income working families will benefit from
an increase of the dependent exemption to $3,000 from $1,500 for
the first dependent and from $1,000 for all additional dependents.
A reduction to the corporate net income tax rate from 12.25 percent
to 9.99 percent to be phased in over a period of four years was
enacted. A net operating loss provision has been added to the
corporate net income tax and will be phased in over three years
with a $500,000 per firm annual cap on losses used to offset profits.
Several other tax changes to the sales tax, the inheritance tax
and the capital stock and franchise tax were also enacted.
The fiscal 1995 budget projects a $4 million fiscal year-end unappropriated
surplus. No assumption as to appropriation lapses in fiscal 1995 has
been made.
Proposed Fiscal 1996 Budget. On March 7, 1995, Pennsylvania Governor
Tom Ridge presented his proposed budget to the General Assembly
for the fiscal year beginning July 1, 1995. The proposed budget
includes spending growth of 2.3%. It includes a reduction of the
Corporate Net Income Tax from 10.99% to 9.99% retroactive to January
1, 1995, resulting in a projected tax cut of $143 million in the
next fiscal year. The proposed budget includes a proportionate
increase in funds for crime-fighting and a proportionate decrease
in funds for welfare. The General Assembly will proceed with its
consideration of the fiscal 1996 budget.
Page 27
All outstanding general obligation bonds of the Commonwealth are
rated AA- by S&P and A1 by Moody's.
Any explanation concerning the significance of such ratings must
be obtained from the rating agencies. There is no assurance that
any ratings will continue for any period of time or that they
will not be revised or withdrawn.
The City of Philadelphia ("Philadelphia") is the largest city
in the Commonwealth, with an estimated population of 1,585,577
according to the 1990 Census. Philadelphia functions both as a
city of the first class and a county for the purpose of administering
various governmental programs.
For the fiscal year ended June 30, 1991, Philadelphia experienced
a cumulative General Fund balance deficit of $153.5 million. The
audit findings for the fiscal year ended June 30, 1992, place
the Cumulative General Fund balance deficit at $224.9.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first
class cities in remedying fiscal emergencies was enacted by the
General Assembly and approved by the Governor in June 1991. PICA
is designed to provide assistance through the issuance of funding
debt to liquidate budget deficits and to make factual findings
and recommendations to the assisted city concerning its budgetary
and fiscal affairs. An intergovernmental cooperation agreement
between Philadelphia and PICA was approved by City Council on
January 3, 1992, and approved by the PICA Board and signed by
the Mayor on January 8,1992. At this time, Philadelphia is operating
under a five-year fiscal plan approved by PICA on April 6, 1992.
Full implementation of the five-year plan was delayed due to labor
negotiations that were not completed until October 1992, three
months after the expiration of the old labor contracts. The terms
of the new labor contracts are estimated to cost approximately
$144.0 million more than what was budgeted in the original five-year
plan. An amended five-year plan was approved by PICA in May 1993.
The audit findings show a surplus of approximately $3 million
for the fiscal year ending June 30, 1993. The fiscal 1994 budget
projects no deficit and a balanced budget for the year ending
June 30, 1994. The Mayor's latest update of the five-year financial
plan was approved by PICA on May 2, 1994.
In June 1992, PICA issued $474,555,000 of its Special Tax Revenue
Bonds to provide financial assistance to Philadelphia and to liquidate
the cumulative General Fund balance deficit. PICA issued $643,430,000
in July 1993 and $178,675,000 in August 1993 of Special Tax Revenue
Bonds to refund certain general obligation bonds of the City and
to fund additional capital projects.
As of the date hereof, the ratings on the City's long-term obligations
supported by payments from the City's General Fund are rated Ba
by Moody's and BB by S&P. Any explanation concerning the significance
of such ratings must be obtained from the rating agencies. There
is no assurance that any ratings will continue for any period
of time or that they will not be revised or withdrawn.
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 in
the Pennsylvania Trust are subject. Additionally, many factors
including national economic, social and environmental policies
and conditions, which are not within the control of the issuers
of Bonds, could have an adverse impact on the financial condition
of the State and various agencies and political subdivisions located
in the State. The Sponsor is unable to predict whether or to what
extent such factors or other factors may affect the issuers of
Bonds, the market value or marketability of the Bonds or the ability
of the respective issuers of the Bonds acquired by the Pennsylvania
Trust to pay interest on or principal of the Bonds.
