National Insured Trust, Series 235
(The First Trust (registered trademark) Combined Series 252)
Prospectus - Part I
THIS PART I OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY THE PART II OF THE PROSPECTUS DATED SEPTEMBER 7, 1995. BOTH PARTS I
AND II OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
National Insured Trust, Series 235 (the "National Insured Trust"),
consists of a portfolio of interest-bearing obligations issued
by or on behalf of certain states or United States Territories
which, in the opinion of recognized bond counsel to the issuing
authorities, provide income which is exempt from Federal income
tax, as detailed in Part II of this Prospectus.
The objectives of the Trust are conservation of capital and income
exempt from Federal income taxes. The objectives are, of course,
dependent upon the continuing ability of the issuers, obligors
and/or insurers to meet their respective obligations.
The National Insured Trust consists of eleven obligations of issuers
located in eight states. Three Bond issues aggregating approximately
26%, and two Bond issues aggregating approximately 20%, of the
aggregate principal amount of the Bonds in the Trust are obligations
of issuers located in Illinois and California, respectively. 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 Portfolio
of Issues Purpose of Issue Percentage
_________ __________________ __________
3 Health Care 29.90%
3 University and School 29.90%
2 Transportation 16.39%
1 Electric 8.87%
2 Miscellaneous 14.94%
Each of eight Bond issues represents approximately 10% of the
aggregate principal amounts of the Bonds in the Trust or a total
of approximately 80%. 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
30% of the aggregate principal amount (approximately 31% 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 7-10
years after the Initial Date of Deposit. See "National Insured
Trust, Series 235-Portfolio" contained herein and "Description
of Bond Ratings" in the Information Supplement.
All of the Bonds included in the Trust are insured. The insurance
guarantees the timely payment of principal and interest of the
Bonds, but does not guarantee the value of the Bonds or the Units.
As a result of the insurance, the Bonds and the Units in the Trust
have received a rating of "AAA" by Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's").
The percentage of the aggregate face amount insured by each insurance
company is:
Insurance Company Portfolio Percentage
_________________ ____________________
AMBAC Indemnity Corporation 13.85%
Connie Lee Insurance Company 29.90%
Capital Guaranty Insurance Company 9.96%
Financial Guaranty Insurance Company 16.39%
Financial Security Assurance, Inc. 29.90%
____________
100% Insured
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 12
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Bonds-September 7, 1995
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
<S> <C>
General Information
Principal Amount of Bonds in the Trust $10,035,000
Number of Units 10,198
Fractional Undivided Interest in the Trust per Unit 1/10,198
Principal Amount (Par Value) of Bonds per Unit (1) $ 984.02
Public Offering Price
Aggregate Offering Price Evaluation of Bonds in the Portfolio $ 9,698,305
Aggregate Offering Price Evaluation per Unit $ 951.00
Sales Charge 4.9% (5.152% of the Aggregate Price Evaluation per Unit) (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) $ 946.08
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 53.92
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $ 4.92
</TABLE>
First Settlement Date September 12, 1995
Discretionary Liquidation Amount The Trust may be terminated if
the value of the 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
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 National
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 the Trust
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 Trust's
termination will be equal to the Principal Amount (Par Value)
of Bonds per Unit stated above.
(2) The sales charge is reduced by a discount of $7.50 per Unit
for purchases between $500,000 and $999,999 and $15.00 per Unit
for purchases in excess of $1,000,000. Such reductions for volume
purchases are not applicable to sales made pursuant to a "wrap
fee account" or similar arrangement as discussed in "Public Offering"
in Part II of the Prospectus.
(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?" in Part II of this Prospectus.
(4) See "How May Units be Redeemed?" in Part II of this Prospectus.
Page 2 of 12
Underwriting
<TABLE>
<CAPTION>
Number
Name Address of Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 5,873
Underwriters
Huntleigh Securities Corporation 222 South Central, Suite 300, St. Louis, MO 63105 700
First Investors Corporation 95 Wall Street, 22nd Floor, New York, NY 10005 300
City Securities Corporation 135 North Pennsylvania Street, Suite 2200,
Indianapolis, IN 46204 250
Fidelity Capital Markets, A division World Trade Center, 164 Northern Avenue, ZT3, 250
of National Financial Services Boston, MA 02210
Corporation
McLaughlin, Piven, Vogel 30 Wall Street, Fifth Floor, New York, NY 10005 175
Securities, Inc.
Roney & Co. One Griswold Street, Detroit, MI 48226 150
Advest, Inc. One Commercial Plaza, 280 Trumbull Street, 18th Floor, 100
Hartford, CT 06103
Robert W. Baird & Co. Incorporated Firstar Center, 777 East Wisconsin Avenue, 100
Milwaukee, WI 53202
J.C. Bradford & Co. 330 Commerce Street, Nashville, TN 37201-1809 100
B.C. Christopher Division 4717 Grand Ave., Suite 700, Kansas City, MO 64112 100
of Fahnestock Inc.
Dain Bosworth Incorporated Dain Bosworth Plaza, 60 S. 6th Street, 14th Floor, 100
Minneapolis, MN 55402-4422
First of Michigan Corporation 100 Renaissance Center, 26th Floor, Detroit, MI 48243 100
Gruntal & Co., Incorporated 14 Wall Street, 20th Floor, New York, NY 10005 100
William R. Hough & Co. 100 Second Avenue South, Suite 800,
St. Petersburg, FL 33701 100
Kemper Securities, Inc. 77 West Wacker Drive, 28th Floor, 100
Chicago, IL 60601
John G. Kinnard 920 Second Ave. South, Minneapolis, MN 55402 100
& Co., Incorporated
McDonald & Company Securities, Inc. 800 Superior Street, Suite 2100, Cleveland, OH 44114 100
Nathan & Lewis Securities, Inc. 1140 Avenue of the Americas, New York, NY 10036 100
Offerman & Co., Inc. 621 North Lilac Drive, Minneapolis, MN 55422 100
The Ohio Company 155 East Broad Street, Columbus, OH 43215 100
Oppenheimer & Co., Inc. Oppenheimer Tower, One World Financial Center, 100
8th Floor, New York, NY 10281
Peacock, Hislop, Staley, Given, Inc. 122 North Kirkwood Road, St. Louis, MO 63122 100
Pershing, Division of Donaldson, One Pershing Plaza, Jersey City, NJ 07399 100
Lufkin & Jenrette
Securities Corporation
Piper Jaffray, Inc. 222 South Ninth Street, Minneapolis, MN 55440 100
Principal Financial Services Fountain Place, 1445 Ross Avenue, Suite 2300, 100
Dallas, TX 75202-2786
Rauscher Pierce Refsnes, Inc. CityPlace, 2711 N. Haskell Avenue, Suite 2400 100
Dallas, TX 75204-2936
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, FL 33710 100
Roosevelt & Cross Incorporated 20 Exchange Place, 47th Floor, New York, NY 10005 100
Southwest Securities Inc. 1201 Elm Street, Suite 4300, Dallas, TX 75270 100
Stifel, Nicolaus 500 North Broadway, 16th Floor, St. Louis, MO 63102 100
& Company, Incorporated
B.C. Ziegler and Company 215 N. Main Street, West Bend, WI 53095 100
________
10,198
========
</TABLE>
Page 3 of 12
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
_______ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ 57.83 $ 57.83
Estimated Annual Trust Expenses per Unit:
Trustee's Fees $ 1.50 $ 1.05
Evaluator's Fees ($.30 per $1,000 principal amount of Bonds
at the Initial Date of Deposit) $ .30 $ .30
Supervisory and Administrative Fees (1) $ .49 $ .49
Organizational Expenses (2) $ .59 $ .59
Other Expenses $ .40 $ .35
__________ __________
Less: Estimated Annual Expense per Unit $ 3.28 $ 2.78
__________ __________
Estimated Net Annual Interest Income per Unit $ 54.55 $ 55.05
Calculation of Interest Distribution per Unit
Divided by 12 and 2, respectively $ 4.55 $ 27.53
Estimated Daily Rate of Net Interest Accrual per Unit $ .151529 $ .152918
Initial Distribution - October 31, 1995 (3) $ 5.00 $ 5.05
Partial Distribution - December 31, 1995 (3) $ - $ 9.18
Regular Distribution (3) $ 4.55 $ 27.53
(Commencing) 11/30/95 6/30/96
Estimated Current Return Based on Public Offering Price (4) 5.46% 5.51%
Estimated Long-Term Return Based on Public Offering Price (4) 5.47% 5.52%
CUSIP 33734D 576 584
</TABLE>
[FN]
_________________________
(1) Supervisory Fees are payable to an affiliate of the Sponsor.
Bookkeeping and Administrative Fees are payable to the Sponsor.
(2) 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 the Trust's portfolio
and the initial fees and expenses of the Trustee but not including
the expenses incurred in the printing of preliminary and final
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?" in Part II of this Prospectus and
"Statement of Net Assets." Historically, the sponsors of unit
investment trusts have paid all the costs of establishing such trusts.
(3) Additional information concerning distributions of interest
and principal can be found in "How are Interest and Principal
Distributed?" in Part II of this Prospectus.
(4) See "What are Estimated Long-Term Return and Estimated Current
Return?" in Part II of this Prospectus 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 4 of 12
Tax Status
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?"
Tax-Exempt vs. Taxable Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
published Federal tax rates scheduled to be in effect in 1995.
The table incorporates increased tax rates for higher-income taxpayers
that were included in the Revenue Reconciliation Act of 1993.
The table illustrates what you would have to earn on taxable investments
to equal the tax-exempt yield for your income tax bracket. The
taxable equivalent yields may be somewhat higher than the equivalent
yields indicated in the following table for those individuals
who have adjusted gross incomes in excess of $114,700. The table
does not reflect the effect of the limitations on itemized deductions
and the deduction for personal exemptions. They were designed to phase
out certain benefits of these deductions for higher income taxpayers.
These limitations, in effect, raise the maximum marginal Federal tax
rate to approximately 44% for taxpayers filing a joint return and
entitled to four personal exemptions and to approximately 41% for
taxpayers filing a single return entitled to only one personal
exemption. These limitations are subject to certain maximums, which
depend on the number of exemptions claimed and the total amount of
the taxpayer's itemized deductions. For example, the limitation on
itemized deductions will not cause a taxpayer to lose more than 80%
of his allowable itemized deductions, with certain exceptions.
