As filed with the Securities and Exchange Commission on June 5, 1995.
Registration No. 33-57925
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 249
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 249
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 JUNE 5, 1995
The First Trust (registered trademark) Combined Series
Prospectus Part II
Dated , 1995
This Part II of the Prospectus may not be distributed unless accompanied
by Part I. Both Parts of this Prospectus should be retained for
future reference.
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN
THE PROSPECTUS IN THE FORM OF AN "INFORMATION SUPPLEMENT" MAY BE
OBTAINED WITHIN FIVE BUSINESS DAYS BY CALLING THE TRUSTEE AT
1-800-682-7520.
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 consists of the underlying separate
unit investment trust set forth in Part I of this Prospectus.
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 13. NO REPRESENTATION IS MADE AS TO ANY INSURER'S
ABILITY TO MEET ITS COMMITMENTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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
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
What is the First Trust Combined Series?
The First Trust Combined Series is one of a series of investment
companies created by the Sponsor, 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 set forth in Part I of this Prospectus (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, 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. 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.
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 deposit of additional
Bonds will duplicate, as nearly as is practicable, the original
proportionate relationship and not the actual proportionate relationship
on the subsequent date of deposit. The actual proportionate relationship
may differ from the original proportionate relationship 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" appearing
in Part I of this Prospectus. 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,
Page 3
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. 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" appearing in Part I of
this Prospectus.
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?"
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.'s
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" appearing
in Part I for each Trust.
Risk Factors
The following paragraphs briefly discuss certain circumstances
which may adversely affect the ability of issuers of Bonds held
in the portfolio of a Trust to make payment of principal and interest
thereon, and which also therefore may adversely affect the ratings
of such Bonds. With respect to the Insured Trusts, however, because
of the insurance obtained by the Sponsor or by the issuers of
the Bonds, such changes should not adversely
Page 4
affect either (i) an Insured Trust's receipt of principal and
interest on an individual Bonds, or (ii) the Units triple-A rating.
The Bonds described below may be subject to special or extraordinary
redemption provisions. For economic risks specific to the individual
Trusts, see Part I of this Prospectus and the Information Supplement
to this Prospectus.
Discount Bonds. Certain of the Bonds 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. The
market discount on previously issued bonds will increase when
interest rates for newly issued comparable bonds increase and
decrease when such interest rates fall, other things being equal.
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?"
Original Issue Discount Bonds. Certain of the Bonds 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. 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 greater price volatility than
conventional bonds. Zero Coupon Bond features include (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 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. The
current returns of such bonds are initially higher than the current
returns of comparable bonds 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.
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 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?"
General Obligation Bonds. Certain of the Bonds 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
Page 5
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, both within a particular classification
and between classifications, depending on numerous factors.
Healthcare Revenue Bonds. Certain of the Bonds may be health care
revenue bonds which are obligations of issuers whose revenues
are primarily derived from services provided by hospitals or other
health care facilities, including nursing homes. A health care
issuer's ability to make debt service payments on these obligations
is dependent on various factors, including occupancy levels of
the facility, demand, government regulations, wages of employees,
overhead expenses, competition from other similar providers, malpractice
insurance costs and the degree of governmental financial assistance,
including Medicare and Medicaid and other similar third-party
payer programs.
Housing Obligations. Certain of the Bonds may be obligations of
issuers whose revenues are primarily derived from mortgage loans
on single family residences or housing projects for low to moderate
income families. Housing obligations are generally payable at
any time and therefore their average life will ordinarily be less
than their stated maturities. The ability of such issuers to make
debt service payments on these obligations is dependent on various
factors, including occupancy levels, rental income, mortgage default
rates, taxes, operating expenses, governmental regulations and
the appropriation of subsidies.
Water and Sewerage Bonds. Certain of the Bonds may be obligations
of issuers whose revenues are derived from the sale of water and/or
sewerage services. Such 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.
Electric Utility Bonds. Certain of the Bonds 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. 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, increased Federal, state and municipal
government regulations, 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
in obtaining fuel at reasonable prices and the effect of energy
conservation.
Lease Obligation Bonds. Certain of the Bonds may be lease obligations
issued primarily 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, or construction and abatement risk-rental obligations cease
in the event that delays in building, damage, destruction or condemnation
of the project prevents its use by the lessee.
Industrial Revenue Bonds. Certain of the Bonds may be industrial
revenue bonds ("IRBs"), 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. Debt service payments on IRBs is dependent
upon various factors, including the creditworthiness of the corporate
operator of the project and, if
Page 6
applicable, corporate guarantor, revenues generated from the project,
expenses associated with the project and regulatory and environmental
restrictions.
Transportation Facility Revenue Bonds. Certain of the Bonds 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 ability of issuers to make debt service payments
on airport obligations is dependent on the capability of airlines
to meet their obligations under use agreements. Due to increased
competition, deregulation, increased fuel costs and other factors,
many airlines may have difficulty meeting their obligations under
these use agreements. 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 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 versus poor areas. General problems relating to college
and university obligations include the prospect of a declining
percentage 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.
Resource Recovery Facility Bonds. Certain of the Bonds 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.
Bonds of Issuers Located in the Commonwealth of Puerto Rico. Certain
Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore,
the economy is largely dependent for its development upon U.S.
policies and programs that are being reviewed and may be eliminated.
The Puerto Rican economy consists principally of manufacturing
(pharmaceuticals, scientific instruments, computers, microprocessors,
medical products, textiles and petrochemicals), agriculture (largely
sugar) and tourism. Most of the island's manufacturing output
is shipped to the mainland United States, which is also the chief
source of semi-finished manufactured articles on which further
manufacturing operations are performed in Puerto Rico. Since World
War II the economic importance of agriculture for Puerto Rico,
particularly in the dominance of sugar production, has declined.
Nevertheless, the Commonwealth-controlled sugar monopoly remains
an important economic factor and is largely dependent upon Federal
maintenance of sugar prices, the discontinuation of which could
severely affect Puerto Rico sugar production. The level of tourism
is affected by various factors including the strength of the U.S.
dollar. During periods when the dollar is strong, tourism in foreign
countries becomes relatively more attractive.
Page 7
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.
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" in Part I
of this Prospectus for the earliest scheduled call date and the
initial redemption price for each Bond. 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 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 specified in a Bond's "Official Statement."
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.
Page 8
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"
appearing in Part I of this Prospectus. 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" appearing
in Part I of this Prospectus 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.
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. 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 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
Page 9
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" appearing in Part
I of this Prospectus 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" appearing in Part I of this Prospectus 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
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" appearing in
Part I of this Prospectus, 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.
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" appearing in Part I of this Prospectus.
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
Page 10
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 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
Page 11
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" appearing in Part I of this Prospectus.
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" appearing
in Part I of this Prospectus. The portfolio insurance continues
so long as such Trust retains the Bonds thus insured. Premiums
are payable monthly in advance by the Trustee on behalf of such
Trust. The Trustee will advance the initial premium for the portfolio
insurance obtained by an Insured Trust and will recover its advancement
without interest or other costs to such Trust from interest received
on Bonds in such Trust. As Bonds in the portfolio are redeemed
by their respective issuers or are sold by the Trustee, the amount
of premium will be reduced in respect of those Bonds no longer
owned by and held in the Trust which were insured by insurance
obtained by such Trust. Preinsured Bonds in an Insured Trust are
not insured by such Trust. The premium payable for Permanent Insurance
will be paid solely from the proceeds of the sale of such Bond
in the event the Trustee exercises the right to obtain Permanent
Insurance on a Bond. 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 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
and any other out-of-pocket expenses, will be paid by the Trusts
and amortized over the first five years of 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
Page 12
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"), or AMBAC Indemnity Corporation
("AMBAC Indemnity" or "AMBAC"), or obtained by the Bond issuer,
the underwriters, the Sponsor or others prior to the Initial Date
of Deposit directly from one of the insurers listed below 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" in Part I of the Prospectus for each Insured Trust).
Nonpayment of premiums on the policy obtained by each Insured
Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or AMBAC Indemnity to take action
against the Trustee to recover premium payments due it. Premium
rates for each issue of Bonds protected by the policy obtained
by each Insured Trust are fixed for the life of such Trust. The
premium for any Preinsured Bonds has been paid in advance by the
Bond issuer, the underwriters, the Sponsor or others and any such
policy or policies are noncancellable and will continue in force
so long as the Bonds so insured are outstanding and the insurer
and/or insurers thereof remain in business. If the provider of
an original issuance insurance policy is unable to meet its obligations
under such policy, or if the rating assigned to the claims-paying
ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure any issue adversely
affected by either of the above described events. A monthly premium
is paid by each Insured Trust for the insurance obtained by such
Trust, which is payable from the interest income received by such
Trust. In the case of Preinsured Bonds, no premiums for insurance
are paid by the Insured Trust. Further information concerning
the individual insurers can be found in the Information Supplement
to this Prospectus.
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
Page 13
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.