Pennsylvania Tax Status
In rendering its opinion, Saul, Ewing, Remick & Saul has not,
for timing reasons, made an independent review of proceedings
related to the issuance of the Bonds. It has relied on the Sponsor
for assurance that the Bonds have been issued by the Commonwealth
of Pennsylvania or by or on behalf of municipalities or other
governmental agencies within the Commonwealth.
Page 28
In the opinion of Saul, Ewing, Remick & Saul, Special Counsel
to the Fund for Pennsylvania tax matters, under existing law:
Units evidencing fractional undivided interests in the Pennsylvania
Trust, which are represented by obligations issued by the Commonwealth
of Pennsylvania, any public authority, commission, board or other
agency created by the Commonwealth of Pennsylvania, any political
subdivision of the Commonwealth of Pennsylvania or any public
authority created by any such political subdivision, are not taxable
under any of the personal property taxes presently in effect in Pennsylvania;
Distributions of interest income to Unit holders that would not
be taxable if received directly by a Pennsylvania resident are
not subject to personal income tax under the Pennsylvania Tax
Reform Code of 1971; nor will such interest be taxable under the
Philadelphia School District Investment Income Tax imposed on
Philadelphia resident individuals;
A Unit holder will have a taxable event under the Pennsylvania
state and local income taxes referred to in the preceding paragraph
upon the redemption or sale of his Units. Units will be taxable
under the Pennsylvania inheritance and estate taxes;
A Unit holder which is a corporation will have a taxable event
under the Pennsylvania Corporate Net Income Tax when it redeems
or sells its Units. Interest income distributed to Unit holders
which are corporations is not subject to Pennsylvania Corporate
Net Income Tax or Mutual Thrift Institutions Tax. However, banks,
title insurance companies and trust companies may be required
to take the value of the Units into account in determining the
taxable value of their shares subject to the Shares tax;
Under Act No. 68 of December 3, 1993, gains derived by the Fund
from the sale, exchange or other disposition of Bonds may be subject
to Pennsylvania personal or corporate income taxes. Those gains
which are distributed by the Fund to Unit holders who are individuals
may be subject to Pennsylvania Personal Income Tax. For Unit holders
which are corporations, the distributed gains may be subject to
Corporate Net Income Tax or Mutual Thrift Institutions Tax. Gains
which are not distributed by the Fund may nevertheless be taxable
to Unit holders if derived by the Fund from the sale, exchange
or other disposition of Bonds issued on or after February 1, 1994.
Gains which are not distributed by the Fund will remain nontaxable
to Unit holders if derived by the Fund from the sale, exchange
or other disposition of Bonds issued prior to February 1, 1994.
Any proceeds paid under insurance policies issued to the Trustee
or obtained by issuers of the Bonds with respect to the Bonds
which represent maturing interest on defaulted obligations held
by the Trustee will be excludable from Pennsylvania gross income
if, and to the same extent as, such interest would have been so
excludable if paid by the issuer of the defaulted obligations;
The Fund is not taxable as a corporation under Pennsylvania tax
laws applicable to corporations.
On December 3, 1993, changes to Pennsylvania laws affecting taxation
of income and gains from the sale of Pennsylvania and local obligations
were enacted. Among these changes was the repeal of the exemption
from tax of gains realized upon the sale or other disposition
of such obligations. The Pennsylvania Department of Revenue has
issued proposed regulations concerning these changes. The opinions
expressed above are based on our analysis of the law and proposed
regulations, but are subject to modification upon review of final
regulations or other guidance that may be issued by the Department
of Revenue or future court decisions.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of Unit Holders?"
Page 29
Pennsylvania Insured Trust, Series 66
Portfolio
Units Rated "AAA"_
At the Opening of Business
On the Initial Date of Deposit of the Bonds- , 1995
<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>
$ $
__________ __________
$ $
========== ==========
</TABLE>
[FN]
__________________
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
{ These Bonds have no stated interest rate ("zero coupon bonds")
and, accordingly, will have no periodic interest payments to the
Trust. Upon maturity, the holders of these Bonds are entitled
to receive 100% of the stated principal amount. The Bonds were
issued at an original issue discount on VAR at a price of VAR%
of their original principal amount.