<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 15.0% 5.88 6.47 7.06
23.4 - 56.6 39.0 - 94.3 28.0 6.94 7.64 8.33
56.6 - 118.0 94.3 - 143.6 31.0 7.25 7.97 8.70
118.0 - 256.5 143.6 - 256.5 36.0 7.81 8.59 9.38
Over 256.5 Over 256.5 39.6 8.28 9.11 9.93
</TABLE>
Page 5 of 12
National Insured Trust, Series 235
Portfolio
Units Rated "AAA"_at the Opening of Business
On the Initial Date of Deposit of the Bonds-September 7, 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>
$ 1,000,000 { Association of Bay Area Governments, 1995 Local AAA 2005 @ 102 $ 956,410
Agency Revenue, Series A1 (California Mello-Roos 2013 @ 100 S.F.
and Assessment Bond Pool) (Capital Guaranty
Insured), 5.75%, Due 9/3/2019
1,000,000 { Illinois Health Facilities Authority, Revenue and AAA 2002 @ 102 1,006,520
Revenue Refunding (Evangelical Hospitals 2018 @ 100 S.F.
Corporation) (FSA Insured), 6.25%, Due 4/15/2022
1,000,000 { The Illinois State Toll Highway Authority, AAA 2003 @ 102 964,240
Toll Highway Priority Revenue, 1992 Series A
(FGIC Insured), 5.75%, Due 1/1/2017
1,000,000 Louisiana Public Facilities Authority, Hospital AAA 2003 @ 102 961,250
Revenue (Our Lady of the Lake Regional 2017 @ 100 S.F.
Medical Center Project), 1993 Series D and E
(FSA Insured), 5.90%, Due 12/3/2021
1,000,000 Massachusetts Industrial Finance Agency, AAA 2005 @ 102 1,008,160
Revenue and Refunding, 1995 Series A 2016 @ 100 S.F.
(Lesley College Project) (Connie Lee Insured),
6.30%, Due 7/1/2025
1,000,000 Certificates of Participation (1995 Master Lease AAA 2005 @ 102 1,004,160
Program), Paramount Unified School District
(California) (FSA Insured), 6.20%, Due 9/1/2015
1,000,000 The Hospitals and Higher Education Facilities AAA 2005 @ 102 950,710
Authority of Philadelphia (Pennsylvania), 2009 @ 100 S.F.
Hospital Revenue, Series of 1995 A, Frankford
Hospital (Connie Lee Insured), 5.75%,
Due 1/1/2019
645,000 Regional Transportation Authority, Cook, DuPage, AAA 2003 @ 102 623,489
Kane, Lake, McHenry and Will Counties, Illinois, 2014 @ 100 S.F.
General Obligation, Series 1993A (FGIC Insured),
5.85%, Due 6/1/2023
1,000,000 Rhode Island Health and Educational Building AAA 2003 @ 102 959,240
Corporation, Higher Education Facility Revenue 2017 @ 100 S.F.
Refunding, Johnson & Wales University Issue,
Series 1993A (Connie Lee Insured), 5.875%,
Due 4/1/2020
500,000 { Vermont Municipal Bond Bank, 1995 Series 2 AAA 2005 @ 102 466,615
Refunding (AMBAC Insured), 5.50%, 2011 @ 100 S.F.
Due 12/1/2022
890,000 Wisconsin Public Power Incorporated System, AAA 2003 @ 102 797,511
Power Supply System Revenue, Series 1993A 2015 @ 100 S.F.
(AMBAC Insured), 5.25%, Due 7/1/2021
___________ __________
$10,035,000 $9,698,305
=========== ==========
</TABLE>
[FN]
_________________________
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
{ These Bonds were issued at an original issue discount on the
following dates and at the following percentages of their original
principal amount:
Date %
________ ______
Association of Bay Area Governments 8/17/95 94.172
Illinois Health Facilities Authority 4/1/92 90.645
Illinois State Toll Highway Authority 9/1/92 92.605
Vermont Municipal Bond Bank 7/1/95 94.916
For industry concentrations of the Bonds in the Trust, see page 1.
Page 6 of 12
NOTES TO PORTFOLIO
(1) Sponsor's contracts to purchase Bonds were entered into during
the period from August 21, 1995 to September 6, 1995. All contracts
to purchase Bonds are expected to be settled on or prior to September
12, 1995 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>
National Insured
Trust, Series 235 $9,698,305 $9,584,655 $113,650 $9,648,130 $ - $589,708
</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.
Such ratings were obtained from a municipal bond information reporting
service. The "AAA" rating on each Bond is a result of insurance.
Insurance, however, does not cover certain market risks associated with
fixed income securities such as accelerated payments of principal,
mandatory redemptions prior to maturity or interest rate risks.
See "Why and How are the Insured Trusts Insured?" in Part II of this
Prospectus and "Description of Bond Ratings" in the Information Supplement.
(3) There is shown under this heading the year in which each issue
of Bonds initially is redeemable and the redemption price for
that year or, if currently redeemable, the redemption price in
effect on the Initial Date of Deposit. Issues of Bonds are redeemable
at declining prices (but not below par value) in subsequent years
except for original issue discount Bonds which are redeemable
at prices based on the issue price plus the amount of original
issue discount accreted to the redemption date plus, if applicable,
some premium, the amount of which will decline in subsequent years.
"S.F." indicates a sinking fund is established with respect to
an issue of Bonds. In addition, certain Bonds in the portfolio
may be redeemed in whole or in part other than by operation of
the stated redemption or sinking fund provisions under certain
unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such Bonds. See "What
are Certain General Matters Relating to the Trusts?-Risk Factors"
in Part II of this Prospectus for a discussion of Bond redemptions
and a description of certain of such unusual or extraordinary
circumstances under which Bonds may be redeemed. 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 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?" in Part II of this Prospectus.
Page 7 of 12
National Insured Trust, Series 235
Statement of Net Assets
(The First Trust Combined Series 252)
At the Opening of Business on the Initial Date of Deposit
September 7, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $ 9,698,305
Accrued interest on underlying bonds (2)(3)(4) 149,717
Organizational costs (5) 30,000
___________
9,878,022
Less distributions payable (4) 149,717
Less accrued organizational costs (5) 30,000
___________
Net assets $ 9,698,305
===========
Outstanding Units 10,198
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (6) $10,198,007
Less gross underwriting commissions (6) 499,702
___________
Net assets $ 9,698,305
===========
</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 allocated among
each Trust included in The First Trust Combined Series 252 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 Trust
of the principal amount of the bonds to be purchased, (b) accrued
interest on those bonds to the Initial Date of Deposit, and (c)
accrued interest on those bonds from the Initial Date of Deposit
to the expected dates of delivery of the bonds.
<TABLE>
<CAPTION>
Accrued
Aggregate Accrued Interest to
Letter of Credit Offering Interest to Expected
To be Price of Date of Dates of
Trust Available Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
National Insured
Trust, Series 235 $10,000,000 $9,849,127 $9,698,305 $149,717 $1,105
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the Trust and
delivered to the Trustee 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 September 12, 1995, 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
costs which will be deferred and amortized over a five year period
from the Initial Date of Deposit.
(6) The aggregate cost to investors and the aggregate gross underwriting
commissions of 4.9% are computed assuming no reduction of sales
charge for quantity purchases.
Page 8 of 12
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust Combined Series 252
National Insured Trust, Series 235
We have audited the accompanying statement of net assets, including
the portfolio, of National Insured Trust, Series 235 ("the Trust"),
included in The First Trust Combined Series 252, as of the opening
of business on September 7, 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 September 7, 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 National Insured Trust, Series 235, included in The First Trust
Combined Series 252, at the opening of business on September 7,
1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 7, 1995
Page 9 of 12
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Page 10 of 12
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Page 11 of 12
FIRST TRUST (registered trademark)
NATIONAL INSURED TRUST
Series 235
Prospectus
Part I
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
This Part One Must Be
Accompanied by Part Two.
September 7, 1995
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 12 of 12
Missouri Insured Trust, Series 29
(The First Trust (registered trademark) Combined Series 252)
Prospectus - Part I
THIS PART I OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY THE PART II OF THE PROSPECTUS DATED SEPTEMBER 7, 1995. BOTH PARTS I
AND II OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Missouri Insured Trust, Series 29 (the "Missouri Insured Trust"),
consists of a portfolio of interest-bearing obligations issued
by or on behalf of the state of Missouri 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, Missouri income tax and local tax, as detailed below.
The objectives of the Trust are conservation of capital and income
exempt from Federal and applicable state and local income taxes.
The objectives are, of course, dependent upon the continuing ability
of the issuers, obligors and/or insurers to meet their respective
obligations.
The Missouri Insured Trust consists of seven obligations of issuers
located in Missouri. The Bond issues in the Trust are either general
obligations of governmental entities or are revenue bonds payable
from the income of a specific project or authority. The Bonds
in the Trust are divided by purpose of issue and represent the
percentage of aggregate principal amount of the Bonds as indicated
by the following table:
Number Portfolio
of Issues Purpose of Issue Percentage
_________ __________________ __________
2 General Obligation 28.60%
3 University and School 49.38%
1 Health Care 16.87%
1 Miscellaneous 5.15%
Each of five Bond issues represents 10% or more of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
86%. The largest such issue represents approximately 23%. 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 45% of the aggregate
principal amount (approximately 47% 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 7-10 years after the Initial
Date of Deposit. See "Missouri Insured Trust, Series 29-Portfolio"
contained herein and "Description of Bond Ratings" in the Information
Supplement.
All of the Bonds included in the Trust are insured. The insurance
guarantees the timely payment of principal and interest of the
Bonds, but does not guarantee the value of the Bonds or the Units.
As a result of the insurance, the Bonds and the Units in the Trust
have received a rating of "AAA" by Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's").
The percentage of the aggregate face amount insured by each insurance
company is:
Insurance Company Portfolio Percentage
_________________ ____________________
MBIA Insurance Corporation 39.79%
AMBAC Indemnity Corporation 17.76%
Capital Guaranty Insurance Company 19.72%
Financial Guaranty Insurance Company 22.73%
____________
100% Insured
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1 of 12
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Bonds-September 7, 1995
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: Securities Evaluation Service, Inc.
<TABLE>
<CAPTION>
<S> <C>
General Information
Principal Amount of Bonds in the Trust $2,815,000
Number of Units 2,911
Fractional Undivided Interest in the Trust per Unit 1/2,911
Principal Amount (Par Value) of Bonds per Unit (1) $ 967.02
Public Offering Price
Aggregate Offering Price Evaluation of Bonds in the Portfolio $2,768,371
Aggregate Offering Price Evaluation per Unit $ 951.00
Sales Charge 4.9% (5.152% of the Aggregate Price Evaluation per Unit) (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) $ 946.17
Excess of Public Offering Price per Unit Over Redemption Price per Unit $ 53.83
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $ 4.83
</TABLE>
First Settlement Date September 12, 1995
Discretionary Liquidation Amount The Trust may be terminated if
the value of the 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
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 Missouri
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 the Trust
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 Trust's
termination will be equal to the Principal Amount (Par Value)
of Bonds per Unit stated above.