Financial Guaranty Insurance Company. 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). In
addition, Financial Guaranty is currently licensed to write insurance
in all fifty states and the District of Columbia.
AMBAC Indemnity Corporation ("AMBAC Indemnity"). 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. The address of AMBAC Indemnity's administrative
offices and its telephone number are One State Street Plaza, 17th
Floor, New York, New York 10004 and (212) 668-0340.
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. 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. 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
Page 14
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").
As of December 31, 1992 and 1991, CapMAC had statutory capital
and surplus of approximately $148 million and $232 million, respectively,
and had not incurred any debt obligations. On June 26, 1992, CapMAC
made a special distribution (the "Distribution") to Holdings in
connection with the Sale in an aggregate amount that caused the
total of CapMAC's statutory capital and surplus to decline to
approximately $150 million. Holdings applied substantially all
of the proceeds of the Distribution to repay debt owed to Citicorp
that was incurred in connection with the capitalization of CapMAC.
As of June 30, 1992, CapMAC had statutory capital and surplus
of approximately $150 million and had not incurred any debt obligations.
In addition, on December 31, 1992 CapMAC had a statutory contingency
reserve of approximately $15 million, which is also available
to cover claims under surety bonds issued by CapMAC. Article 69
of the New York State Insurance Law requires that CapMAC establishes
and maintains the contingency reserve.
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.
As of March 31, 1993, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were,
in accordance with statutory accounting principles, approximately
$479,110,000 (unaudited) and $220,078,000 (unaudited), and the
total shareholders' equity and the unearned premium reserve, respectively,
of Financial Security and its consolidated subsidiaries were,
in accordance with generally accepted accounting principles, approximately
$628,119,000 (unaudited), and $202,493,000 (unaudited). Copies
of Financial Security's financial statements may be obtained by
writing to Financial Security at 350 Park Avenue, New York, New
York, 10022, Attention Communications Department. Financial Security's
telephone number is (212) 826-0100.
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
Page 15
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 an 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 16
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is determined by adding
to the Evaluator's determination of the aggregate offering price
of the Bonds in each Trust, an amount as indicated in the following
table. During the initial offering period, the Sponsor's Repurchase
Price is equal to the Evaluator's determination of the aggregate
offering price of the Bonds in a Trust. A National Trust consists
of The First Trust of Insured Municipal Bonds. A State Trust consists
of The First Trust of Insured Municipal Bonds-Multi-State and/or
The First Trust Advantage other than an Intermediate, Long Intermediate,
Short Intermediate or Discount Trust. An Intermediate, Long Intermediate,
Short Intermediate or Discount Trust consists of trusts so designated.
<TABLE>
<CAPTION>
Initial Offering Period (1)
Sales Charge
_____________________________
Percentage Percentage
of Public of Net
Offering Amount
Series of the Fund Price Invested
_______________ _________ _________
<S> <C> <C>
National Trust and certain State Trusts 4.9% 5.152%
Other State Trusts 5.5 5.820
Long Intermediate Trust 4.4 4.603
Intermediate Trust 3.9 4.058
Short Intermediate Trust 3.0 3.093
</TABLE>
[FN]
_______________
(1) The Public Offering Price includes a proportionate share
of interest accrued but unpaid on the Bonds after the First Settlement
Date to the date of settlement. See "General Trust Information-How
is Accrued Interest Treated?"
The applicable sales charge is reduced by a discount as indicated
below for volume purchases (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
in the Information Supplement to this Prospectus, 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.
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
Page 17
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" appearing
in Part I of this Prospectus. In addition to fluctuations in the
amount of interest accrued but unpaid on Bonds in each Trust of
the Fund, the Public Offering Price at any time during the initial
offering period will vary from the Public Offering Price stated
herein in accordance with fluctuations in the prices of the underlying
Bonds.
The aggregate price of the Bonds in each Trust is determined by
whomever from time to time is acting as evaluator (the "Evaluator"),
on the basis of bid prices or offering prices as is appropriate,
(1) on the basis of current market prices for the Bonds obtained
from dealers or brokers who customarily deal in bonds comparable
to those held by the Trust; (2) if such prices are not available
for any of the Bonds, on the basis of current market prices for
comparable bonds; (3) by determining the value of the Bonds by
appraisal; or (4) by any combination of the above. Unless Bonds
are in default in payment of principal or interest or, in the
Sponsor's opinion, in significant risk of such default, the Evaluator
will not attribute any value to the insurance obtained by an Insured
Trust. On the other hand, the value of insurance obtained by the
issuer of Bonds in a Trust is reflected and included in the market
value of such Bonds.
The Evaluator will consider in its evaluation of Bonds which are
in default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default (the "Defaulted Bonds")
and which are covered by insurance obtained by an Insured Trust,
the value of the insurance guaranteeing interest and principal
payments. The value of the insurance will be equal to the difference
between (i) the market value of Defaulted Bonds assuming the exercise
of the right to obtain Permanent Insurance (less the insurance
premium attributable to the purchase of Permanent Insurance) and
(ii) the market value of such Defaulted Bonds not covered by Permanent
Insurance. In addition, the Evaluator will consider the ability
of Financial Guaranty and/or AMBAC Indemnity to meet its commitments
under the Insured Trust's insurance policy, including the commitments
to issue Permanent Insurance. It is the position of the Sponsor
that this is a fair method
Page 18
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 three days following the order
for purchase, payment may be made prior thereto. A person will
become owner of Units on the date of settlement provided payment
has been received. Cash, if any, made available to the Sponsor
prior to the date of settlement for the purchase of Units may
be used in the Sponsor's business and may be deemed to be a benefit
to the Sponsor, subject to the limitations of the Securities Exchange
Act of 1934. Delivery of Certificates representing Units so ordered
will be made five business days following such order or shortly
thereafter. See "Rights of Unit Holders-How May Units Be Redeemed?"
for information regarding the ability to redeem Units ordered
for purchase.
How are Units Distributed?
Until the primary distribution of the Units offered by this Prospectus
is completed, (i) for Units issued on the Initial Date of Deposit
and (ii) for additional Units issued after such date as additional
Bonds are deposited by the Sponsor, Units will be offered to the
public at the Public Offering Price, computed as described above,
by the Underwriters, including the Sponsor (see "What are the
Underwriting Concessions?") and through dealers and 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.
Page 19
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 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" appearing in Part I of this
Prospectus. 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
Page 20
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 other 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?"
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
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
Page 21
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 three
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
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
Page 22
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
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
Page 23
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.
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
Page 24
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
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
Page 25
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 "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.
Page 26
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%. However,
it should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed. All taxpayers
are presently required to disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. Present
Federal income tax law also provides for an alternative minimum
tax for corporations levied at a rate of 20% of alternative minimum
taxable income. The alternative minimum tax and the environmental
tax (the "Superfund Tax") depend upon the corporation's alternative
minimum taxable income ("AMTI"), which is the corporation's taxable
income with certain adjustments. One of the adjustment items used
in computing AMTI of a corporation (excluding an S Corporation,
Regulated Investment Company, Real Estate Investment Trust, or
REMIC) is an amount equal to 75% of the excess of such corporation's
"adjusted current earnings" over an amount equal to its AMTI (before
such adjustment item and the alternative tax net operating loss
deduction). Although tax-exempt interest received by the Trusts
on Bonds deposited therein will not be included in the gross income
of corporations for Federal income tax purposes, "adjusted current
earnings" includes all tax-exempt interest, including interest
on all Bonds in the Trusts.
Unit holders are urged to consult their own tax advisers with
respect to the particular tax consequences to them, including
the corporate alternative minimum tax, the Superfund Tax and the
branch profits tax imposed by Section 884 of the Code.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Fund for New York tax matters, under the existing income tax
laws of the State and City of New York, each Trust will not constitute
an association taxable as a corporation under New York law, and
accordingly will not be subject to the New York State franchise
tax or the New York City general corporation tax. Under the income
tax laws of the State and City of New York, the income of each
Trust will be considered the income of the holders of the Units.
For information with respect to exemption from state or other
local taxes, see the sections in the Prospectus pertaining to
each Trust.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
What 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
Page 27
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 third
day following such tender, 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 as of the close of trading
on the New York Stock Exchange on the date any such determination
is made. On the Initial Date of Deposit the Public Offering Price
per Unit (which is based on the offering prices of the Bonds in
the Trust and includes the sales charge) exceeded the Unit value
at which Units could have been redeemed (based upon the current
bid prices of the Bonds in such Trust) by the amount shown under
"Summary of Essential Information" in Part I of this Prospectus.
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?"
Page 28
The difference between the bid and offering prices of such Bonds
may be expected to average 1-2% of the principal amount. In the
case of actively traded bonds, the difference may be as little
as 1/2 of 1% and, in the case of inactively traded bonds, such
difference usually will not exceed 3%. Therefore, the price at
which Units may be redeemed could be less than the price paid
by the Unit holder and may be less than the par value of the Securities
represented by the Units so redeemed.