These Bonds were issued at an original issue discount on VAR
at a price of VAR% of their original principal amount.
[] These Bonds are of the same issue as another Bond in the Trust.
{{ This issue of Bonds is secured by and payable from, escrowed
U.S. Government securities.
For industry concentrations of the Bonds in the Trust, see
"Pennsylvania Insured 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 248
We have audited the accompanying statements of net assets, including
the portfolios, of The First Trust Combined Series 248, comprised
of The First Trust of Insured Municipal Bonds, Series 234; The
First Trust of Insured Municipal Bonds-Multi-State: New York Trust,
Series 60 and Pennsylvania Trust, Series 66 (the Trusts), as of
the opening of business on , 1995. 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 , 1995. 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 248, comprised of The First
Trust of Insured Municipal Bonds, Series 234; The First Trust
of Insured Municipal Bonds-Multi-State: New York Trust, Series
60 and Pennsylvania Trust, Series 66, at the opening of business
on , 1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
, 1995
Page 31
Statements of Net Assets
The First Trust Combined Series 248
At the Opening of Business on the Initial Date of Deposit
, 1995
<TABLE>
<CAPTION>
National New York Pennsylvania
Insured Insured Insured
Trust, Trust, Trust,
Series 234 Series 60 Series 66
__________ __________ __________
NET ASSETS
<S> <C> <C> <C>
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $ $ $
Accrued interest on underlying bonds (2)(3)(4)
Organizational costs (5)
___________ ___________ _________
Less distributions payable (4)
Accrued organizational costs (5)
___________ ___________ ___________
Net assets $ $ $
=========== =========== ===========
Outstanding Units
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C> <C> <C>
Cost to investors (6) $ $ $
Less gross underwriting commissions (6)
___________ ___________ ___________
Net assets $ $ $
=========== =========== ===========
</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, which is exclusive of the amount by which
the Trustee has agreed to reduce its fees during the first year.
<TABLE>
<CAPTION>
Accrued
Aggregate Accrued Interest to
Letter of Credit Offering Interest to Expected
To be Price of Date of Dates of
Trust Allocated Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
National Insured
Trust, Series 234 $ $ $ $ $
New York Insured
Trust, Series 60 $ $ $ $ $
Pennsylvania Insured
Trust, Series 66 $ $ $ $ $
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the National
Insured Trust, the New York Insured Trust and the Pennsylvania
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.
Page 32
(4) The Trustee will advance to each Trust the amount of net interest
accrued to , the First Settlement Date, for distribution to the
Sponsor as the Unit holder of record.
(5) Each Trust will bear all or a portion of its organizational
costs which will be deferred and amortized over five years.
(6) The aggregate cost to investors (exclusive of accrued interest)
and the aggregate gross underwriting commissions of 5.5% (4.9%
for the National Insured Trust) are computed assuming no reduction
of sales charge for quantity purchases.
NOTES TO PORTFOLIOS
The following Notes to Portfolios pertain to the information contained
in the Trust Portfolios (the National Insured Trust, Series 234
on page 10, the New York Insured Trust, Series 60 on page 21 and
the Pennsylvania Insured Trust, Series 66 on page 30).
(1) Sponsor's contracts to purchase Bonds were entered into during
the period from to . All contracts to purchase Bonds are expected
to be settled on or prior to 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>
National Insured
Trust, Series 234 $ $ $ $ $ $
New York Insured
Trust, Series 60 $ $ $ $ $ $
Pennsylvania Insured
Trust, Series 66 $ $ $ $ $ $
</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.
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 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
Page 33
(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?"
"New York Insured Trust Summary-New York Tax Status," "Pennsylvania
Insured Trust Summary-Pennsylvania Tax Status."
(4) Ratings by Moody's Investors Service, Inc. Such ratings were
obtained from a municipal bond information reporting service.