(2) The sales charge is reduced by a discount of $7.50 per Unit
for purchases between $500,000 and $999,999 and $15.00 per Unit
for purchases in excess of $1,000,000. Such reductions for volume
purchases are not applicable to sales made pursuant to a "wrap
fee account" or similar arrangement as discussed in "Public Offering"
in Part II of the Prospectus.
(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?" in Part II of this Prospectus.
(4) See "How May Units be Redeemed?" in Part II of this Prospectus.
Page 2 of 12
Underwriting
<TABLE>
<CAPTION>
Number
Name Address of Units
____ _______ _________
<S> <C> <C>
Sponsor
Nike Securities L.P. 1001 Warrenville Road, Lisle, IL 60532 2,061
Underwriters
Stifel, Nicolaus 500 North Broadway, 16th Floor, St. Louis, MO 63102 750
& Company, Incorporated*
Fidelity Capital Markets, A division World Trade Center, 164 Northern Avenue, ZT3, 100
of National Financial Services Boston, MA 02210
Corporation ________
2,911
========
</TABLE>
[FN]
* Notwithstanding anything to the contrary in Part II of the
Prospectus, this Underwriter will receive a concession of $38.50
per Unit for 750 Units underwritten.
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annual
__________ ___________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income (1)
Estimated Annual Interest Income per Unit $ 54.87 $ 54.87
Estimated Annual Trust Expenses per Unit:
Trustee's Fees $ 1.43 $ .98
Evaluator's Fees ($.30 per $1,000 principal amount of Bonds
at the Initial Date of Deposit) $ .29 $ .29
Supervisory and Administrative Fees (2) $ .49 $ .49
Organizational Expenses (3) $ .17 $ .17
Other Expenses $ .40 $ .35
__________ __________
Less: Estimated Annual Expense per Unit $ 2.78 $ 2.28
__________ __________
Estimated Net Annual Interest Income per Unit $ 52.09 $ 52.59
Calculation of Interest Distribution per Unit
Divided by 12 and 2, respectively $ 4.34 $ 26.29
Estimated Daily Rate of Net Interest Accrual per Unit $ .144683 $ .146071
Initial Distribution - October 31, 1995 (4) $ 4.77 $ 4.82
Partial Distribution - December 31, 1995 (4) $ - $ 8.76
Regular Distribution (4) $ 4.34 $ 26.29
(Commencing) 11/30/95 6/30/96
Estimated Current Return Based on Public Offering Price (5) 5.21% 5.26%
Estimated Long-Term Return Based on Public Offering Price (5) 5.14% 5.19%
CUSIP 3371M5 221 239
</TABLE>
[FN]
_________________________
(1) During the first year only, the Trustee has agreed to reduce
its fee and pay expenses of the Trust in an amount (approximately
$.19) equal to the interest that would have accrued prior to the
expected delivery dates of Bonds included in the Portfolio that
were purchased on a "when, as and if issued" or delayed delivery
basis. During the first year, Estimated Annual Interest Income
per Unit would be $54.68. Estimated Net Annual Interest Income
per Unit, Estimated Current Return Based on Public Offering Price
and Estimated Long-Term Return Based on Public Offering Price
would be as indicated above. See "What are Certain General Matters
Relating to the Trusts?" and "What are the Expenses and Charges?"
(2) Supervisory Fees are payable to an affiliate of the Sponsor.
Bookkeeping and Administrative Fees are payable to the Sponsor.
(3) 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 the Trust's portfolio
and the initial fees and expenses of the Trustee but not including
the expenses incurred in the printing of preliminary and final
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?" in Part II of this Prospectus and
"Statement of Net Assets." Historically, the sponsors of unit
investment trusts have paid all the costs of establishing such
trusts.
(4) Additional information concerning distributions of interest
and principal can be found in "How are Interest and Principal
Distributed?" in Part II of this Prospectus.
(5) See "What are Estimated Long-Term Return and Estimated Current
Return?" in Part II of this Prospectus 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 Sponsor at no charge by
calling the Trustee at the number listed in Part II of this prospectus.
Page 3 of 12
Missouri Risk Factors
The financial condition of the State of Missouri 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. Farming
plays a vital role in Missouri's economy. Cash receipts from sales
of crops and livestock average $3.8 billion annually. These cash
receipts come from a variety of agricultural commodities produced
in the State. In 1993, over two million workers had nonagricultural
jobs in Missouri. Nearly 27% of these workers were employed in
services, approximately 24% were employed in wholesale and retail
trade, and 17% were employed in manufacturing. In the last ten
years, Missouri has experienced a significant increase in employment
in the service sector and in wholesale and retail trade.
All outstanding general obligation bonds of the State are rated
"AAA" by Standard and Poor's and "Aaa" by Moody's. Further information
concerning Missouri 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?" in Part
II of this Prospectus.
Missouri Tax Status
The assets of the Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Missouri (the "State")
or counties, municipalities, authorities or political subdivisions
thereof (the "Missouri Bonds") or by the Commonwealth of Puerto
Rico, Guam and the United States Virgin Islands (the "Possession
Bonds") (collectively, the "Bonds").
Neither the Sponsor nor its counsel have independently examined
the Bonds to be deposited in and held in the Trust. However, although
no opinion is expressed herein regarding such matters, it is assumed
that: (i) the Bonds were validly issued, (ii) the interest thereon
is excludable from gross income for Federal income tax purposes
and (iii) interest on the Missouri Bonds, if received directly
by a Unit holder, would be exempt from the Missouri income tax
applicable to individuals and corporations ("Missouri State Income
Tax"). The opinion set forth below does not address the taxation
of persons other than full time residents of Missouri.
In the opinion of Chapman and Cutler, Special Counsel to the Fund
for Missouri tax matters, under existing law:
The Trust is not an association taxable as a corporation for Missouri
income tax purposes, and each Unit holder of the Trust will be
treated as the owner of a pro rata portion of the Trust and the
income of such portion of the Trust will be treated as the income
of the Unit holder for Missouri State Income Tax purposes.
Interest paid and original issue discount, if any, on the Bonds
which would be exempt from the Missouri State Income Tax if received
directly by a Unit holder will be exempt from the Missouri State
Income Tax when received by the Trust and distributed to such
Unit holder; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
To the extent that interest paid and original issue discount,
if any, derived from the Trust by a Unit holder with respect to
Possession Bonds is excludable from gross income for Federal income
tax purposes pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section
1423a, and 48 U.S.C. Section 1403, such interest paid and original
issue discount, if any, will not be subject to the Missouri State
Income Tax; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
Page 4 of 12
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
Each Unit holder of the Trust will recognize gain or loss for
Missouri State Income Tax purposes if the Trustee disposes of
a bond (whether by redemption, sale, or otherwise) or if the Unit
holder redeems or sells Units of the Trust to the extent that
such a transaction results in a recognized gain or loss to such
Unit holder for Federal income tax purposes. Due to the amortization
of bond premium and other basis adjustments required by the Internal
Revenue Code, a Unit holder, under some circumstances, may realize
taxable gain when his or her Units are sold or redeemed for an
amount equal to their original cost.
Any insurance proceeds paid under policies which represent maturing
interest on defaulted obligations which are excludable from gross
income for Federal income tax purposes will be excludable from
Missouri State Income Tax to the same extent as such interest
would have been so excludable if paid by the issuer of such Bonds
held by the Trust; however, no opinion is expressed herein regarding
taxation of interest paid and original issue discount, if any,
on the Bonds received by the Trust and distributed to Unit holders
under any other tax imposed pursuant to Missouri law, including
but not limited to the franchise tax imposed on financial institutions
pursuant to Chapter 148 of the Missouri Statutes.
The Missouri State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase or
carry Units in the Trust, the interest on which is exempt from such Tax.
The Trust will not be subject to the Kansas City, Missouri Earnings
and Profits Tax and each Unit holder's share of income of the
Bonds held by the Trust will not generally be subject to the Kansas
City, Missouri Earnings and Profits Tax or the City of St. Louis
Earnings Tax (except in the case of certain Unit holders, including
corporations, otherwise subject to the St. Louis City Earnings Tax).
For information with respect to the Federal income tax status
and other tax matters, see "What is the Federal Tax Status of
Unit Holders?" in Part II of this Prospectus.
Federal and Missouri State Tax-Free Income
The following table shows the approximate marginal taxable yields
for individuals that are equivalent to tax-exempt yields under
combined Federal and state taxes, using published Federal tax
rates and state tax rates scheduled to be in effect in 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.
Page 5 of 12
<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 19.4% 6.20 6.82 7.44
23.4 - 56.6 39.0 - 94.3 32.3 7.39 8.12 8.86
56.6 - 118.0 94.3 - 143.6 35.1 7.70 8.47 9.24
118.0 - 256.5 143.6 - 256.5 39.8 8.31 9.14 9.97
Over 256.5 Over 256.5 43.2 8.80 9.68 10.56
</TABLE>
[FN]
* Combined State and Federal tax rate was computed by taking
into account the deductibility of State tax in determining Federal
tax and the limited deductibility of Federal tax in determining
State tax. Specifically, the deduction allowed for Federal income
tax liability may not exceed $5,000 and $10,000 for single and
joint taxpayers, respectively. Accordingly, the combined tax rate
reflects the cross-deductibility of each tax in determining the
other only for levels of income corresponding to the 15% Federal
tax rate.
Page 6 of 12
Missouri Insured Trust, Series 29
Portfolio
Units Rated "AAA"_at the Opening of Business
On the Initial Date of Deposit of the Bonds-September 7, 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>
$ 305,000 Cameron R-I School District of Clinton County, AAA 2002 @ 100 $ 306,623
Missouri, General Obligation Refunding, Series 1995
(Capital Guaranty Insured), 5.80%, Due 3/1/2011
640,000 School District of Kansas City, Missouri, AAA 2004 @ 102 585,920
Building Corporation, Insured Leasehold 2009 @ 100 S.F.
Revenue, Series 1993D (The School District
of Kansas City, Missouri, Elementary School
Project) (FGIC Insured), 5.00%, Due 2/1/2014
475,000 Health and Educational Facilities Authority of AAA 2002 @ 102 485,882
the State of Missouri, Health Facilities Revenue 2013 @ 100 S.F.