The Trustee is empowered to sell underlying Bonds in a Trust in
order to make funds available for redemption. To the extent that
Bonds are sold, the size and diversity of such Trust will be reduced.
Such sales may be required at a time when Bonds would not otherwise
be sold and might result in lower prices than might otherwise
be realized.
The right of redemption may be suspended and payment postponed
for any period during which the New York Stock Exchange is closed,
other than for customary weekend and holiday closings, or during
which the Securities and Exchange Commission determines that trading
on that Exchange is restricted or an emergency exists, as a result
of which disposal or evaluation of the Bonds is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances,
the Sponsor may apply to the Securities and Exchange Commission
for an order permitting a full or partial suspension of the right
of Unit holders to redeem their Units.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 12:00 p.m. eastern
standard 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. 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 such of the Bonds in each Trust
on a list furnished by the Sponsor as the Trustee in its sole
discretion may deem necessary to meet redemption requests or pay
expenses to the extent funds are unavailable. 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
Page 29
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 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.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Fund which the Trustee may be required to pay under
any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the
Indenture contains other customary provisions limiting the liability
of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor
Page 30
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
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,
Page 31
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.
Supplemental Information
Upon written or telephonic request to the Trustee, investors will
receive at no cost to the investor supplemental information about
this Series, which has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference. The supplemental
information includes more detailed information concerning certain
of the Bonds included in the Trusts and more specific risk information
concerning the individual state Trusts.
Page 32
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
What is the First Trust Combined Series? 3
What are Certain General Matters Relating
to the Trusts? 4
Risk Factors 4
What are Estimated Long-Term Return and
Estimated Current Return? 10
How is Accrued Interest Treated? 11
What are the Expenses and Charges? 11
Why and How are the Insured Trusts Insured? 13
Public Offering:
How is the Public Offering Price Determined? 17
How are Units Distributed? 19
What are the Sponsor's Profits? 20
What are the Underwriting Concessions? 21
Will There be a Secondary Market? 21
Rights of Unit Holders:
How are Certificates Issued and Transferred? 22
How are Interest and Principal Distributed? 22
How Can Distributions to Unit Holders be
Reinvested? 23
What is the Federal Tax Status of Unit Holders? 24
What Reports will Unit Holders Receive? 27
How May Units be Redeemed? 28
How May Units be Purchased by the Sponsor? 29
How May Bonds be Removed from the Fund? 29
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 30
Who is the Trustee? 30
Limitations on Liabilities of Sponsor and Trustee 30
Who is the Evaluator? 31
Other Information:
How May the Indenture be Amended or
Terminated? 31
Legal Opinions 31
Experts 32
Supplemental Information 32
</TABLE>
___________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL 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
Prospectus
Part II
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
The First Trust (registered trademark) Combined Series
INFORMATION SUPPLEMENT
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN
THE PROSPECTUS MAY BE OBTAINED WITHIN FIVE BUSINESS DAYS OF WRITTEN
OR TELEPHONIC REQUEST TO THE TRUSTEE, THE ADDRESS AND TELEPHONE
NUMBER OF WHICH ARE SET FORTH IN "INFORMATION AS TO SPONSOR, TRUSTEE
AND EVALUATOR - WHO IS THE TRUSTEE?"
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.
This Information Supplement provides additional information concerning
the structure, operations and risks of a First Trust Combined
Series Trust not found in the prospectuses for the Trusts. This
Information Supplement is not a prospectus and does not include
all of the information that a prospective investor should consider
before investing in a Trust. This Information Supplement should
be read in conjunction with the prospectus for the Trust in which
an investor is considering investing ("Prospectus"). Copies of
the Prospectus can be obtained by calling or writing the Trustee
at the telephone number and address indicated in Part I of the
Prospectus. This Information Supplement has been incorporated
by reference into the Prospectus.
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.
This Information Supplement is dated ___________, 1995. Capitalized
terms have been defined in the Prospectus.
TABLE OF CONTENTS
General Risk Disclosure
Discount Bonds 1
Original Issue Discount Bonds 2
Zero Coupon Bonds 2
Premium Bonds 2
General Obligation Bonds 3
Healthcare Revenue Bonds 3
Single Family Mortgage Revenue Bonds 3
Multi-Family Mortgage Revenue Bonds 4
Water and Sewerage Bonds 4
Electric Utility Bonds 4
Lease Obligation Bonds 5
Industrial Revenue Bonds 5
Transportation Facility Revenue Bonds 6
Educational Obligation Bonds 6
Bonds of Issuers Located in the Commonwealth of Puerto Rico 6
Insurance on the Bonds 8
How is the Public Offering Price Determined? 15
Description of Bond Ratings 15
Appendix A - New Jersey Disclosure A-1
Appendix B - New York Disclosure B-1
General Risk Disclosure
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
Page 1
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 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
Page 2
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 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
Page 3
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 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,
Page 4
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 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
Page 5
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.
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
Page 6
of such limitation, it is expected that the limitation of Section
936 credits would have a negative impact on Puerto Rico's economy.
Aid for Puerto Rico's economy has traditionally depended heavily
on Federal programs, and current Federal budgetary policies suggest
that an expansion of aid to Puerto Rico is unlikely. An adverse
effect on the Puerto Rican economy could result from other U.S.
policies, including a reduction of tax benefits for distilled
products, further reduction in transfer payment programs such
as food stamps, curtailment of military spending and policies
which could lead to a stronger dollar.
In a plebiscite held in November 1993, the Puerto Rican electorate
chose to continue Puerto Rico's Commonwealth status. Previously
proposed legislation, which was not enacted, would have preserved
the federal tax exempt status of the outstanding debts of Puerto
Rico and its public corporations regardless of the outcome of
the referendum, to the extent that similar obligations issued
by the states are so treated and subject to the provisions of
the Internal Revenue Code currently in effect. There can be no
assurance that any pending or future legislation finally enacted
will include the same or a similar protection against loss of
tax exemption. The November 1993 plebiscite can be expected to
have both direct and indirect consequences on such matters as
the basic characteristics of future Puerto Rico debt obligations,
the markets for these obligations, and the types, levels and quality
of revenue sources pledged for the payment of existing and future
debt obligations. Such possible consequences include, without
limitation, legislative proposals seeking restoration of the status
of Section 936 benefits otherwise subject to the limitations discussed
above. However, no assessment can be made at this time of the
economic and other effects of a change in federal laws affecting
Puerto Rico as a result of the November 1993 plebiscite.
The foregoing information constitutes only a brief summary of
some of the 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.
Page 7
Insurance on the Bonds
All Bonds in the portfolio of an Insured Trust are insured as
to the scheduled payment of interest and principal by policies
obtained by each Insured Trust from Financial Guaranty Insurance
Company ("Financial Guaranty" or "FGIC"), a New York stock insurance
company, or AMBAC Indemnity Corporation ("AMBAC Indemnity" or
"AMBAC"), a Wisconsin-domiciled stock insurance company, or obtained
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit directly from Financial Guaranty,
AMBAC Indemnity or other insurers (the "Preinsured Bonds"). The
insurance policy obtained by each Insured Trust is noncancellable
and will continue in force for such Trust so long as such Trust
is in existence and the Bonds described in the policy continue
to be held by such Trust (see "Portfolio" for each Insured Trust).
Nonpayment of premiums on the policy obtained by each Insured
Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or AMBAC Indemnity to take action
against the Trustee to recover premium payments due it. Premium
rates for each issue of Bonds protected by the policy obtained
by each Insured Trust are fixed for the life of such Trust. The
premium for any Preinsured Bonds has been paid in advance by the
Bond issuer, the underwriters, the Sponsor or others and any such
policy or policies are noncancellable and will continue in force
so long as the Bonds so insured are outstanding and the insurer
and/or insurers thereof remain in business. If the provider of
an original issuance insurance policy is unable to meet its obligations
under such policy, or if the rating assigned to the claims-paying
ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure any issue adversely
affected by either of the above described events. A monthly premium
is paid by each Insured Trust for the insurance obtained by such
Trust, which is payable from the interest income received by such
Trust. In the case of Preinsured Bonds, no premiums for insurance
are paid by the Insured Trust.
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.
Page 8
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).
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
Page 9
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 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
Page 10
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. 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
Page 11
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").
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
Page 12
such change of control or unless such change of control occurs
as a result of a public offering of Holdings' capital stock.
In addition, the Ownership Policy Agreement includes agreements
(i) not to change the "zero-loss" underwriting standards or policies
and procedures of CapMAC in a manner that would materially and
adversely affect the risk profile of CapMAC's book of business,
(ii) that CapMAC will adhere to the aggregate leverage limitations
and maintain capitalization levels considered by Moody's from
time to time as consistent with maintaining CapMAC's Rating and
(iii) that until CapMAC's statutory capital surplus and contingency
reserve ("qualified statutory capital") equal $250 million, CapMAC
will maintain a specified amount of qualified statutory capital
in excess of the amount of qualified statutory capital that CapMAC
is required at such time to maintain under the aggregate leverage
limitations set forth in Article 69 of the New York Insurance Law.