(5) Insurance has been obtained by the Bond issuer, the underwriters,
the Sponsor or others prior to the 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>
National Insured Trust, Series 234
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
</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>
</TABLE>
Page 35
Estimated Cash Flows to Unit Holders
<TABLE>
<CAPTION>
New York Insured Trust, Series 60
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
</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>
</TABLE>
Page 36
Estimated Cash Flows to Unit Holders
<TABLE>
<CAPTION>
Pennsylvania Insured Trust, Series 66
Monthly
Estimated Estimated Estimated
Interest Principal Total
Date (Each Month) Distribution Distribution Distribution
_________________ ____________ ____________ ____________
<S> <C> <C> <C>
</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>
</TABLE>
Page 37
This page is intentionally left blank.
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 rating or Fitch Investors Service, Inc.
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?
With the exception of bookkeeping and other administrative services
provided to the Trusts, for which the Sponsor will be reimbursed
in amounts as set forth under "Summary of Essential Information,"
the Sponsor will not receive any fees in connection with its activities
relating to the Trusts. 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 Bonds
Page A-11
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.
Expenses incurred in establishing the Trusts, including the cost
of the initial preparation of documents relating to the Trusts (including
the Prospectus, Trust Agreement and certificates), federal and
state registration fees, the initial fees and expenses of the
Trustee, legal and accounting expenses, payment of closing fees
and any other out-of-pocket expenses, will be paid by the Trusts
and amortized over the first five years of the such Trusts.
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
Page A-12
income received by such Trust. In the case of Preinsured Bonds,
no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of
the aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay
to Citibank, N.A., or its successor, as its agent (the "Fiscal
Agent"), that portion of the principal of and interest on the
Bonds covered by the policy which shall become due for payment
but shall be unpaid by reason of nonpayment by the issuer of the
Bonds. The term "due for payment" means, when referring to the
principal of a Bond, its stated maturity date or the date on which
it shall have been called for mandatory sinking fund redemption
and does not refer to any earlier date on which payment is due
by reason of call for redemption (other than by mandatory sinking
fund redemption), acceleration or other advancement of maturity
and means, when referring to interest on a Bond, the stated date
for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation,
"due for payment" also means, when referring to the principal
of such Bond, the date on which such Bond has been called for
mandatory redemption as a result of such determination of taxability,
and when referring to interest on such Bond, the accrued interest
at the rate provided in such documentation to the date on which
such Bond has been called for such mandatory redemption, together
with any applicable redemption premium. The term "due for payment"
will not include, when referring to either the principal of a
Bond or the interest on a Bond, any acceleration of payment unless
such acceleration is at the sole option of Financial Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent
on the date such principal or interest becomes due for payment
or on the business day next following the day on which Financial
Guaranty shall have received notice of nonpayment, whichever is
later. The Fiscal Agent will disburse to the Trustee the face
amount of principal and interest which is then due for payment
but is unpaid by reason of nonpayment by the issuer but only upon
receipt by the Fiscal Agent of (i) evidence of the Trustee's right
to receive payment of the principal or interest due for payment
and (ii) evidence, including any appropriate instruments of assignment,
that all of the rights to payment of such principal or interest
due for payment shall thereupon vest in Financial Guaranty. Upon
such disbursement, Financial Guaranty shall become the owner of
the Bond, appurtenant coupon or right to payment of principal
or interest on such Bond and shall be fully subrogated to all
of the Trustee's rights thereunder, including the right to payment thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained
by an Insured Trust has the right to obtain permanent insurance
with respect to such Bond (i.e., insurance to maturity of the
Bonds regardless of the identity of the holder thereof) (the "Permanent
Insurance") upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly,
any Bond in an Insured Trust is eligible to be sold on an insured
basis. It is expected that the Trustee will exercise the right
to obtain Permanent Insurance only if upon such exercise the Insured
Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium attributable to the Permanent Insurance) from
such sale in excess of the sale proceeds if such Bonds were sold
on an uninsured basis. The insurance premium with respect to each
Bond eligible for Permanent Insurance is determined 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 December 31, 1994, the total capital and surplus of Financial
Guaranty was approximately $893,700,000. Copies of Financial Guaranty's
financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared
on the basis of generally accepted accounting principles, may
be obtained by writing to Financial Guaranty at 115 Broadway,
New York, New York 10006, Attention: Communications Department
(telephone number (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
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.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation" or "MBIA") is the principal operating subsidiary of
MBIA, Inc., a New York Stock Exchange listed company. MBIA, Inc.
is not obligated to pay the debts of or claims against MBIA Corporation.