(Health Midwest), Series 1992B (MBIA Insured),
6.25%, Due 2/15/2022
500,000 Northeast Missouri State University, Recreational AAA 2005 @ 100 501,645
Facility Revenue (Campus Recreation Center 2011 @ 100 S.F.
Project), Series 1995 (AMBAC Insured), 5.80%,
Due 6/1/2015
250,000 * Northwest R-I Educational Facilities Authority, AAA 2005 @ 100 247,097
Leasehold Revenue, Series 1995 (Northwest 2011 @ 100 S.F.
R-I School District of Jefferson County, Missouri
Project) (Capital Guaranty Insured), 5.70%,
Due 3/1/2015
145,000 Southeast Missouri Correctional Facility, Inc., AAA 2002 @ 100 144,114
Correctional Facility Lease Revenue Refunding 2012 @ 100 S.F.
(State of Missouri), Series 1992 (MBIA Insured),
5.75%, Due 10/15/2016
500,000 Reorganized School District No. R-IV of Stone AAA 2005 @ 100 497,090
County, Missouri (Reeds Spring, Missouri), 2011 @ 100 S.F.
General Obligation School Building Refunding
and Improvement, Series 1995 (MBIA Insured),
5.75%, Due 3/1/2015
__________ __________
$2,815,000 $2,768,371
========== ==========
</TABLE>
[FN]
_________________________
_ Units are rated "AAA" as a result of insurance. See "Why and
How are the Insured Trusts Insured?"
* Sponsor's contracts for the purchase of all or a portion of
these Bonds (approximately 9% of the aggregate principal amount
of the Bonds in the Trust) are either on a "when, as and if issued"
basis or are delayed delivery Bonds and are expected to be settled
on or before September 26, 1995.
For industry concentrations of the Bonds in the Trust, see page 1.
Page 7 of 12
NOTES TO PORTFOLIO
(1) Sponsor's contracts to purchase Bonds were entered into during
the period from June 15, 1995 to September 7, 1995. All contracts
to purchase Bonds are expected to be settled on or prior to September
12, 1995 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>
Missouri Insured
Trust, Series 29 $2,768,371 $2,754,198 $14,173 $2,754,296 $ - $159,715
</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.
Such ratings were obtained from a municipal bond information reporting
service. The "AAA" rating on each Bond is a result of insurance.
Insurance, however, does not cover certain market risks associated
with fixed income securities such as accelerated payments of principal,
mandatory redemptions prior to maturity or interest rate risks.
See "Why and How are the Insured Trusts Insured?" in Part II of
this Prospectus and "Description of Bond Ratings" in the Information
Supplement.
(3) There is shown under this heading the year in which each issue
of Bonds initially is redeemable and the redemption price for
that year or, if currently redeemable, the redemption price in
effect on the Initial Date of Deposit. Issues of Bonds are redeemable
at declining prices (but not below par value) in subsequent years
except for original issue discount Bonds which are redeemable
at prices based on the issue price plus the amount of original
issue discount accreted to the redemption date plus, if applicable,
some premium, the amount of which will decline in subsequent years.
"S.F." indicates a sinking fund is established with respect to
an issue of Bonds. In addition, certain Bonds in the portfolio
may be redeemed in whole or in part other than by operation of
the stated redemption or sinking fund provisions under certain
unusual or extraordinary circumstances specified in the instruments
setting forth the terms and provisions of such Bonds. See "What
are Certain General Matters Relating to the Trusts?-Risk Factors"
in Part II of this Prospectus for a discussion of Bond redemptions
and a description of certain of such unusual or extraordinary
circumstances under which Bonds may be redeemed. 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?" in Part II of this Prospectus and
"Missouri Tax Status."
Page 8 of 12
Missouri Insured Trust, Series 29
Statement of Net Assets
(The First Trust Combined Series 252)
At the Opening of Business on the Initial Date of Deposit
September 7, 1995
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Delivery statements relating to Sponsor's contracts to
purchase tax-exempt municipal bonds (1)(2)(3) $2,768,371
Accrued interest on underlying bonds (2)(3)(4) 17,952
Organizational costs (5) 2,500
__________
2,788,823
Less distributions payable (4) 17,952
Less accrued organizational costs (5) 2,500
__________
Net assets $2,768,371
==========
Outstanding Units 2,911
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (6) $2,911,011
Less gross underwriting commissions (6) 142,640
__________
Net assets $2,768,371
==========
</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 allocated among
each Trust included in The First Trust Combined Series 252 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 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 ($554).
<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>
Missouri Insured
Trust, Series 29 $3,000,000 $2,786,579 $2,768,371 $17,952 $256
</TABLE>
(3) Insurance coverage providing for the scheduled payment of
principal and interest on all Bonds deposited in the Trust and
delivered to the Trustee 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 September 12, 1995, 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
costs which will be deferred and amortized over a five year period
from the Initial Date of Deposit.
(6) The aggregate cost to investors and the aggregate gross underwriting
commissions of 4.9% are computed assuming no reduction of sales
charge for quantity purchases.
Page 9 of 12
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust Combined Series 252
Missouri Insured Trust, Series 29
We have audited the accompanying statement of net assets, including
the portfolio, of Missouri Insured Trust, Series 29 ("the Trust"),
included in The First Trust Combined Series 252, as of the opening
of business on September 7, 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 September 7, 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 Missouri Insured Trust, Series 29, included in The First Trust
Combined Series 252, at the opening of business on September 7,
1995 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 7, 1995
Page 10 of 12
This page is intentionally left blank.
Page 11 of 12
FIRST TRUST (registered trademark)
MISSOURI INSURED TRUST
Series 29
Prospectus
Part I
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
This Part One Must Be
Accompanied by Part Two.
September 7, 1995
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 12 of 12
The First Trust (registered trademark) Combined Series
Prospectus Part II
Dated September 7, 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.
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 each 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, The Chase
Manhattan Bank (National Association), as Trustee, Securities Evaluation
Service, Inc., as Evaluator and First Trust Advisors L.P., as
Portfolio Supervisor. On the Initial Date of Deposit, the Sponsor
deposited with the Trustee interest-bearing obligations, including
delivery statements relating to contracts for the purchase of
certain such obligations and an irrevocable letter of credit issued
by a financial institution in the amount required for such purchases
(the "Bonds"). The Trustee thereafter credited the account of
the Sponsor for Units of each Trust representing the entire ownership
of the Fund which Units are being offered hereby. The 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."
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 although interest on certain
Bonds in certain Trusts as indicated in Part I of this Prospectus
will be a preference item for purposes of the Alternative Minimum
Tax. 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
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Page 1
Trusts from Financial Guaranty Insurance Company ("FGIC") and/or
AMBAC Indemnity Corporation ("AMBAC") or was obtained directly
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit from FGIC, AMBAC 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?"
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 each 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, 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 under "Summary of Essential
Information" appearing in each Part I of this Prospectus.
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. There is, of course, no guarantee that the
Trusts' objectives will be achieved. See "What are Certain General
Matters Relating to the Trusts?-Risk Factors."
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 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
Page 2
Unit Holders-How May Bonds be Removed from the Fund?" For additional
risks specific to the individual State Trusts see "Risk Factors"
appearing in Part I for each State 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 on the Bonds, such changes should not adversely
affect either (i) an Insured Trust's receipt of principal and
interest on any individual Bonds, or (ii) the Units' triple-A
rating. For economic risks specific to the individual State Trusts,
see each Part I of this Prospectus and the Information Supplement
to this Prospectus. Certain of the Trusts may contain some of
the following types of Bonds:
Discount Bonds are Bonds which 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 are Bonds which are originally issued
at a price which represents a discount from the Bonds' stated
redemption price at maturity. Under current law, the original
issue discount 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 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 represent a certain type of original issue discount
bonds which 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.
Premium Bonds are Bonds which 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. Redemptions
are more likely to occur at times 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. 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?"
Page 3
General Obligation Bonds are 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,
both within a particular classification and between classifications,
depending on numerous factors.
Healthcare Revenue Bonds 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 Revenue Bonds are 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
Revenue Bonds 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 interest rates,
occupancy levels, rental income, mortgage default rates, taxes,
operating expenses, governmental regulations and the appropriation of
subsidies.
Water and Sewerage Revenue Bonds are 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 Revenue Bonds are 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 Revenue Bonds are 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 (i.e., schools, administrative offices, convention centers
and prisons) or the purchase of equipment (i.e., police cars and
computer systems) that will be used by a state or local government
(the "lessee"). 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 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 ("IRBs") 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 applicable, corporate guarantor,
revenues generated from the project, expenses associated with
the project and regulatory and environmental restrictions.
Page 4
Transportation Facility Revenue Bonds are obligations 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 Revenue Bonds are obligations of issuers
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. 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 Revenue Bonds are obligations which
are payable from and secured by revenues derived from the operation
of facilities 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.
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.
Page 5
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 each 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.
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 "Portfolio" appearing in each 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
Page 6
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 "Special Trust Information" appearing
in each 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, at the time of acquisition must be insured
under either the insurance policy obtained by such Insured Trust
or an insurance policy obtained by the Bond issuer, the underwriters,
the Sponsor or others and (vi) shall have the benefit of exemption
from Federal and 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 New Bonds are not acquired 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 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 amount
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
Page 7
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) appearing in Part I of
this Prospectus 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 and (2) takes into account the expenses
and sales charge associated with each Unit of a Trust. Since the
market values and estimated retirements of the Bonds and the expenses
of the Trust will change, there is no assurance that the Estimated
Long-Term Return indicated in Part I of this Prospectus 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
each Part I of this Prospectus, reduce its fee and, to the extent
necessary, pay expenses of each Trust in an amount equal to 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.
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.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond
from the last day on which interest thereon was paid. Interest
on Bonds generally is paid semi-annually, although the Trust accrues
such interest daily. Because of this, the Trust always has an
amount of interest earned but not yet collected by the Trustee.
For this reason, with respect to sales settling subsequent to
the First Settlement Date, the Public Offering Price of Units
will have added to it the proportionate share of accrued interest
to the date of settlement. Unit holders will receive on the next
distribution date of the Trust the amount, if any, of accrued
interest paid on their Units.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price
in the sale of Units to the public, the Trustee will advance the
amount of accrued interest as of the First Settlement Date and
the same will be distributed to the Sponsor as the Unit holder
of record as of the First Settlement Date. Consequently, the amount
of accrued interest to be added to the Public Offering Price of
Units will include only accrued interest from the First Settlement
Date to the date of settlement, less any distributions from the
Interest Account subsequent to the First Settlement Date. See
"Rights of Unit Holders-How are Interest and Principal Distributed?"