The Ownership Policy Agreement will terminate on the earlier of
the date on which a change of control of CapMAC occurs and the
date on which CapMAC and Holdings agree in writing to terminate
the Ownership Policy Agreement; provided that, CapMAC or Holdings
has confirmed that CapMAC's Rating in effect immediately prior
to any such termination will not be downgraded upon such termination.
As of December 31, 1992 and 1991, CapMAC had statutory capital
and surplus of approximately $148 million and $232 million, respectively,
and had not incurred any debt obligations. On June 26, 1992, CapMAC
made a special distribution (the "Distribution") to Holdings in
connection with the Sale in an aggregate amount that caused the
total of CapMAC's statutory capital and surplus to decline to
approximately $150 million. Holdings applied substantially all
of the proceeds of the Distribution to repay debt owed to Citicorp
that was incurred in connection with the capitalization of CapMAC.
As of June 30, 1992, CapMAC had statutory capital and surplus
of approximately $150 million and had not incurred any debt obligations.
In addition, on December 31, 1992 CapMAC had a statutory contingency
reserve of approximately $15 million, which is 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
Page 13
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, 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.
Page 14
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.
How is the Public Offering Price Determined?
Secondary Market Sales Charge. The sales charge assessed on Units
sold in secondary market transactions is determined in accordance
with the table set forth below based upon the number of years
remaining to the maturity of each such Bond. The effect of this
method of sales charge calculation will be that different sales
charge rates will be applied to the various Bonds in a Trust portfolio
based upon the maturities of such Bonds, in accordance with the
following schedule.
Secondary Offering Period
Sales Charge
________________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_______________ _________ _________
[S] [C] [C]
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
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.
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;
Page 15
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,
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.
Page 16
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.
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 17
APPENDIX A
NEW JERSEY DISCLOSURE
New Jersey is the ninth largest state in population and the fifth
smallest in land area. With an average of 1,062 people per square
mile, it is the most densely populated of all the states. The
State's economic base is diversified, consisting of a variety
of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture. Historically,
New Jersey's average per capita income has been well above the
national average, and in 1992 the State ranked second among the
states in per capita personal income ($26,967).
The New Jersey Economic Policy Council, a statutory arm of the
New Jersey Department of Commerce and Economic Development, has
reported in New Jersey Economic Indicators, a monthly publication
of the New Jersey Department of Labor, Division of Labor Market
and Demographic Research, that in 1988 and 1989 employment in
New Jersey's manufacturing sector failed to benefit from the export
boom experienced by many Midwest states and the State's service
sectors, which had fueled the State's prosperity since 1982, lost
momentum. In the meantime, the prolonged fast growth in the State
in the mid 1980s resulted in a tight labor market situation, which
has led to relatively high wages and housing prices. This means
that, while the incomes of New Jersey residents are relatively
high, the State's business sector has become more vulnerable to
competitive pressures.
The onset of the national recession (which officially began in
July 1990 according to the National Bureau of Economic Research)
caused an acceleration of New Jersey's job losses in construction
and manufacturing. In addition, the national recession caused
an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing.
Reflecting the downturn, the rate of unemployment in the State
rose from a low of 3.6% during the first quarter of 1989 to an
estimated 6.1% in December 1994, which is higher than the national
average of 5.4% in December 1994. Economic recovery is likely
to be slow and uneven in New Jersey, with unemployment receding
at a correspondingly slow pace, due to the fact that some sectors
may lag due to continued excess capacity. In addition, employers
even in rebounding sectors can be expected to remain cautious
about hiring until they become convinced that improved business
will be sustained. Also, certain firms will continue to merge
or downsize to increase profitability.
Debt Service. The primary method for State financing of capital
projects is through the sale of the general obligation bonds of
the State. These bonds are backed by the full faith and credit
of the State tax revenues and certain other fees are pledged to
meet the principal and interest payments and if provided, redemption
premium payments, if any, required to repay the bonds. As of June
30, 1993, there was a total authorized bond indebtedness of approximately
$9.0 billion, of which $3.6 billion was issued and outstanding,
$4.0 billion was retired (including bonds for which provision
for payment has been made through the sale and issuance of refunding
bonds) and $1.4 billion was unissued. The debt service obligation
for such outstanding indebtedness is $103.5 million for Fiscal
Year 1994.
New Jersey's Budget and Appropriation System. The State operates
on a fiscal year beginning July 1 and ending June 30. At the end
of Fiscal Year 1989, there was a surplus in the State's general
fund (the fund into which all State revenues not otherwise restricted
by statute are deposited and from which appropriations are made)
of $411.2 million. At the end of Fiscal Year 1990, there was a
surplus in the general fund of $1.0 million. At the end of Fiscal
Year 1991, there was a surplus of $1.4 million. New Jersey closed
its Fiscal Year 1992 with a surplus of $760.8 million. It is estimated
that New Jersey closed its Fiscal Year 1993 with a surplus of
$937.4 million.
In order to provide additional revenues to balance future budgets,
to redistribute school aid and to contain real property taxes,
on June 27, 1990, and July 12, 1990, Governor Florio signed into
law legislation which was estimated to raise approximately $2.8
billion in additional taxes (consisting of $1.5 billion in sales
and use taxes and $1.3 billion in income taxes), the biggest tax
hike in New Jersey history. There can be no assurance that receipts
and collections of such taxes will meet such estimates.
Page A-1
The first part of the tax hike took effect on July 1, 1990, with
the increase in the State's sales and use tax rate from 6% to
7% and the elimination of exemptions for certain products and
services not previously subject to the tax, such as telephone
calls, paper products (which has since been reinstated), soaps
and detergents, janitorial services, alcoholic beverages and cigarettes.
At the time of enactment, it was projected that these taxes would
raise approximately $1.5 billion in additional revenue. Projections
and estimates of receipts from sales and use taxes, however, have
been subject to variance in recent fiscal years.
The second part of the tax hike took effect on January 1, 1991,
in the form of an increased state income tax on individuals. At
the time of enactment, it was projected that this increase would
raise approximately $1.3 billion in additional income taxes to
fund a new school aid formula, a new homestead rebate program
and state assumption of welfare and social services costs. Projections
and estimates of receipts from income taxes, however, have also
been subject to variance in recent fiscal years. Under the legislation,
income tax rates increased from their previous range of 2% to
3.5% to a new range of 2% to 7%, with the higher rates applying
to married couples with incomes exceeding $70,000 who file joint
returns, and to individuals filing single returns with incomes
of more than $35,000.
The Florio administration had contended that the income tax package
will help reduce local property tax increases by providing more
state aid to municipalities. Under the income tax legislation
the State will assume approximately $289 million in social services
costs that previously were paid by counties and municipalities
and funded by property taxes. In addition, under the new formula
for funding school aid, an extra $1.1 billion is proposed to be
sent by the State to school districts beginning in 1991, thus
reducing the need for property tax increases to support education
programs.
Effective July 1, 1992, the State's sales and use tax rate decreased
from 7% to 6%. Effective January 1, 1994, an across-the-board
5% reduction in the income tax rates was enacted and effective
January 1, 1995, further reductions ranging from 1% up to 10%
in income tax rates took effect.
On June 30, 1994, Governor Whitman signed the New Jersey Legislature's
$15.7 billion budget for Fiscal Year 1995. The balanced budget,
which includes $455 million in surplus, is $141 million less than
the 1994 budget. Whether the State can achieve a balanced budget
depends on its ability to enact and implement expenditure reductions
and to collect the estimated tax revenues. The Fiscal Year 1995
Appropriations Act forecasts sales and use tax collections of
$3.98 billion, a 5.3% increase from receipts estimated in the
Revised Revenue Estimates for Fiscal Year 1994. It also forecasts
gross income tax collections of $4.582 billion, a 1.2% increase
from receipts estimated for Fiscal Year 1994, and corporation
business tax collections of $915 million, a 12% decrease from
receipts estimated for Fiscal Year 1994. However, projections
and estimates of receipts from taxes have been subject to variance
in recent years as a result of several factors, most recently
a significant slowdown in the national, regional and State economies,
sluggish employment and uncertainties in taxpayer behavior as
a result of actual and proposed changes in Federal tax laws.