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, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guam. MBIA has one European branch in
the Republic of France.
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 December 31, 1994, MBIA had
admitted assets of $3.4 billion (audited), total liabilities
of $2.3 billion (audited), and total capital and surplus of
$1.1 billion (audited), 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 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, the Commonwealth of Puerto Rico,
Guam and the U.S. Virgin Islands. Capital Guaranty focuses on insuring
municipal securities, and its policies guaranty the timely payment of
principal and interest when due for payment on new issue and secondary
market issue municipal bond transactions. Capital Guaranty's claims-
paying ability is rated "Triple-A" by both Moody's Investors Service, Inc.
and Standard & Poor's.
As of December 31, 1994, Capital Guaranty had more than $15.7
billion in net exposure outstanding (excluding defeased issues).
The total statutory policyholders' surplus and contingency reserve
of Capital Guaranty was $196,529,000 and the total
admitted assets were $303,723,316 (unaudited) as reported to the
Insurance Department of the State of Maryland as of December
31, 1994. The address of Capital Guaranty's headquarters and its
telephone number are Steuart Tower, 22nd Floor, One Market Plaza,
San Francisco, CA 94105-1413 and (415) 995-8000.
CapMAC. CapMAC is a New York-domiciled monoline stock insurance
company which engages only in the business of financial guarantee
and surety insurance. CapMAC is licensed in 49 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and
the territory of Guam. CapMAC insures structured asset-backed,
corporate and other financial obligations in the domestic and
foreign capital markets. CapMAC may also provide financial guarantee
reinsurance for structured asset-backed, corporate and municipal
obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's, and "AAA"
by Duff & Phelps, Inc. ("Duff & Phelps"). Such ratings reflect
only the views of the respective rating agencies, are not recommendations
to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
CapMAC is wholly owned by CapMAC Holdings Inc. ("Holdings"), a
company that is owned by a group of institutional and other investors,
including CapMAC's management and employees. CapMAC commenced
operations on December 24, 1987 as an indirect, wholly-owned subsidiary
of Citibank (New York State), a wholly-owned subsidiary of Citicorp.
On June 25, 1992, Citibank (New York State) sold CapMAC to Holdings
(the "Sale").
Page A-16
Neither Holdings nor any of its stockholders is obligated to pay
any claims under any surety bond issued by CapMAC or any debts
of CapMAC or to make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the
State of New York. In addition, CapMAC is subject to regulation
by the insurance departments of the other jurisdictions in which
it is licensed. CapMAC is subject to periodic regulatory examinations
by the same regulatory authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and
acquisitions. The amount of exposure per risk that CapMAC may
retain, after giving effect to reinsurance, collateral or other
securities, is also regulated. Statutory and regulatory accounting
practices may prescribe appropriate rates at which premiums are
earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form
of surety bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured.
Such reinsurance does not relieve CapMAC of any of its obligations
under the Surety Bond(s).
THE SURETY BONDS ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In connection with the Sale, Holdings and CapMAC entered into
an Ownership Policy Agreement (the "Ownership Policy Agreement"),
which sets forth Holdings' intent with respect to its ownership
and control of CapMAC and provides for certain policies and agreements
with respect to Holdings' exercise of its control of CapMAC. In
the Ownership Policy Agreement, Holdings has agreed that, during
the term of the Ownership Policy Agreement, it will not and will
not permit any stockholder of Holdings to enter into any transaction
the result of which would be a change of control (as defined in
the Ownership Policy Agreement) of CapMAC, unless the long-term
debt obligations or claims-paying ability of the person which
would control CapMAC after such transaction or its direct or indirect
parent are rated in a high investment grade category, unless Holdings
or CapMAC has confirmed that CapMAC's claims-paying ability rating
by Moody's (the "Rating") in effect immediately prior to any such
change of control will not be downgraded by Moody's upon such
change of control or unless such change of control occurs as a
result of a public offering of Holdings' capital stock.