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount
of interest actually received by the Trust and distributed to
Unit holders. Therefore, there
Page 8
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 "Special Trust Information" in each
Part I of this Prospectus, 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. 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 "Special Trust Information" in each
Part I of this Prospectus, for providing portfolio supervisory
services for the Trust. Such fee is based on the number of Units
outstanding in each Trust on January 1 of each year except for
Trusts which were established subsequent to the last January 1,
in which case the fee will be based on the number of Units outstanding
in such Trusts as of the respective Dates of Deposit. While the
bookkeeping and administrative charges and the supervisory services
fees may exceed the actual costs of providing such services for
this Fund, 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 or 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 "Special Trust Information" in each Part I of this Prospectus.
The Trustee pays certain expenses of the Trusts for which it is
reimbursed by the Trust or Trusts. The Trustee will receive for
its ordinary recurring services to a Trust a fee as indicated
in the "Special Trust Information" appearing in each Part I of
this Prospectus. For a discussion of the services performed by
the Trustee pursuant to its obligations under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
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 Portfolio" appearing
in each 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.
Page 9
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, legal fees, 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 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 that 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 FGIC 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 claims-paying
ability of each of these insurers was rated AAA by Standard &
Poor's or another nationally recognized rating organizaiton at
the time the insured Bonds were purchased for the Trust. 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 FGIC and/or AMBAC 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,
FGIC and/or AMBAC 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
Page 10
by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by
the Trustee, the insurance terminates as to such Bond on the date
of sale. In the event of a sale of a Bond insured by an Insured
Trust, the Trustee has the right to obtain Permanent Insurance
upon the payment of an insurance premium from the proceeds of
the sale of such Bond. Except as indicated below, insurance obtained
by an Insured Trust has no effect on the price or redemption value
of Units. It is the present intention of the Evaluator to attribute
a value to such insurance obtained by an Insured Trust (including
the right to obtain Permanent Insurance) for the purpose of computing
the price or redemption value of Units only if the Bonds covered
by such insurance are in default in payment of principal or interest
or, in the Sponsor's opinion, in significant risk of such default.
The value of the insurance will be equal to the difference between
(i) the market value of a Bond which is in default in payment
of principal or interest or in significant risk of such default
assuming the exercise of the right to obtain Permanent Insurance
(less the insurance premium attributable to the purchase of Permanent
Insurance) and (ii) the market value of such Bonds not covered
by Permanent Insurance. See "Public Offering-How is the Public
Offering Price Determined?" herein for a more complete description
of the Evaluator's method of valuing defaulted Bonds and Bonds
which have a significant risk of default. Insurance on a Preinsured
Bond is effective as long as such Bond is outstanding. Therefore,
any such insurance may be considered to represent an element of
market value in regard to the Bonds thus insured, but the exact
effect, if any, of this insurance on such market value cannot
be predicted.
The following summary information relating to the listed insurance
companies has been obtained from publicly available information:
<TABLE>
<CAPTION>
Financial Information
as of December 31, 1994
(in millions of dollars)
____________________________________________
Date Admitted Policyholders'
Name Established Assets Surplus
____ ___________ _________ ______________
<S> <C> <C> <C>
AMBAC Indemnity Corporation 1970 $2,145 $ 782
Capital Guaranty Insurance Company 1986 304 168
Capital Markets Assurance Corporation 1987 199 140
Connie Lee Insurance Company 1987 194 106
Financial Guaranty Insurance Company 1984 2,131 894
Financial Security Assurance, Inc. 1984 804 344
MBIA Insurance Corporation 1986 3,401 1,110
</TABLE>
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
Page 11
"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?"
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, such price is determined by adding to the Evaluator's
determination of the aggregate offering price of the Bonds in
each Trust, an amount as indicated in the following table. During
the initial offering period, the Sponsor's Repurchase Price is
equal to the Evaluator's determination of the aggregate offering
price of the Bonds in a Trust. A National Trust consists of The
First Trust of Insured Municipal Bonds. A State Trust consists
of The First Trust of Insured Municipal Bonds-Multi-State and/or
The First Trust Advantage other than an Intermediate, Long Intermediate,
Short Intermediate or Discount Trust. An Intermediate, Long Intermediate,
Short Intermediate or Discount Trust consists of trusts so designated.
Initial Offering Period (1)
Sales Charge
_____________________________
Percentage Percentage
of Public of Net
Offering Amount
Series of the Fund Price Invested
__________________ _________ _________
National Trust and certain State Trusts 4.9% 5.152%
Other State Trusts 5.5 5.820
Long Intermediate Trust 4.4 4.603
Intermediate Trust 3.9 4.058
Short Intermediate Trust 3.0 3.093
[FN]
_____________________
(1) The Public Offering Price includes a proportionate share
of interest accrued but unpaid on the Bonds after the First Settlement
Date to the date of settlement. See "General Trust Information-How
is Accrued Interest Treated?"
The applicable sales charge is reduced by a discount as indicated
in "Summary of Essential Information" in each Part 1 of this Prospectus
(except for sales made pursuant to a "wrap fee account" or similar
arrangements as set forth below) for volume purchases.
The Public Offering Price of Units 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. 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.
Page 12
An investor may aggregate purchases of Units of two or more consecutive
series of a particular State, National, Discount, Intermediate,
Long Intermediate or Short Intermediate Trust for purposes of
calculating the discount for volume purchases listed above. The
purchaser must inform the Underwriter or dealer of any such combined
purchase prior to the sale in order to obtain the indicated discount.
In addition, with respect to the employees, officers and directors
(including their immediate family members, defined as spouses,
children, grandchildren, parents, grandparents, mothers-in-law,
fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of
the Sponsor and the Underwriters and their subsidiaries, the sales
charge is reduced by 2.0% of the Public Offering Price for purchases
of Units during the primary and secondary public offering periods.
Any such reduced sales charge shall be the responsibility of the
selling Underwriter or dealer except that with respect to purchases
of Units of $500,000 or more, the Sponsor will reimburse the selling
Underwriter or dealer in an amount equal to $2.50 per Unit (in
the case of a Discount Trust, .25% of the Public Offering Price).
The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any
one Underwriter or dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from such
Underwriter or dealer of Units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally,
Units purchased in the name of the spouse of a purchaser or in
the name of a child of such purchaser will be deemed, for the
purpose of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also
be applicable to a trustee or other fiduciary purchasing securities
for a single trust estate or single fiduciary account.
Units may be purchased in the primary or secondary market at the
Public Offering Price less the concession the Sponsor typically
allows to dealers and other selling agents for purchases (see
"Public Offering-How are Units Distributed?") by investors who
purchase Units through registered investment advisers, certified
financial planners and registered broker-dealers who in each case
either charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services
in connection with the establishment of an investment account
for which a comprehensive "wrap fee" charge is imposed.
On the Initial Date of Deposit, the Public Offering Price is as
indicated in the "Summary of Essential Information" appearing
in each Part I of this Prospectus. The Public Offering Price during
the initial offering period will vary from day-to-day due to fluctuations
in the amount of interest accrued but unpaid on Bonds in each
Trust of the Fund and/or fluctuations in the prices of the underlying
Bonds.
The aggregate price of the Bonds in each Trust is determined by
the 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 FGIC and/or AMBAC to meet its commitments under the Insured
Trust's insurance policy, including the commitments to issue Permanent
Insurance. It is the position of the Sponsor that this is a fair
method of valuing the Bonds and the insurance obtained by an Insured
Trust and reflects a proper valuation method in accordance with
the provisions of the Investment Company Act of 1940.
Page 13
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.
Although payment is normally made three days following the order
for purchase (the date of settlement), 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 three 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?
During the initial offering period, until the primary distribution
of the Units offered by this Prospectus is completed, Units will
be offered to the public at the Public Offering Price, computed
as described above, by the Underwriters, including the Sponsor
(see "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 above. Under the
Glass-Steagall Act, banks are prohibited from underwriting Units;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available
must be registered as broker/dealers under state law. Any broker/dealer
or bank will receive additional concessions for purchases made
from the Sponsor on the Initial Date of Deposit resulting in total
concessions as contained in the following table:
Page 14
<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
(5.152% of the net amount invested), 5.5% of the Public Offering
Price of the Units for other State Trusts (5.820% of the net amount
invested), 4.4% of the Public Offering Price of the Units for
a Long Intermediate Trust (4.603% of the net amount invested),
3.9% of the Public Offering Price of the Units for an Intermediate
Trust (4.058% of the net amount invested) and 3.0% of the Public
Offering Price of the Units for a Short Intermediate Trust (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 Portfolio" appearing in each 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 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
Page 15
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 Uni
___________________________________________________________
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 Portfolio" in
each Part I of this Prospectus. 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 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.
The Sponsor may, at any time, 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.
Page 16
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
to be redeemed or transferred must be surrendered to the Trustee
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 FGIC and/or AMBAC 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.
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 each 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 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. 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.
Page 17
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.
The pro rata share of cash in the Principal Account of each Trust
will be computed as of the fifteenth day of each month, and distributions
to the Unit holders of such Trust as of such Record Date will
be made on or shortly after the last day of each month. Proceeds
from the disposition of any of the Bonds of such Trust (less any
premiums due with respect to Bonds for which the Trustee has exercised
the right to obtain Permanent Insurance) received after such Record
Date and prior to the following Distribution Date will be held
in the Principal Account of such Trust and not distributed until
the next Distribution Date. The Trustee is not required to make
a distribution from the Principal Account of a Trust unless the
amount available for distribution shall equal at least $1.00 per Unit.
The Trustee will credit to the Interest Account of each Trust
all interest received by such Trust, including that part of the
proceeds (including insurance proceeds if any, paid to an Insured
Trust) of any disposition of Bonds which represents accrued interest.
Other receipts will be credited to the Principal Account of such
Trust. The distribution to the Unit holders of a Trust as of each
Record Date will be made on the following Distribution Date or
shortly thereafter and shall consist of an amount substantially
equal to such portion of the holder's pro rata share of the estimated
annual income of such Trust after deducting estimated expenses.
Except through an advancement of its own funds, the Trustee has
no cash for distribution to Unit holders until it receives interest
payments on the Bonds in a Trust. The Trustee shall be reimbursed,
without interest, for any advances from funds in the Interest
Account of such Trust on the ensuing Record Date. Persons who
purchase Units between a Record Date and a Distribution Date will
receive their first distribution on the second Distribution Date
after the purchase under the applicable plan of distribution.