Litigation. The State is a party in numerous legal proceedings
pertaining to matters incidental to the performance of routine
governmental operations. Such litigation includes, but is not
limited to, claims asserted against the State arising from alleged
torts, alleged breaches of contracts, condemnation proceedings
and other alleged violations of State and Federal laws. Included
in the State's outstanding litigation are cases challenging the
following: the formula relating to State aid to public schools,
the method by which the State shares with its counties maintenance
recoveries and costs for residents in State institutions, unreasonably
low Medicaid payment rates for long-term facilities in New Jersey,
the obligation of counties to maintain Medicaid or Medicare eligible
residents of institutions and facilities for the developmentally
disabled, taxes paid into the Spill Compensation Fund (a fund
established to provide money for use by the State to remediate
hazardous waste sites and to compensate other persons for damages
incurred as a result of hazardous waste discharge) based on Federal
preemption, various provisions, and the constitutionality, of
the Fair Automobile Insurance Reform Act of 1990, the State's
role in a consent order concerning the construction of a resource
facility in Passaic County, actions taken by the New Jersey Bureau
of Securities against an individual, the State's actions regarding
alleged chromium contamination of State-owned property in Hudson
County, the issuance of emergency redirection orders and a draft
permit by the Department
Page A-2
of Environmental Protection and Energy, the adequacy of Medicaid
reimbursement for services rendered by doctors and dentists to
Medicaid eligible children, the Commissioner of Health's calculation
of the hospital assessment required by the Health Care Cost Reduction
Act of 1991, refusal of the State to share with Camden County
Federal funding the State recently received for disproportionate
share hospital payments made to county psychiatric facilities,
and the constitutionality of annual A-901 hazardous and solid
waste licensure renewal fees collected by the Department of Environmental
Protection and Energy. Adverse judgments in these and other matters
could have the potential for either a significant loss of revenue
or a significant unanticipated expenditure by the State.
At any given time, there are various numbers of claims and cases
pending against the State, State agencies and employees seeking
recovery of monetary damages that are primarily paid out of the
fund created pursuant to the New Jersey Tort Claims Act. In addition,
at any given time, there are various numbers of contract claims
against the State and State agencies seeking recovery of monetary
damages. The State is unable to estimate its exposure for these claims.
Debt Ratings. For many years prior to 1991, both Moody's Investors
Service, Inc. and Standard and Poor's had rated New Jersey general
obligation bonds Aaa and "AAA," respectively. On July 3, 1991,
however, Standard and Poor's downgraded New Jersey general obligation
bonds to "AA+." On June 4, 1992, Standard and Poor's placed New
Jersey general obligation bonds on CreditWatch with negative implications,
citing as its principal reason for its caution the unexpected
denial by the Federal Government of New Jersey's request for $450
million in retroactive Medicaid payments for psychiatric hospitals.
These funds were critical to closing a $1 billion gap in the State's
$15 billion budget for fiscal year 1992 which ended on June 30,
1992. Under New Jersey state law, the gap in the current budget
was required to be closed before the new budget year began on
July 1, 1992. Standard and Poor's suggested the State could close
fiscal 1992's budget gap and help fill fiscal 1993's hole by a
reversion of $700 million of pension contributions to its general
fund under a proposal to change the way the State calculates its
pension liability.
On July 6, 1992, Standard and Poor's reaffirmed its "AA+" rating
for New Jersey general obligation bonds and removed the debt from
its CreditWatch list, although it stated that New Jersey's long-term
financial outlook was negative. Standard & Poor's was concerned
that the State was entering Fiscal Year 1993 with only a $26 million
surplus and remained concerned about whether the State economy
would recover quickly enough to meet lawmakers' revenue projections.
It also remained concerned about the recent federal ruling leaving
in doubt how much the State was due in retroactive Medicaid reimbursements
and a ruling by a federal judge, now on appeal, of the State's
method for paying for uninsured hospital patients. However, on
July 27, 1994, Standard and Poor's announced that it was changing
the State's outlook from negative to stable due to a brightening
of the State's prospects as a result of Governor Whitman's effort
to trim spending and cut taxes, coupled with an improving economy.
Standard and Poor's reaffirmed its "AA+" rating at the same time.
On August 24, 1992, Moody's Investors Service, Inc. downgraded
New Jersey general obligation bonds to "Aa1", stating that the
reduction reflected a developing pattern of reliance on nonrecurring
measures to achieve budgetary balance, four years of financial
operations marked by revenue shortfalls and operating deficits,
and the likelihood that serious financial pressures would persist.
On August 5, 1994, Moody's reaffirmed its "Aa1" rating, citing
on the positive side New Jersey's broad-based economy, high income
levels, history of maintaining a positive financial position and
moderate (albeit rising) debt ratios, and on the negative side,
a continued reliance on one-time revenue and a dependence on pension-related
savings to achieve budgetary balance.
There can be no assurance that these ratings will continue.
Page A-3
APPENDIX B
NEW YORK DISCLOSURE
The New York Trust includes obligations issued by New York State
(the "State"), by its various public bodies (the "Agencies"),
and/or by other entities located within the State, including the
City of New York (the "City").
Some of the more significant events and conditions relating to
the financial situation in New York are summarized below. This
section provides only a brief summary of the complex factors affecting
the financial situation in New York and is derived from sources
that are generally available to investors and is believed to be
accurate. It is based in part on Official Statements and prospectuses
issued by, and on other information reported by the State, the
City, and the Agencies in connection with the issuance of their
respective securities.
There can be no assurance that current or future statewide or
regional economic difficulties, and the resulting impact on State
or local government finances generally, will not adversely affect
the market value of New York Municipal Obligations held in the
portfolio of the Trust or the ability of particular obligors to
make timely payments of debt service on (or relating to) those
obligations.
(1) The State: The State has historically been one of the wealthiest
states in the nation. For decades, however, the State economy
has grown more slowly than that of the nation as a whole, gradually
eroding the State's relative economic affluence. Statewide, urban
centers have experienced significant changes involving migration
of the more affluent to the suburbs and an influx of generally
less affluent residents. Regionally, the older Northeast cities
have suffered because of the relative success that the South and
the West have had in attracting people and business. The City
has also had to face greater competition as other major cities
have developed financial and business capabilities which make
them less dependent on the specialized services traditionally
available almost exclusively in the City.
The State has for many years had a very high state and local tax
burden relative to other states. The burden of State and local
taxation, in combination with the many other causes of regional
economic dislocation, has contributed to the decisions of some
businesses and individuals to relocate outside, or not locate
within, the State.
Slowdown of Regional Economy. A national recession commenced in
mid-1990. The downturn continued throughout the State's 1990-91
fiscal year and was followed by a period of weak economic growth
during the 1991 calendar year. For calendar year 1992, the national
economy continued to recover, although at a rate below all post-war
recoveries. For calendar year 1993, the economy is expected to
grow faster than in 1992, but still at a very moderate rate, as
compared to other recoveries. Moderate economic growth continued
in calendar year 1994. The State has projected the rate of economic
growth to slow within New York during 1995 as the expansion of
the national economy moderates. 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.
1995-96 Fiscal Year. The Governor issued a proposed Executive
Budget for the 1995-96 fiscal year (the "Proposed Budget") on
February 1, 1995, which projected a balanced general fund and
receipts and disbursements of $32.5 billion and $32.4 billion,
respectively. As of May 29, 1995, the State legislature had not
yet enacted, nor had the Governor and the legislature reached
an agreement on, the budget for the 1995-96 fiscal year which
commenced on April 1, 1995. The delay in the enactment of the
budget may negatively affect certain proposed actions and reduce
projected savings.
The Proposed Budget and the 1995-96 Financial Plan provide for
the closing of a projected $4.7 billion budget gap in the 1995-96
fiscal year by cost-containment savings in social welfare programs,
savings from State agency restructurings, freezing the level of
some categories of local aid and new revenue measures.
Page B-1
The State's proposed budget and the 1995-96 Plan may be impacted
negatively by uncertainties relating to the economy and tax collections,
although recent signs of improvement in the national economy could
lead to short-term increases in State receipts.
1994-95 Fiscal Year. The State Legislature enacted the State's
1994-95 fiscal year budget on June 7, 1994, more than two months
after the start of that fiscal year. As of February 1, 1995, the
updated 1994-95 State Financial Plan (the "Plan") projected total
general fund receipts and disbursements of $33.3 billion and $33.5
billion, respectively, representing reductions in receipts and
disbursements of $1 billion and $743 million, respectively, from
the amount set forth in the 1994-95 budget. The Plan projected
for a General Fund balance of approximately $157 million at the
close of the 1994-95 fiscal year.
1993-94 Fiscal Year. The State ended the 1993-94 fiscal year with
an operating surplus of approximately $1.0 billion.
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 March 31, 1994, the total amount of long-term
State general obligation debt authorized but unissued stood at
$8.0 billion. As of the same date, the State had approximately
$5.4 billion in general obligation bonds including $224 million
of Bond Anticipation Notes outstanding.
The State originally projected that its borrowings for capital
purposes during the State's 1994-95 fiscal year would consist
of $374 million in general obligation bonds and bond anticipation
notes and $140 million in general obligation commercial paper.