In addition, the Ownership Policy Agreement includes agreements
(i) not to change the "zero-loss" underwriting standards or policies
and procedures of CapMAC in a manner that would materially and
adversely affect the risk profile of CapMAC's book of business,
(ii) that CapMAC will adhere to the aggregate leverage limitations
and maintain capitalization levels considered by Moody's from
time to time as consistent with maintaining CapMAC's Rating and
(iii) that until CapMAC's statutory capital surplus and contingency
reserve ("qualified statutory capital") equal $250 million, CapMAC
will maintain a specified amount of qualified statutory capital
in excess of the amount of qualified statutory capital that CapMAC
is required at such time to maintain under the aggregate leverage
limitations set forth in Article 69 of the New York Insurance Law.
The Ownership Policy Agreement will terminate on the earlier of
the date on which a change of control of CapMAC occurs and the
date on which CapMAC and Holdings agree in writing to terminate
the Ownership Policy Agreement; provided that, CapMAC or Holdings
has confirmed that CapMAC's Rating in effect immediately prior
to any such termination will not be downgraded upon such termination.
As of December 31, 1992 and 1991, CapMAC had statutory capital
and surplus of approximately $148 million and $232 million, respectively,
and had not incurred any debt obligations. On June 26, 1992, CapMAC
made a special distribution (the "Distribution") to Holdings in
connection with the Sale in an aggregate amount that caused the
total of CapMAC's statutory capital and surplus to decline to
approximately $150 million. Holdings applied substantially all
of the proceeds of the Distribution to repay debt owed to Citicorp
that was incurred in connection with the capitalization of CapMAC.
As of June 30, 1992, CapMAC had statutory capital and surplus
of approximately $150 million and had not incurred any debt obligations.
In addition, on December 31, 1992 CapMAC had a statutory contingency
reserve of approximately
Page A-17
$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 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,
Page A-18
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, 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 has assigned to units of each Insured
Trust its "AAA" investment rating. This is the highest rating
assigned to securities by Standard & Poor's. See "Description
of Bond Ratings." The obtaining of this rating by each Insured
Trust should not be construed as an approval of the offering of
the Units by Standard & Poor's or as a guarantee of the market
value of each Insured Trust or the Units of such Trust. Standard
& Poor's has indicated that this rating is not a recommendation
to buy, hold or sell Units nor does it take into account the extent
to which expenses of each Trust or sales by each Trust of Bonds
for less than the purchase price paid by such Trust will reduce
payment to Unit holders of the interest and principal required
to be paid on such Bonds. There is no guarantee that the "AAA"
investment rating with respect to the Units of an Insured Trust
will be maintained.
An objective of portfolio insurance obtained by such Insured Trust
is to obtain a higher yield on the Bonds in the portfolio of such
Trust than would be available if all the Bonds in such portfolio
had the Standard & Poor's "AAA" and/or Moody's Investors Service,
Inc. "Aaa" rating(s) and at the same time to have the protection
of insurance of scheduled payment of interest and principal on
the Bonds. There is, of course, no certainty that this result
will be achieved. Bonds in a Trust for which insurance has been
obtained by the Bond issuer, the underwriters, the Sponsor or
others (all of which were rated "AAA" by Standard & Poor's and/or
"Aaa" by Moody's Investors Service, Inc.) may or may not have
a higher yield than uninsured bonds rated "AAA" by Standard &
Poor's or "Aaa" by Moody's Investors Service, Inc. In selecting
Bonds for the portfolio of each Insured Trust, the Sponsor has
applied the criteria 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?"
Page A-19
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is determined by adding
to the Evaluator's determination of the aggregate offering price
of the Bonds in each Trust, an amount as indicated in the following
table. During the initial offering period, the Sponsor's Repurchase
Price is equal to the Evaluator's determination of the aggregate
offering price of the Bonds in a Trust. A National Trust consists
of The First Trust of Insured Municipal Bonds. A State Trust consists
of The First Trust of Insured Municipal Bonds-Multi-State and/or
The First Trust Advantage other than an Intermediate, Long Intermediate,
Short Intermediate or Discount Trust. An Intermediate, Long Intermediate,
Short Intermediate or Discount Trust consists of trusts so designated.
Initial Offering Period (1)
Sales Charge
_____________________________
Percentage Percentage
of Public of Net
Offering Amount
Series of the Fund Price Invested
__________________ _________ _________
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
[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 (except for sales made pursuant to a "wrap
fee account" or similar arrangements as set forth below):
<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
Secondary Offering Period
Sales Charge
__________________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_______________ _________ _________
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
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.