The Trustee is not required to pay interest on funds held in the
Principal or Interest Account of a Trust (but may itself earn
interest thereon and therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct
from the Interest Account of each Trust and, to the extent funds
are not sufficient therein, from the Principal Account of each
Trust, amounts necessary to pay the expenses of such Trust. The
Trustee also may withdraw from said accounts such amounts, if
any, as it deems necessary to establish a reserve for any governmental
charges payable out of the Trust. Amounts so withdrawn shall not
be considered a part of the Trust's assets until such time as
the Trustee shall return all or any part of such amounts to the
appropriate account. In addition, the Trustee may withdraw from
the Interest Account and the Principal Account of a Trust such
amounts as may be necessary to cover redemption of Units of such
Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation
in a Universal Distribution Option which permits a Unit holder
to direct the Trustee to distribute principal and interest payments
to any other investment vehicle of which the Unit holder has an
existing account. For example, at a Unit holder's direction, the
Trustee would distribute automatically on the applicable distribution
date interest income or principal on the participant's Units to,
among other investment vehicles, a Unit holder's checking, bank
savings, money market, insurance, reinvestment or any other account.
All such distributions, of course, are subject to the minimum
investment and sales charges, if any, of the particular investment
vehicle to which distributions are directed. The Trustee will
notify the participant of each distribution pursuant to the Universal
Distribution Option. The Trustee will distribute directly to the
Unit holder any distributions which are not accepted
Page 18
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 contact the Trustee
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. If interest on a Bond should be determined to be taxable,
the Bond would generally have to be sold at a substantial discount.
In addition, investors could be required to pay income tax on
interest received prior to the date on which interest is determined
to be taxable. Gain realized on the sale or redemption of the
Bonds by the Trustee or of a Unit by a Unit holder is, however,
includable in gross income for Federal income tax purposes. (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") that subject accretion of market discount on tax-exempt
bonds to taxation as ordinary income, gain realized on the sale
or redemption of Bonds by the Trustee or of Units by a Unit holder
that would have been treated as capital gain under prior law is
treated as ordinary income to the extent it is attributable to
accretion of market discount. Market discount can arise based
on the price a Trust pays for Bonds or the price a Unit holder
pays for his Units. 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
Page 19
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.
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.
Counsel for the Sponsor has also advised that under Section 265
of the Code, interest on indebtedness incurred or continued to
purchase or carry Units of a Trust is not deductible for Federal
income tax purposes. The Internal Revenue Service has taken the
position that such indebtedness need not be directly traceable
to the purchase or carrying of Units (however, these rules generally
do not apply to interest paid on indebtedness incurred to purchase
or improve a personal residence). Under Section 265 of the Code,
certain financial institutions that acquire Units generally would
not be able to deduct any of the interest expense attributable
Page 20
to ownership of Units. Investors with questions regarding these
issues should consult with their tax advisers.
In the case of certain of the Bonds in a Trust, the opinions of
bond counsel indicate that interest on such securities received
by a "substantial user" of the facilities being financed with
the proceeds of these securities, or persons related thereto,
for periods while such securities are held by such a user or related
person, will not be excludable from Federal gross income, although
interest on such securities received by others would be excludable
from Federal gross income. "Substantial user" and "related person"
are defined under U.S. Treasury Regulations. Any person who believes
he or she may be a substantial user or related person as so defined
should contact his tax adviser.
In general, Section 86 of the Code provides that Social Security
benefits are includible in gross income in an amount equal to
the lesser of (1) 50% of the Social Security benefits received
or (2) 50% of the excess of "modified adjusted gross income" plus
50% of the Social Security benefits received over the appropriate
"base amount." The base amount is $25,000 for unmarried taxpayers,
$32,000 for married taxpayers filing a joint return and zero for
married taxpayers who do not live apart at all times during the
taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard
to certain otherwise allowable deductions and exclusions from
gross income and by including tax-exempt interest. To the extent
that Social Security benefits are includible in gross income,
they will be treated as any other item of gross income.
In addition, under the Tax Act, for taxable years beginning after
December 31, 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted
gross income" plus 50% of Social Security benefits received exceeds
an "adjusted base amount." The adjusted base amount is $34,000
for unmarried taxpayers, $44,000 for married taxpayers filing
a joint return, and zero for married taxpayers who do not live
apart at all times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted
gross income solely for the purpose of determining what portion,
if any, of Social Security benefits will be included in gross
income, no tax-exempt interest, including that received from a
Trust, will be subject to tax. A taxpayer whose adjusted gross
income already exceeds the base amount or the adjusted base amount
must include 50% or 85%, respectively, of his Social Security
benefits in gross income whether or not he receives any tax-exempt
interest. A taxpayer whose modified adjusted gross income (after
inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest
on certain private activity bonds (which includes most industrial
and housing revenue bonds) issued on or after August 8, 1986 is
included as an item of tax preference. See "Portfolio" in Part
I of this Prospectus for each Trust to determine whether the Trust
includes any such private activity bonds issued on or after that
date. SEE "PORTFOLIO" IN PART I OF THIS PROSPECTUS FOR EACH TRUST
TO DETERMINE WHETHER THE TRUST INCLUDES ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
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.
Page 21
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Fund for New York tax matters, under the existing income tax
laws of the State and City of New York, each Trust will not constitute
an association taxable as a corporation under New York law, and
accordingly will not be subject to the New York State franchise
tax or the New York City general corporation tax. Under the income
tax laws of the State and City of New York, the income of each
Trust will be considered the income of the holders of the Units.
For information with respect to exemption from state or other
local taxes, see the sections in the Prospectus pertaining to
each Trust.
All statements in the Prospectus concerning exemption from Federal,
state or other local taxes are the opinions of Counsel and are
to be so construed.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection
with each distribution a statement of the amount of interest,
if any, and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit.
Within a reasonable time after the last business day of each calendar
year, the Trustee will furnish to each person who at any time
during the calendar year was a Unit holder of a Trust of record,
a statement as to (1) the Interest Account: interest received
by such Trust (including amounts representing interest received
upon any disposition of Bonds of such Trust), the amount of such
interest representing insurance proceeds (if applicable), deductions
for payment of applicable taxes and for fees and expenses of the
Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar
amount and as a dollar amount representing the pro rata share
of each Unit outstanding on the last business day of such calendar
year; (2) the Principal Account: the dates of disposition of any
Bonds of such Trust and the net proceeds received therefrom (excluding
any portion representing interest and the premium attributable
to the exercise of the right, if applicable, to obtain Permanent
Insurance), deduction for payment of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, and the
balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing
the pro rata share of each Unit outstanding on the last business
day of such calendar year; (3) the Bonds held and the number of
Units of such Trust outstanding on the last business day of such
calendar year; (4) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (5)
the amounts actually distributed during such calendar year from
the Interest Account and from the Principal Account of such Trust,
separately stated, expressed both as total dollar amounts and
as dollar amounts per Unit outstanding on the Record Date for
such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its unit investment trust office in the City
of New York of the certificates representing the Units to be redeemed,
duly endorsed or accompanied by proper instruments of transfer
with signature guaranteed as explained above (or by providing
satisfactory indemnity, as in connection with lost, stolen or
destroyed certificates), and payment of applicable governmental
charges, if any. No redemption fee will be charged. On the 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
Page 22
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 each 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?"
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
Page 23
for which it is determined by the Depositor to be in the best
interests of the Unit holders or if there is no alternative, the
Trustee is empowered to sell Bonds in a Trust which are in default
in payment of principal or interest or in significant risk of
such default and for which value has been attributed to the insurance,
if any, obtained by the Trust. See "How May Units be Redeemed?"
The Sponsor is empowered, but not obligated, to direct the Trustee
to dispose of Bonds in a Trust in the event of advanced refunding.
The Sponsor may from time to time act as agent for a Trust with
respect to selling Bonds out of a Trust. From time to time, the
Trustee may retain and pay compensation to the Sponsor subject
to the restrictions under the Investment Company Act of 1940,
as amended.
If any default in the payment of principal or interest on any
Bond occurs and no provision for payment is made therefor, either
pursuant to the portfolio insurance, if any, or otherwise, within
thirty days, the Trustee is required to notify the Sponsor thereof.
If the Sponsor fails to instruct the Trustee to sell or to hold
such Bond within thirty days after notification by the Trustee
to the Sponsor of such default, the Trustee may, in its discretion,
sell the defaulted Bond and not be liable for any depreciation
or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made
by an issuer of any of the Bonds to issue new obligations in exchange
and substitution for any Bonds pursuant to a refunding or refinancing
plan, except that the Sponsor may instruct the Trustee to accept
such an offer or to take any other action with respect thereto
as the Sponsor may deem proper if the issuer is in default with
respect to such Bonds or in the written opinion of the Sponsor
the issuer will probably default in respect to such Bonds in the
foreseeable future. Any obligations so received in exchange or
substitution will be held by the Trustee subject to the terms
and conditions in the Indenture to the same extent as Bonds originally
deposited thereunder. Within five days after the deposit of obligations
in exchange or substitution for underlying Bonds, the Trustee
is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under
"What are Certain General Matters Relating to the Trusts?" for
Failed Bonds, the acquisition by a Trust of any securities other
than the Bonds initially deposited is prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $9 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994, the total partners' capital of Nike Securities
L.P. was $10,863,058 (audited). (This paragraph relates only to
the Sponsor and not to the Trust or to any series thereof or to
any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank (National Association), a national
banking association with its principal executive office located at 1 Chase
Manhattan Plaza, New York, New York 10081 and its unit investment trust
office at 770 Broadway, New York, New York 10003. Unit holders who have
questions regarding the Trusts may call the Customer Service Help Line at
1-800-682-7520. The Trustee is subject to supervision by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and
the Board of Governors of the Federal Reserve System.