The Legislature has authorized the issuance of up to $69 million
in certificates of participation in pools of leases for equipment
and real property to be utilized by State agencies. Through March
15, 1995, the State had issued in excess of $590 million of its
general obligation bonds (including $430 million of refunding
bonds). The projections of the State regarding its borrowings
for any fiscal year are subject to 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 March 31, 1994, LGAC has issued
its bonds to provide net proceeds of $4.5 billion. The LGAC was
authorized to provide net proceeds of $315 million, during the
State's 1994-95 fiscal year. The LGAC issued $347 million of bonds
on March 1, 1995 providing the authorized net proceeds.
Financing of capital programs by other public authorities of the
State is also obtained from lease-purchase and contractual-obligation
financing arrangements, the debt service for which is paid from
State appropriations. As of March 31, 1994, there were $16.6 billion
of such other financing arrangements outstanding and additional
financings of this nature by public authorities are projected
to total $2.4 billion during the 1994-95 fiscal year. In addition,
certain agencies had issued and outstanding approximately $7.3
billion of "moral obligation financings" as of March 31, 1994,
which are to be repaid from project revenues. While there has
never been a default on moral obligation debt of the State, the
State would be required to make up any shortfall in debt service.
Ratings. The $850 million in TRANS issued by the State in April
1993 were rated SP-1-Plus by S&P and MIG-1 by Moody's, which represent
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 February 28, 1994, and S&P's rating stood at A- with a positive
outlook on February 28, 1994, an improvement from S&P's stable
outlook from April 1993 through February 1994 and 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
Page B-2
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 $537 million of its
general obligation bonds in March 1995.
(2) The City and the Municipal Assistance Corporation ("MAC"):
The City accounts for approximately 40% 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").
In recent years, the rate of economic growth in the City slowed
substantially as the City's economy entered a recession. While
by some measures the City's economy may have begun to recover,
a number of factors, including poor performance by the City's
financial services companies, may prevent a significant improvement
in the City's economy and may in fact negatively impact upon the
City's finances by reducing tax receipts. The City Comptroller
has issued reports concluding that the recession of the City's
economy may be ending, but there is little prospect of any significant
improvement in the near term.
Fiscal Year 1996 and the 1995-1998 Financial Plan. On February
14, 1995, the Mayor released his preliminary $30.5 billion budget
for fiscal year 1996, which included $2.7 billion of deficit reduction
measures. The Mayor is seeking a $1.2 billion reduction in mandated
welfare and Medicaid expenditures from the State, a $569 million
reduction in expenditures by city agencies and the Board of Education
budget, $600 million in personnel-related savings partly through
the elimination of 15,000 jobs within 18 months, and other measures.
The 1995-1998 Financial Plan (the "Plan"), which was submitted
to the Control Board on February 23, 1995, projected budget gaps
of $3.2 billion and $3.8 billion for fiscal years 1997 and 1998,
respectively. The City Comptroller warned on March 7, 1995 that
the budget gap for fiscal year 1996 could increase by $500 million
to as much as $3.2 billion. The Control Board reported on March
17, 1995 that the proposed budget for fiscal year 1996 relies
heavily on risky assumptions such as $600 million in savings to
be negotiated with City unions and $1.4 billion in savings dependent
on State legislative approval.
The City successfully negotiated concessions with a number of
unions in order to ensure that the fiscal year 1995 budget remained
in balance. The Mayor has indicated that to avoid additional lay-offs,
higher than the number referred to above, reductions will be necessary
in the benefit plans of City employees to close the budget gaps
for fiscal years 1996 and thereafter. Union leadership has publicly
opposed such "givebacks." With respect to fiscal year 1995 the
City was also successful in obtaining additional funds and relief
from certain mandated expenditures from the State for various
programs, including Medicaid. However, the amount of gap closing
measures requiring State action set forth in the Plan is well
in excess of proposed assistance to the City outlined in the Governor's
Proposed Budget.
The Mayor has directed City agencies to identify an additional
$300 million in cuts for fiscal year 1996 because of anticipated
shortfalls of as much as $500 million in State aid and budgetary
actions. An extended delay by the State in adopting its 1995-96
fiscal year budget would negatively impact upon the City's financial
condition and ability to close budget gaps for fiscal years 1996
and thereafter.
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
Page B-3
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 1995-96 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 the 1996-97 or 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 the Plan are based on various
assumptions and contingencies which are uncertain and which may
not materialize. Changes in major assumptions could significantly
affect the City's ability to balance its budget as required by
State law and to meet its annual cash flow and financing requirements.
Such assumptions and contingencies include the timing of any regional
and local economic recovery, the absence of wage increases in
excess of the increases assumed in its financial plan, employment
growth, provision of State and Federal aid and mandate relief,
State legislative approval of future State budgets, levels of
education expenditures as may be required by State law, adoption
of future City budgets by the New York City Council, and approval
by the Governor or the State Legislature and the cooperation of
MAC with respect to various other actions proposed in the 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 1996 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 1995 through
1998 contemplates capital spending of $16.4 billion, which will
be financed through issuance of $10.7 billion of general obligation
bonds and the balance through Water Authority Revenue Bonds and
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 Year 1995. New York City adopted its fiscal year 1995 budget
on June 21, 1994, which provided for spending of $31.6 billion
and closed a budget gap of $2.3 billion. However, following adoption
of the fiscal year 1995 budget, additional unexpected budget gaps
totaling approximately $2.0 billion were identified. The widening
of the budget gap for fiscal year 1995 resulted from shortfalls
in tax revenues and State and federal aid. The Mayor and the City
Council were unable to reach agreement on additional cuts proposed
by the Mayor in October 1994. The City Council passed its own
budget cut proposal in November 1994. The Mayor vetoed the City
Council version, the City Council overrode his veto and the Mayor
implemented his original plan. A state court held in December
1994 that neither budget cut proposal could be implemented. The
Mayor then elected not to spend certain funds in order to keep
the budget in balance.
Page B-4
Fiscal Years 1990 through 1994. The City achieved balanced operating
results as reported in accordance with GAAP for its fiscal years
1990 through 1994. The City was required to close substantial
budget gaps in these fiscal years to maintain balanced operating
results.
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, 1994, the City estimated
its potential future liability to be $2.6 billion.
On January 30, 1995, Robert L. Schulz and other defendants commenced
a federal district court action seeking among other matters to
cancel the issuance on January 31, 1995 of $659 million of City
bonds. While the federal courts have rejected requests for temporary
restraining orders and expedited appeals, the case is still pending.
The City has indicated that it believes the action to be without
merit as it relates to the City, but there can be no assurance
as to the outcome of the litigation and an adverse ruling or the
granting of a permanent injunction would have a negative impact
on the City's financial condition and its ability to fund its
operations.
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 March 13, 1995, Moody's confirmed its Baa1 rating in connection
with a scheduled March 1995 sale of $795 million of the City's
general obligation bonds.
S&P confirmed its rating of the City's general obligation bonds
in connection with the City's $795 million general obligation
bond issue in March 1995. In January 1995, in response to the
City's plan to borrow $120 million to refund debt due in February
without imposing additional cuts in the fiscal 1995 budget, S&P
placed the City on negative credit watch and indicated that in
April 1995 it would consider a possible downgrade of the City's
general obligation debt from A- to BBB. At the end of March 1995,
concerned by published reports that the Mayor might not produce
his executive budget for fiscal year 1996, S&P suggested that
the Mayor should prepare "a budget-balancing contingency plan"
or face the possibility of downgrade of the City's general obligation
bonds. As of May 22, 1995, S&P had not announced any change in
its ratings of the City's debt. Any such rating decrease would
negatively affect the marketability of the City's bonds and significantly
increase the City's financing costs.
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 December 31, 1994, the City and MAC had, respectively, $22.5
billion and $4.1 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
Page B-5
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
and an aggregate of $63.5 billion of outstanding debt, some of
which was state-supported, state-related debt.
(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 State has entered into a settlement agreement with Delaware,
Massachusetts and all other parties with respect to State of Delaware
v. State of New York, an action by Delaware and other states to
recover unclaimed property from New York-based brokers, which
had escheated to the State pursuant to its Abandoned Property
Law. Annual payments under this settlement will be made through
the State's 2002-03 fiscal year in amounts not exceeding $48.4
million in any fiscal year subsequent to the State's 1994-95 fiscal
year.
In Schulz v. State of New York, commenced May 24, 1993 ("Schulz
1993"), petitioners have challenged the constitutionality of mass
transportation bonding programs of the New York State Thruway
Authority and the Metropolitan Transportation Authority. On May
24, 1993, the Supreme Court, Albany County, temporarily enjoined
the State from implementing those bonding programs. In previous
actions Mr. Schulz and others have challenged on similar grounds
bonding programs.
Petitioners in Schulz 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. On June
30, 1994, the Court of Appeals, the State's highest court, upheld
the decisions of the Supreme Court and Appellate Division in Schulz.
Plaintiffs' motion for reargument was denied by the Court of Appeals
on September 1, 1994 and their writ of certiorari to the U.S.
Supreme Court was denied on January 23, 1995.
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 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.