Units may be purchased in the primary or secondary market at the
Public Offering Price less the concession the Sponsor typically allows
to dealers and other selling agents for purchases (see "Public Offering-
How are Units Distributed?") by investors who purchase Units through
registered investment advisers, certified financial planners and
registered broker-dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management services,
or provide such services in connection with the establishment of an
investment account for which a comprehensive "wrap fee" charge is imposed.
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
Page A-21
each Trust of the Fund, the Public Offering Price at any time
during the initial offering period will vary from the Public
Offering Price stated herein in accordance with fluctuations in
the prices of the underlying Bonds.
The aggregate price of the Bonds in each Trust is determined by
whomever from time to time is acting as evaluator (the "Evaluator"),
on the basis of bid prices or offering prices as is appropriate,
(1) on the basis of current market prices for the Bonds obtained
from dealers or brokers who customarily deal in bonds comparable
to those held by the Trust; (2) if such prices are not available
for any of the Bonds, on the basis of current market prices for
comparable bonds; (3) by determining the value of the Bonds by
appraisal; or (4) by any combination of the above. Unless Bonds are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default, the Evaluator will
not attribute any value to the insurance obtained by an Insured
Trust. On the other hand, the value of insurance obtained by the
issuer of Bonds in a Trust is reflected and included in the market
value of such Bonds.
The Evaluator will consider in its evaluation of Bonds which are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default (the "Defaulted Bonds")
and which are covered by insurance obtained by an Insured Trust,
the value of the insurance guaranteeing interest and principal
payments. The value of the insurance will be equal to the difference
between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance) and
(ii) the market value of such Defaulted Bonds not covered by Permanent
Insurance. In addition, the Evaluator will consider the ability
of Financial Guaranty and/or AMBAC Indemnity to meet its commitments
under the Insured Trust's insurance policy, including the commitments
to issue Permanent Insurance. It is the position of the Sponsor
that this is a fair method of valuing the Bonds and the insurance
obtained by an Insured Trust and reflects a proper valuation method
in accordance with the provisions of the Investment Company Act of 1940.
No value has been attributed to insurance obtained by an Insured
Trust as of the date of this Prospectus. However, the Evaluator
is attributing value to insurance for the purpose of computing
the price or redemption value of Units for certain previous series
of The First Trust of Insured Municipal Bonds.
During the initial public offering period, a determination of
the aggregate price of the Bonds in a Trust is made by the Evaluator
on an offering price basis, as of the close of trading on the
New York Stock Exchange on each day on which it is open, effective
for all sales made subsequent to the last preceding determination.
For purposes of such determinations, the close of trading on the
New York Stock Exchange is 4:00 p.m. eastern standard 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
Page A-22
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 other selling agents.
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 other selling agents at prices which represent a concession
or agency commission of $32 per Unit for a National Trust and certain
State Trusts, $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 other selling agents 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 other selling agents. 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
Page A-23
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 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 selling agents 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
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>
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 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 will receive
an additional $2.00 per Unit sold. 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.
have an agreement under which MPV will receive from Nike Securities
Page A-24
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
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
Page A-25
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 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
Page A-26
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.
Each person who purchases Units of a Trust may use the card attached
to this prospectus to request a prospectus describing each Series
and a form by which such person may elect to become a participant
in a Distribution Reinvestment Option with respect to a Series.
Each distribution of interest income or principal on the participant's
Units will automatically be applied by the Trustee to purchase
shares (or fractions thereof) of a Series without a sales charge
and with no minimum investment requirements.
The shareholder service agent for each Series will mail to each
participant in the Distribution Reinvestment Option confirmations
of all transactions undertaken for such participant in connection
with the receipt of distributions from The First Trust Combined
Series and the purchase of shares (or fractions thereof) of a Series.
Page A-27
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 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
Page A-28
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 a statutory
de minimis rule. Under the Tax Act, accretion of market discount
is taxable as ordinary income; under prior law the accretion had
been treated as capital gain. Market discount that accretes while
a Trust holds a Bond would be recognized as ordinary income by
the Unit holders when principal payments are received on the Bond,
upon sale or at redemption (including early redemption) or upon
the sale or redemption of the Units, unless a Unit holder elects
to include market discount in taxable income as it accrues. The
market discount rules are complex and Unit holders should consult
their tax advisers regarding these rules and their application.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
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
Page A-29
"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 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.