Page 24
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Bonds. In the
event of the failure of the Sponsor to act under the Indenture,
the Trustee may act thereunder and shall not be liable for any
action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in
respect of the Fund which the Trustee may be required to pay under
any present or future law of the United States of America or of
any other taxing authority having jurisdiction. In addition, the
Indenture contains other customary provisions limiting the liability
of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or
its affairs are taken over by public authorities, then the Trustee
may (a) appoint a successor Sponsor at rates of compensation deemed
by the Trustee to be reasonable and not exceeding amounts prescribed
by the Securities and Exchange Commission, or (b) terminate the
Indenture and liquidate the Trusts as provided herein, or (c)
continue to act as Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187. The Evaluator
may resign or may be removed by the Sponsor or the Trustee, in
which event the Sponsor and the Trustee are to use their best
efforts to appoint a satisfactory successor. Such resignation
or removal shall become effective upon the acceptance of appointment
by the successor Evaluator. If upon resignation of the Evaluator
no successor has accepted appointment within thirty days after
notice of resignation, the Evaluator may apply to a court of competent
jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for
the accuracy thereof. Determinations by the Evaluator under the
Indenture shall be made in good faith upon the basis of the best
information available to it, provided, however, that the Evaluator
shall be under no liability to the Trustee, Sponsor or Unit holders
for errors in judgment. This provision shall not protect the Evaluator
in any case of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment
is (1) to cure any ambiguity or to correct or supplement any provision
of the Indenture which may be defective or inconsistent with any
other provision contained therein, or (2) to make such other provisions
as shall not adversely affect the interest of the Unit holders
(as determined in good faith by the Sponsor and the Trustee),
provided that the Indenture is not amended to increase the number
of Units of any Trust issuable thereunder or to permit the deposit
or acquisition of securities either in addition to or in substitution
for any of the Bonds of any Trust initially deposited in a Trust,
except for the substitution of certain refunding securities for
Bonds or New Bonds for Failed Bonds. In the event of any amendment,
the Trustee is obligated to notify promptly all Unit holders of
the substance of such amendment.
Page 25
Each Trust may be liquidated at any time by consent of 100% of
the Unit holders of such Trust or by the Trustee when the value
of such Trust, as shown by any evaluation, is less than 20% of
the aggregate principal amount of the Bonds deposited in the Trust
during the primary offering period or by the Trustee in the event
that Units of a Trust not yet sold aggregating more than 60% of
the Units of such Trust are tendered for redemption by the Underwriters,
including the Sponsor. If a Trust is liquidated because of the
redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of such Trust the
entire sales charge paid by such purchaser. The Indenture will
terminate upon the redemption, sale or other disposition of the
last Bond held thereunder, but in no event shall it continue beyond
December 31, 2044. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders of such
Trust. Within a reasonable period after termination, the Trustee
will sell any Bonds remaining in the Trust and, after paying all
expenses and charges incurred by such Trust, will distribute to
each Unit holder of such Trust (including the Sponsor if it then
holds any Units), upon surrender for cancellation of his Certificate
for Units, his pro rata share of the balances remaining in the
Interest and Principal Accounts of such Trust, all as provided
in the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating
to Federal tax law have been passed upon by Chapman and Cutler,
111 West Monroe Street, Chicago, Illinois 60603, as counsel for
the Sponsor. Carter, Ledyard & Milburn, 2 Wall Street, New York,
New York 10005, will act as counsel for the Trustee and as special
counsel for the Fund for New York tax matters. For information
with respect to state and local tax matters, including the State
Trust special counsel for such matters, see the section of the
Prospectus describing each Trust appearing herein.
Experts
The statements of net assets, including the portfolios, of the
Trusts on the Initial Date of Deposit appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon
appearing in each Part I of this Prospectus and
in the Registration Statement, and are included in reliance upon
such reports given upon the authority of such firm as experts
in accounting and auditing.
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 26
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Page 27
<TABLE>
<CAPTION>
<S> <C>
CONTENTS:
What is the First Trust Combined Series? 1
What are Certain General Matters Relating
to the Trusts? 2
Risk Factors 3
What are Estimated Long-Term Return and
Estimated Current Return? 7
How is Accrued Interest Treated? 8
What are the Expenses and Charges? 9
Why and How are the Insured Trusts Insured? 10
Public Offering:
How is the Public Offering Price Determined? 12
How are Units Distributed? 14
What are the Sponsor's Profits? 15
What are the Underwriting Concessions? 15
Will There be a Secondary Market? 16
Rights of Unit Holders:
How are Certificates Issued and Transferred? 17
How are Interest and Principal Distributed? 17
How Can Distributions to Unit Holders be
Reinvested? 18
What is the Federal Tax Status of Unit Holders? 19
What Reports will Unit Holders Receive? 22
How May Units be Redeemed? 22
How May Units be Purchased by the Sponsor? 23
How May Bonds be Removed from the Fund? 23
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 24
Who is the Trustee? 24
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 25
Other Information:
How May the Indenture be Amended or
Terminated? 25
Legal Opinions 26
Experts 26
Supplemental Information 26
</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:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
This Part Two Must Be
Accompanied by Part One.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
September 7, 1995
Page 28
The First Trust (registered trademark) Combined Series 252
INFORMATION SUPPLEMENT
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 II of the
Prospectus. This Information Supplement has been created to supplement
information contained in the Prospectus.
The Objectives of the Fund are conservation of capital through
investment in portfolios of tax-exempt bonds and income exempt, with
certain exceptions, from Federal and applicable state and local income
taxes. The payment of interest and the preservation of principal are,
of course, dependent upon the continuing ability of the issuers,
obligors and/or insurers to meet their respective obligations.
This Information Supplement is dated September 7, 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 Revenue Bonds 4
Electric Utility Revenue Bonds 4
Lease Obligation Revenue Bonds 4
Industrial Revenue Bonds 5
Transportation Facility Revenue Bonds 5
Educational Obligation Revenue Bonds 6
Resource Recovery Facility Revenue Bonds 6
Bonds of Issuers Located in the Commonwealth of Puerto Rico 6
Insurance on the Bonds 7
How is the Public Offering Price Determined? 14
Description of Bond Ratings 15
Appendix A - Missouri Disclosure A-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
Page 1
form of tax-exempt interest income than a comparable bond newly
issued at current market rates. See "What is the Federal Tax Status
of Unit Holders?" Market discount attributable to interest changes
does not indicate a lack of market confidence in the issue. Neither
the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Bonds.
Original Issue Discount Bonds. Certain of the Bonds in the Trusts
may be original issue discount bonds. Under current law, the original
issue discount, which is the difference between the stated redemption
price at maturity and the issue price of the Bonds, is deemed
to accrue on a daily basis and the accrued portion is treated
as tax-exempt interest income for Federal income tax purposes.
On sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable
as capital gain unless the gain is attributable to market discount
in which case the accretion of market discount is taxable as ordinary
income. See "What is the Federal Tax Status of Unit Holders?"
The current value of an original issue discount bond reflects
the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the
Bonds approach maturity.
Zero Coupon Bonds. Certain of the original issue discount bonds
may be Zero Coupon Bonds (including bonds known as multiplier
bonds, money multiplier bonds, capital appreciation bonds, capital
accumulator bonds, compound interest bonds and money discount
maturity payment bonds). Zero Coupon Bonds do not provide for
the payment of any current interest and generally provide for
payment at maturity at face value unless sooner sold or redeemed.
Zero Coupon Bonds may be subject to more price volatility than
conventional bonds. While some types of Zero Coupon Bonds, such
as multipliers and capital appreciation 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
Page 2
of the Trust or in case the Trust is terminated. See "Rights of
Unit Holders: How May Bonds be Removed from the Fund?" and "Other
Information: How May the Indenture be Amended or Terminated?"
See "Portfolio" for each Trust for the earliest scheduled call
date and the initial redemption price for each Bond.
General Obligation Bonds. Certain of the Bonds in the Trusts may
be general obligations of a governmental entity that are backed
by the taxing power of such entity. All other Bonds in the Trusts
are revenue bonds payable from the income of a specific project
or authority and are not supported by the issuer's power to levy
taxes. General obligation bonds are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal
and interest. Revenue bonds, on the other hand, are payable only
from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special
excise tax or other specific revenue source. There are, of course,
variations in the security of the different Bonds in the Fund,
both within a particular classification and between classifications,
depending on numerous factors.
Healthcare Revenue Bonds. Certain of the Bonds in the Trusts may
be health care revenue bonds. Ratings of bonds issued for health
care facilities are sometimes based on feasibility studies that
contain projections of occupancy levels, revenues and expenses.
A facility's gross receipts and net income available for debt
service may be affected by future events and conditions including
among other things, demand for services, the ability of the facility
to provide the services required, physicians' confidence in the
facility, management capabilities, competition with other hospitals,
efforts by insurers and governmental agencies 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 Revenue 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 Revenue 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 Revenue 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
Page 4
(schools, administrative offices, convention centers and prisons,
for example) or the purchase of equipment (police cars and computer
systems, for example) that will be used by a state or local government
(the "lessee"). Thus, these obligations are subject to the ability
and willingness of the lessee government to meet its lease rental
payments which include debt service on the obligations. Lease
obligations are subject, in almost all cases, to the annual appropriation
risk, i.e., the lessee government is not legally obligated to
budget and appropriate for the rental payments beyond the current
fiscal year. These obligations are also subject to construction
and abatement risk in many states-rental obligations cease in
the event that delays in building, damage, destruction or condemnation
of the project prevents its use by the lessee. In these cases,
insurance provisions designed to alleviate this risk become important
credit factors. In the event of default by the lessee government,
there may be significant legal and/or practical difficulties involved
in the re-letting or sale of the project. Some of these issues,
particularly those for equipment purchase, contain the so-called
"substitution safeguard", which bars the lessee government, in
the event it defaults on its rental payments, from the purchase
or use of similar equipment for a certain period of time. This
safeguard is designed to insure that the lessee government will
appropriate, even though it is not legally obligated to do so,
but its legality remains untested in most, if not all, states.
Industrial Revenue Bonds. Certain of the Bonds in the Trusts may
be industrial revenue bonds ("IRBs"), including pollution control
revenue bonds, which are tax-exempt securities issued by states,
municipalities, public authorities or similar entities to finance
the cost of acquiring, constructing or improving various industrial
projects. These projects are usually operated by corporate entities.
Issuers are obligated 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 Revenue 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 Revenue 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.
Insurance on the Bonds
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS.
THE BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED
BY INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as
to the scheduled payment of interest and principal by policies
obtained by each Insured Trust from Financial Guaranty Insurance
Company ("Financial Guaranty" or "FGIC"), a New York stock insurance
company, or AMBAC Indemnity Corporation ("AMBAC Indemnity" or
"AMBAC"), a Wisconsin-domiciled stock insurance company, or obtained
by the Bond issuer, the underwriters, the Sponsor or others prior
to the Initial Date of Deposit directly from Financial Guaranty,
AMBAC Indemnity or other insurers (the "Preinsured Bonds"). The
insurance policy obtained by each Insured Trust is noncancellable
and will continue in force for such Trust so long as such Trust
is in existence and the Bonds described in the policy continue
to be held by such Trust (see "Portfolio" for each Insured Trust).