Page B-6
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1992, the total indebtedness
of all localities in the State was approximately $35.2 billion,
of which $19.5 billion was debt of New York City (excluding $5.9
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. Seventeen localities had outstanding
indebtedness for state financing at the close of their fiscal
year ending in 1992.
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 B-7
New Jersey Insured Trust, Series 13
(The First Trust Combined Series 249)
Prospectus - Part I
New Jersey Insured Trust, Series 13 (the "New Jersey Insured Trust"),
consists of a portfolio of interest-bearing obligations issued
by or on behalf of the State of New Jersey or certain United States
Territories which, in the opinion of recognized bond counsel to
the issuing authorities, provide income which is exempt from Federal
income tax, New Jersey income tax and local tax, as detailed below.
The New Jersey Insured Trust consists of obligations
of issuers located in New Jersey. 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 %
Electric %
Sewer %
University and School %
Miscellaneous %
Each of Bond issues represents % 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 (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 Jersey Insured Trust, Series
13-Portfolio" and "Description of Bond Ratings" in the Information
Supplement.
Page 1 of 9
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>
<S> <C>
General Information
Principal Amount of Bonds in the Trusts $
Number of Units
Fractional Undivided Interest in the Trust per Unit 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
Public Offering Price per Unit (3) $ 1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 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 $
</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 (5) Maximum of $0.35 per Unit annually (6)
Evaluator's Annual Fee $0.30 per $1,000 principal amount
of Bonds at the Initial Date of Deposit
Estimated Annual Organizational
Expenses per Unit (7)
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. For the New
Jersey Insured Trust, the Sponsor has elected 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. Because certain of the Bonds
in certain Trusts may from time to time under certain circumstances
be sold or redeemed or will be called or will mature in accordance
with their terms, there is no guarantee that the value of each
Unit at the respective Trust's termination will be equal to the
Principal Amount (Par Value) of Bonds per Unit stated above.
(2) The sales charges for the Trust, 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,
is 4.9% (5.152%).
(3) Anyone ordering Units for settlement after the First Settlement
Date will pay accrued interest from such date to the date of settlement
(normally three 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) The Sponsor will also be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of
$0.10 per Unit.
(6) Payable to an affiliate of the Sponsor.
(7) The 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.
Page 2 of 9
<TABLE>
<CAPTION>
Underwriting
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532
Underwriters
_________
=========
</TABLE>
<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) See "What are Estimated Long-Term Return and Estimated Current
Return?" for a description of how these returns are calculated.
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 may
be obtained from the Trustee at no charge by calling the Trustee
at the number listed in Part II of this Prospectus.
Page 3 of 9
New Jersey Risk Factors
The financial condition of the State of New Jersey is affected
by various national, economic, social and environmental policies
and conditions. Additionally, Constitutional and statutory limitations
imposed on the State and its local governments concerning taxes,
bond indebtedness and other matters may constrain the revenue-generating
capacity of the State and its local governments and, therefore,
the ability of the issuers of the Bonds to satisfy their obligations.
The economic vitality of the State and its various regions and,
therefore, the ability of the State and its local governments
to satisfy the Bonds, are affected by numerous factors. The State's
economic base is diversified, consisting of manufacturing, construction
and service industries, supplemented by rural areas with selective
commercial agriculture. The State has a relatively high wage labor
market which has resulted in the State's business sector becoming
more vulnerable to competitive pressures.
The State is a party to numerous lawsuits in which an adverse
final decision could materially affect the State's governmental
operations and consequently its ability to pay debt service on its
obligations.
All outstanding general obligation bonds of the State are rated
"AA+" by Standard and Poor's and "Aa1" by Moody's.
Further information concerning New Jersey risk factors may be
obtained upon written or telephonic request to the Trustee as
described in "Information as to Sponsor, Trustee and Evaluator-Who
is the Trustee?"
New Jersey Tax Status
The assets of the New Jersey Insured Trust will consist of interest-bearing
obligations issued by or on behalf of the State of New Jersey
and counties, municipalities, authorities and other political
subdivisions thereof, and certain territories of the United States,
including Puerto Rico, Guam, the Virgin Islands and the Northern
Mariana Islands (the "New Jersey Bonds").
In the opinion of Pitney, Hardin, Kipp & Szuch, Special Counsel
to the Fund for New Jersey tax matters, under existing law:
The New Jersey Trust will be recognized as a trust and not an
association taxable as a corporation. The New Jersey Trust will
not be subject to the New Jersey Corporation Business Tax or the
New Jersey Corporation Income Tax.
With respect to the non-corporate Unit holders who are residents
of New Jersey, the income of the New Jersey Trust will be treated
as the income of such Unit holders under the New Jersey Gross
Income Tax. Interest on the underlying New Jersey Bonds which
is exempt from tax under the New Jersey Gross Income Tax Law when
received by the New Jersey Trust will retain its status as tax-exempt
interest when distributed to the Unit holders.
A non-corporate Unit holder will not be subject to the New Jersey
Gross Income Tax on any gain realized either when the New Jersey
Trust disposes of a New Jersey Bond (whether by sale, exchange,
redemption, or payment at maturity) or when the Unit holder redeems
or sells his Units. Any loss realized on such disposition may
not be utilized to offset gains realized by such Unit holder on
the disposition of assets the gain on which is subject to the
New Jersey Gross Income Tax.
Units of the New Jersey Trust may be taxable on the death of a
Unit holder under the New Jersey Transfer Inheritance Tax Law
or the New Jersey Estate Tax Law.
If a Unit holder is a corporation subject to the New Jersey Corporation
Business Tax or New Jersey Corporation Income Tax, interest from
the Bonds in the New Jersey Trust which is allocable to such corporation
will be includable in its entire net income for purposes of the
New Jersey Corporation Business Tax or New Jersey Corporation
Income Tax, less any interest expense incurred to carry such investment
to the extent such interest expense has not been deducted in computing
Federal taxable income. Net gains derived by such corporation
on the disposition of the New Jersey Bonds by the New Jersey Trust
or on the disposition of its Units will be included in its entire
net income for purposes of the New Jersey Corporation Business
Tax or New Jersey Corporation Income Tax.
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of Unit Holders?"
Page 4 of 9
Federal and New Jersey 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 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 5.50% 6.00% 6.50%
Return Return Rate Taxable Equivalent Yield
_____________________________________________________________________________________________________
<C> <C> <S> <C> <C> <C>
$ 0 - 23.4 $ 0 - 39.0 16.8% 6.61 7.21 7.81
23.4 - 56.6 39.0 - 94.3 32.3 8.12 8.86 9.60
94.3 - 143.6 35.2 8.49 9.26 10.03
56.6 - 118.0 35.5 8.53 9.30 10.08
118.0 - 256.5 143.6 - 256.5 40.2 9.20 10.03 10.87
Over 256.5 Over 256.5 43.6 9.75 10.64 11.52
</TABLE>
Page 5 of 9
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?"
For industry concentrations of the Bonds in the Trust, see
"New Jersey Insured Trust Summary."
(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 the 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>
New Jersey Insured
Trust, Series 13 $ $ $ $ $ $
</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
Page 6 of 9
to an issue of Bonds. In addition, certain Bonds in the portfolio
may be redeemed in whole or in part other than by operation of
the stated redemption or sinking fund provisions under certain
unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such Bonds. See "What
are Certain General Matters Relating to the Trusts?" for a description
of certain of such unusual or extraordinary circumstances. Redemption
pursuant to call provisions generally will, and redemption pursuant
to sinking fund provisions may, occur at times when the redeemed
Bonds have an offering side valuation which represents a premium
over par or for original issue discount Bonds a premium over the
accreted value. To the extent that the Bonds were deposited in
the Fund at a price higher than the price at which they are redeemed,
this will represent a loss of capital when compared with the original
Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared
to the original Public Offering Price of the Units, excluding
the effect of the sales charge on the Units. Distributions will
generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium
received on such redemption (except to the extent the proceeds
of the redeemed Bonds are used to pay for Unit redemptions). The
estimated current return and the estimated long-term return in
this event may be affected by such redemptions. For the Federal
and state tax effect on Unit holders of such redemptions and resultant
distributions, see "Rights of Unit Holders-What is the Federal
Tax Status of Unit Holders?" and "New Jersey Insured Trust Summary-New
Jersey 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 7 of 9
Statement of Net Assets
At the Opening of Business on the Initial Date of Deposit
, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <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)
Less accrued organizational costs (5)
_____________
Net assets $
=============
Outstanding Units
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (6) $
Less gross underwriting commissions (6)
_____________
Net assets $
=============
</TABLE>
[FN]
(1) The aggregate offering price of the bonds for the Trust at
the opening of business on the Initial Date of Deposit and the
cost to the 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 deposited in the
Trust as collateral. The amount of available letter of credit
and the amount expected to be utilized as collateral for the 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 Available Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
New Jersey Insured
Trust, Series 13 $ $ $ $ $
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the New Jersey
Insured Trust and delivered to the Trustee has been obtained by
such Insured Trust or has been obtained directly by the Bond issuer,
the underwriters, the Sponsor or others prior to the Initial Date
of Deposit.