Page A-30
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 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
Page A-31
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 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.
Page A-32
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 trust in 1974
and to date more than $9 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994, the total partners' capital of Nike Securities
L.P. was $10,863,058 (audited). (This paragraph relates only to
the Sponsor and not to the Trust or to any series thereof or to
any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its
Page A-33
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is United States Trust Company of New York with its
principal place of business at 45 Wall Street, New York, New York
10005 and its unit investment trust offices at 770 Broadway, New
York, New York 10003. Unit holders who have questions regarding
the Fund may call the Customer Service Help Line at 1-800-682-7520.
The Trustee is a member of the New York Clearing House Association
and is subject to supervision and examination by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Fund which the Trustee may be required to pay under
any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the
Indenture contains other customary provisions limiting the liability
of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trusts as provided herein, or (c)
continue to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor or 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
Page A-34
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, 2044. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders of such
Trust. Within a reasonable period after termination, the Trustee
will sell any Bonds remaining in the Trust and, after paying all
expenses and charges incurred by such Trust, will distribute to
each Unit holder of such Trust (including the Sponsor if it then
holds any Units), upon surrender for cancellation of his Certificate
for Units, his pro rata share of the balances remaining in the
Interest and Principal Accounts of such Trust, all as provided
in the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, 2 Wall Street, New York,
New York 10005, will act as counsel for the Trustee and as special
counsel for the Fund for New York tax matters. For information
with respect to state and local tax matters, including the State
Trust special counsel for such matters, see the section of the
Prospectus describing each Trust appearing herein.
Experts
The statements of net assets, including the portfolios, of the
Trusts on the 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.
Page A-35
DESCRIPTION OF BOND RATINGS*
* As published by the rating companies.
Standard & Poor's. A brief description of the applicable Standard
& Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect
to a specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold
a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
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.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB-Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category
than for bonds in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating
is provisional. A provisional rating assumes the successful completion
of the project being financed by the bonds being rated and indicates
that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent
to completion of the project, makes no comment on the likelihood
of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to
such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings
of bonds and other fixed income securities. It focuses on events
and trends which place companies and government units under special
surveillance by S&P's 180-member analytical staff. These may include
mergers, voter referendums, actions by regulatory authorities,
or developments gleaned from analytical reviews. Unless otherwise
noted, a rating decision will be made within 90 days. Issues appear
on Credit Watch where an event, situation, or deviation from trends
occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is
inevitable. Since S&P continuously monitors all of its ratings,
Page A-36
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.
Fitch Investors Service, Inc. A brief description of the applicable
Fitch Investors Service, Inc. rating symbols and their meanings follow:
AAA-Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA.
Bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments.
Page A-37
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA,
A and BBB ratings may be modified by the addition of a plus or
minus sign to show relative standing within these major rating categories.
Page A-38
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Page A-39
<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:
National Insured Trust, Series 234 7
New York Insured Trust, Series 60 11
Pennsylvania Insured Trust, Series 66 22
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-23
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-32
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-34
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 248
The First Trust of Insured
Municipal Bonds, Series 234
The First Trust of Insured
Municipal Bonds-Multi-State:
New York Trust, Series 60
Pennsylvania Trust, Series 66
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
, 1995
CONTENTS OF REGISTRATION STATEMENT
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.
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 Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 248 has duly
caused this Amendment No. 1 to Form S-6 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on May 26, 1995.
THE FIRST TRUST COMBINED SERIES 248
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to Form S-6 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 May 26, 1995
Corporation, the
General Partner of Carlos E. Nardo
Nike Securities L.P. Attorney-in-Fact**
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with 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 by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF INDEPENDENT AUDITORS
The consent of Ernst & Young LLP to the use of its Report and to
the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
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 RATINGS GROUP, A DIVISION OF McGRAW-
HILL, INC.
The consent of Standard & Poor's Ratings Group, A Division of
McGraw-Hill, Inc. 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-3
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 248 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 Ratings Group, A Division of
McGraw-Hill, Inc.
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