(4) The Trustee will advance to the Trust the amount of net interest
accrued to , the First Settlement Date,
for distribution to the Sponsor as the Unit holder of record.
(5) The Trust will bear all or a portion of its estimated organizational
cost which will be deferred and amortized over five years from the
Initial Date of Deposit.
(6) The aggregate cost to investors (exclusive of accrued interest)
and the aggregate gross underwriting commissions of 4.9% are computed
assuming no reduction of sales charge for quantity purchases.
Page 8 of 9
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
New Jersey Insured Trust, Series 13
We have audited the accompanying statement of net assets, including
the portfolio, of New Jersey Insured Trust, Series 13 ("the Trust"),
contained in The First Trust Combined Series 249, as of the opening
of business on , 1995. This statement of net assets
is the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on this statement 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 statement
of net assets is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of net assets. Our procedures included
confirmation of the letter of credit held by the Trustee and deposited
in the Trust 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 statement of net assets. We believe that our audit of the
statement of net assets provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above
presents fairly, in all material respects, the financial position
of New Jersey Insured Trust, Series 13, as contained in The First
Trust Combined Series 249, at the opening of business on
, 1995 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
, 1995
Page 9 of 9
New York Insured Trust, Series 60
(The First Trust Combined Series 249)
Prospectus - Part I
New York Insured Trust, Series 60 (the "New York Insured Trust"),
consists of a portfolio of interest-bearing obligations issued
by or on behalf of the State of New York or certain United States
Territories which, in the opinion of recognized bond counsel to
the issuing authorities, provide income which is exempt from Federal
income tax, New York income tax and local tax, as detailed below.
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 %
Electric %
Sewer %
University and School %
Miscellaneous %
Each of Bond issues represents % 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 (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" in the Information
Supplement.
Page 1 of 9
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>
<S> <C>
General Information
Principal Amount of Bonds in the Trusts $
Number of Units
Fractional Undivided Interest in the Trust per Unit 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
Public Offering Price per Unit (3) $1,000.00
Sponsor's Initial Repurchase Price per Unit (3) $ 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 $
</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 (5) Maximum of $0.35 per Unit annually (6)
Evaluator's Annual Fee $0.30 per $1,000 principal amount
of Bonds at the Initial Date of Deposit
Estimated Annual Organizational
Expenses per Unit (7)
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. For the New
York Insured Trust, the Sponsor has elected 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. Because certain of the Bonds in certain Trusts
may from time to time under certain circumstances be sold or redeemed
or will be called or will mature in accordance with their terms,
there is no guarantee that the value of each Unit at the respective
Trust's termination will be equal to the Principal Amount (Par
Value) of Bonds per Unit stated above.
(2) The sales charges for the Trust, 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,
is 4.9% (5.152%).
(3) Anyone ordering Units for settlement after the First Settlement
Date will pay accrued interest from such date to the date of settlement
(normally three 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) The Sponsor will also be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of
$0.10 per Unit.
(6) Payable to an affiliate of the Sponsor.
(7) The 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.
Page 2 of 9
Underwriting
<TABLE>
<CAPTION>
Number of
Name Address Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532
Underwriters _________
=========
</TABLE>
<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) See "What are Estimated Long-Term Return and Estimated Current
Return?" for a description of how these returns are calculated.
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 may
be obtained from the Trustee at no charge by calling the Trustee
at the number listed in Part II of this Prospectus.
Page 3 of 9
New York Risk Factors
The financial condition of the State of New York is affected by
various national, economic, social and environmental policies
and conditions. Additionally, constitutional and statutory limitations
imposed on the State and its local governments concerning taxes,
bond indebtedness and other matters may constrain the revenue-generating
capacity of the State and its local governments and, therefore,
the ability of the issuers of the Bonds to satisfy their obligations.
Historically, the State has been one of the wealthiest states
in the nation; however, for decades the State economy has grown
more slowly than that of the nation as a whole, gradually eroding
the State's relative economic affluence.
The economic vitality of the State and its various regions and,
therefore, the ability of the State and its local governments
to satisfy the Bonds, are affected by numerous factors. The economy
of the State continues to be influenced by the financial health
of the City of New York, which faces greater competition as other
major cities develop comparable financial and business capabilities.
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.
The State is a party to numerous lawsuits in which an adverse
final decision could materially affect the State's governmental
operations and consequently its ability to pay debt service on
its obligations. On January 21, 1994, the State entered into a
settlement with Delaware with respect to State of Delaware v.
State of New York. The State made an immediate $35 million payment
and agreed to make a $33 million annual payment en 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.
All outstanding general obligation bonds of the State are rated
"A-" by Standard and Poor's and "A" by Moody's.
Further information concerning New York risk factors may be obtained
upon written or telephonic request to the Trustee as described
in "Information as to Sponsor, Trustee and Evaluator-Who is the Trustee?"
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?"
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
Page 4 of 9
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 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.
Page 5 of 9
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?"
For industry concentrations of the Bonds in the Trust, see
"New York Insured Trust Summary."
(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 the 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>
New York Insured
Trust, Series 60 $ $ $ $ $ $
</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
Page 6 of 9
amount of which will decline in subsequent years. "S.F." indicates
a sinking fund is established with respect to an issue of Bonds.
In addition, certain Bonds in the portfolio may be redeemed in
whole or in part other than by operation of the stated redemption
or sinking fund provisions under certain unusual or extraordinary
circumstances specified in the instruments setting forth the terms
and provisions of such Bonds. See "What are Certain General Matters
Relating to the Trusts?" for a description of certain of such
unusual or extraordinary circumstances. Redemption pursuant to
call provisions generally will, and redemption pursuant to sinking
fund provisions may, occur at times when the redeemed Bonds have
an offering side valuation which represents a premium over par
or for original issue discount Bonds a premium over the accreted
value. To the extent that the Bonds were deposited in the Fund
at a price higher than the price at which they are redeemed, this
will represent a loss of capital when compared with the original
Public Offering Price of the Units. Conversely, to the extent
that the Bonds were acquired at a price lower than the redemption
price, this will represent an increase in capital when compared
to the original Public Offering Price of the Units, excluding
the effect of the sales charge on the Units. Distributions will
generally be reduced by the amount of the income which would otherwise
have been paid with respect to redeemed Bonds and there will be
distributed to Unit holders the principal amount and any premium
received on such redemption (except to the extent the proceeds
of the redeemed Bonds are used to pay for Unit redemptions). The
estimated current return and the estimated long-term return in
this event may be affected by such redemptions. For the Federal
and state tax effect on Unit holders of such redemptions and resultant
distributions, see "Rights of Unit Holders-What is the Federal
Tax Status of Unit Holders?" and "New York Insured Trust Summary-New
York 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 7 of 9
Statement of Net Assets
At the Opening of Business on the Initial Date of Deposit
, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <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)
Less accrued organizational costs (5)
____________
Net assets $
============
Outstanding Units
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (6) $
Less gross underwriting commissions (6)
____________
Net assets $
============
</TABLE>
[FN]
(1) The aggregate offering price of the bonds for the Trust at
the opening of business on the Initial Date of Deposit and the
cost to the 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 deposited in the
Trust as collateral. The amount of available letter of credit
and the amount expected to be utilized as collateral for the 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 Available Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
New York Insured
Trust, Series 60 $ $ $ $ $
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the New York
Insured Trust and delivered to the Trustee has been obtained by
such Insured Trust or has been obtained directly by the Bond issuer,
the underwriters, the Sponsor or others prior to the Initial Date
of Deposit.
(4) The Trustee will advance to the Trust the amount of net interest
accrued to , the First Settlement Date,
for distribution to the Sponsor as the Unit holder of record.
(5) The Trust will bear all or a portion of its estimated organizational
cost which will be deferred and amortized over five years from the Initial
Date of Deposit.
(6) The aggregate cost to investors (exclusive of accrued interest)
and the aggregate gross underwriting commissions of 4.9% are computed
assuming no reduction of sales charge for quantity purchases.
Page 8 of 9
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
New York Insured Trust, Series 60
We have audited the accompanying statement of net assets, including
the portfolio, of New York Insured Trust, Series 60 ("the Trust"),
contained in The First Trust Combined Series 249, as of the opening
of business on , 1995. This statement of net assets
is the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on this statement 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 statement
of net assets is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of net assets. Our procedures included
confirmation of the letter of credit held by the Trustee and deposited
in the Trust 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 statement of net assets. We believe that our audit of the
statement of net assets provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above
presents fairly, in all material respects, the financial position
of New York Insured Trust, Series 60, as contained in The First
Trust Combined Series 249, at the opening of business on
, 1995 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
, 1995
Page 9 of 9
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 249 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 June 5, 1995.
THE FIRST TRUST COMBINED SERIES 249
(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 June 5, 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 249 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