Nonpayment of premiums on the policy obtained by each Insured
Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or AMBAC Indemnity to take action
against the Trustee to recover premium payments due it. Premium
rates for each issue of Bonds protected by the policy obtained
by each Insured Trust are fixed for the life of such Trust. The
premium for any Preinsured Bonds has been paid in advance by the
Bond issuer, the underwriters, the Sponsor or others and any such
policy or policies are noncancellable and will continue in force
so long as the Bonds so insured are outstanding and the insurer
and/or insurers thereof remain in business. If the provider of
an original issuance insurance policy is unable to meet its obligations
under such policy, or if the rating assigned to the claims-paying
ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure
Page 7
any issue adversely affected by either of the above described
events. A monthly premium is paid by each Insured Trust for the
insurance obtained by such Trust, which is payable from the interest
income received by such Trust. In the case of Preinsured Bonds,
no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of
the aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay
to Citibank, N.A., or its successor, as its agent (the "Fiscal
Agent"), that portion of the principal of and interest on the
Bonds covered by the policy which shall become due for payment
but shall be unpaid by reason of nonpayment by the issuer of the
Bonds. The term "due for payment" means, when referring to the
principal of a Bond, its stated maturity date or the date on which
it shall have been called for mandatory sinking fund redemption
and does not refer to any earlier date on which payment is due
by reason of call for redemption (other than by mandatory sinking
fund redemption), acceleration or other advancement of maturity
and means, when referring to interest on a Bond, the stated date
for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation,
"due for payment" also means, when referring to the principal
of such Bond, the date on which such Bond has been called for
mandatory redemption as a result of such determination of taxability,
and when referring to interest on such Bond, the accrued interest
at the rate provided in such documentation to the date on which
such Bond has been called for such mandatory redemption, together
with any applicable redemption premium. The term "due for payment"
will not include, when referring to either the principal of a
Bond or the interest on a Bond, any acceleration of payment unless
such acceleration is at the sole option of Financial Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent
on the date such principal or interest becomes due for payment
or on the business day next following the day on which Financial
Guaranty shall have received notice of nonpayment, whichever is
later. The Fiscal Agent will disburse to the Trustee the face
amount of principal and interest which is then due for payment
but is unpaid by reason of nonpayment by the issuer but only upon
receipt by the Fiscal Agent of (i) evidence of the Trustee's right
to receive payment of the principal or interest due for payment
and (ii) evidence, including any appropriate instruments of assignment,
that all of the rights to payment of such principal or interest
due for payment shall thereupon vest in Financial Guaranty. Upon
such disbursement, Financial Guaranty shall become the owner of
the Bond, appurtenant coupon or right to payment of principal
or interest on such Bond and shall be fully subrogated to all
of the Trustee's rights thereunder, including the right to payment
thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained
by an Insured Trust has the right to obtain permanent insurance
with respect to such Bond (i.e., insurance to maturity of the
Bonds regardless of the identity of the holder thereof) (the "Permanent
Insurance") upon the payment of a single predetermined insurance
premium from the proceeds of the sale of such Bond. Accordingly,
any Bond in an Insured Trust is eligible to be sold on an insured
basis. It is expected that the Trustee will exercise the right
to obtain Permanent Insurance only if upon such exercise the Insured
Trust would receive net proceeds (sale of Bond proceeds less the
insurance premium attributable to the Permanent Insurance) from
such sale in excess of the sale proceeds if such Bonds were sold
on an uninsured basis. The insurance premium with respect to each
Bond eligible for Permanent Insurance is determined 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 June 30, 1995, the total capital and surplus of Financial
Guaranty was approximately $978,500,000. 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,
Page 8
or to the New York State Insurance Department at 160 West Broadway,
18th Floor, New York, New York 10013, Attention: Financial Condition
Property/Casualty 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
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.
Page 9
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 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.
Page 10
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 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
Page 11
operations on December 24, 1987 as an indirect, wholly-owned subsidiary
of Citibank (New York State), a wholly-owned subsidiary of Citicorp.
On June 25, 1992, Citibank (New York State) sold CapMAC to Holdings
(the "Sale").
Neither Holdings nor any of its stockholders is obligated to pay
any claims under any surety bond issued by CapMAC or any debts
of CapMAC or to make additional capital contributions.
CapMAC is regulated by the Superintendent of Insurance of the
State of New York. In addition, CapMAC is subject to regulation
by the insurance departments of the other jurisdictions in which
it is licensed. CapMAC is subject to periodic regulatory examinations
by the same regulatory authorities.
CapMAC is bound by insurance laws and regulations regarding capital
transfers, limitations upon dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and
acquisitions. The amount of exposure per risk that CapMAC may
retain, after giving effect to reinsurance, collateral or other
securities, is also regulated. Statutory and regulatory accounting
practices may prescribe appropriate rates at which premiums are
earned and the levels of reserves required. In addition, various
insurance laws restrict the incurrence of debt, regulate permissible
investments of reserves, capital and surplus, and govern the form
of surety bonds.
CapMAC's obligations under the Surety Bond(s) may be reinsured.
Such reinsurance does not relieve CapMAC of any of its obligations
under the Surety Bond(s).
THE SURETY BONDS ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In connection with the Sale, Holdings and CapMAC entered into
an Ownership Policy Agreement (the "Ownership Policy Agreement"),
which sets forth Holdings' intent with respect to its ownership
and control of CapMAC and provides for certain policies and agreements
with respect to Holdings' exercise of its control of CapMAC. In
the Ownership Policy Agreement, Holdings has agreed that, during
the term of the Ownership Policy Agreement, it will not and will
not permit any stockholder of Holdings to enter into any transaction
the result of which would be a change of control (as defined in
the Ownership Policy Agreement) of CapMAC, unless the long-term
debt obligations or claims-paying ability of the person which
would control CapMAC after such transaction or its direct or indirect
parent are rated in a high investment grade category, unless Holdings
or CapMAC has confirmed that CapMAC's claims-paying ability rating
by Moody's (the "Rating") in effect immediately prior to any such
change of control will not be downgraded by Moody's upon such
change of control or unless such change of control occurs as a
result of a public offering of Holdings' capital stock.
In addition, the Ownership Policy Agreement includes agreements
(i) not to change the "zero-loss" underwriting standards or policies
and procedures of CapMAC in a manner that would materially and
adversely affect the risk profile of CapMAC's book of business,
(ii) that CapMAC will adhere to the aggregate leverage limitations
and maintain capitalization levels considered by Moody's from
time to time as consistent 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
Page 12
that was incurred in connection with the capitalization of CapMAC.
As of June 30, 1992, CapMAC had statutory capital and surplus
of approximately $150 million and had not incurred any debt obligations.
In addition, on December 31, 1992 CapMAC had a statutory contingency
reserve of approximately $15 million, which is also available
to cover claims under surety bonds issued by CapMAC. Article 69
of the New York State Insurance Law requires that CapMAC establishes
and maintains the contingency reserve.
In addition to its capital (including contingency reserve) and
other reinsurance available to pay claims under its surety bonds,
on June 25, 1992, CapMAC entered into a Stop Loss Reinsurance
Agreement (the "Stop Loss Agreement") with Winterthur Swiss Insurance
Company (the "Reinsurer"), which is rated AAA by Standard & Poor's
and Aaa by Moody's, pursuant to which the Reinsurer will be required
to pay any losses incurred by CapMAC during the term of the Stop
Loss Agreement on the surety bonds covered under the Stop Loss
Agreement in excess of a specified amount of losses incurred by
CapMAC under such surety bonds (such specified amount initially
being $100 million and increasing annually by an amount equal
to 66 2/3% of the increase in CapMAC's statutory capital and surplus)
up to an aggregate limit payable under the Stop Loss Agreement
of $50 million. The Stop Loss Agreement has an initial term of
seven years, is extendable for one-year periods and is subject
to early termination upon the occurrence of certain events.
CapMAC also has available a $100,000,000 standby corporate liquidity
facility (the "Liquidity Facility") provided by a syndicate of
banks rated A1+/P1 by Standard & Poor's and Moody's, respectively,
having a term of 360 days. Under the Liquidity Facility CapMAC
will be able, subject to satisfying certain conditions, to borrow
funds from time to time in order to enable it to fund any claim
payments or payments made in settlement or mitigation of claims
payments under its surety bonds, including the Surety Bond(s).
Copies of CapMAC's financial statements prepared in accordance
with statutory accounting standards, which differ from generally
accepted accounting principles, and filed with the Insurance Department
of the State of New York are available upon request. CapMAC is
located at 885 Third Avenue, New York, New York 10022, and its
telephone number is (212) 755-1155.
Financial Security Assurance. Financial Security Assurance ("Financial
Security") is a monoline insurance company incorporated on March
16, 1984 under the laws of the State of New York. The operations
of Financial Security commenced on July 25, 1985, and Financial
Security received its New York State insurance license on September
23, 1985. Financial Security and its two wholly-owned subsidiaries
are licensed to engage in the financial guaranty insurance business
in 49 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged exclusively
in the business of writing financial guaranty insurance, principally
in respect of asset-backed and other collateralized securities
offered in domestic and foreign markets. Financial Security and
its subsidiaries also write financial guaranty insurance in respect
of municipal and other obligations and reinsure financial guaranty
insurance policies written by other leading insurance companies.
In general, financial guaranty insurance consists of the issuance
of a guaranty 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,
Page 13
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.
Connie Lee Insurance Company. Connie Lee Insurance Company ("Connie
Lee") is a stock insurance company incorporated in the State of
Wisconsin and a wholly-owned subsidiary of College Construction
Loan Insurance Association ("CCLIA"), a District of Columbia insurance
holding company. As of December 31, 1994, the total policyholders'
surplus of Connie Lee was approximately $106,000,000 (audited)
and total admitted assets was approximately $194,000,000 (audited),
as reported to the Commissioner of Insurance of the State of Wisconsin.
Connie Lee's address is 2445 M Street, N.W., Washington D.C. 20037.
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.
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.
Page 14
Secondary Offering Period
Sales Charge
_________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ _________ __________
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
There will be no reduction of the sales charges for volume purchases
for secondary market transactions. A dealer will receive from
the Sponsor a dealer concession of 70% of the total sales charges
for Units sold by such dealer and dealers will not be eligible
for additional concessions for Units sold pursuant to the above
schedule.
Description Of Bond Ratings*
______________
* As published by the rating companies.
Standard & Poor's. A brief description of the applicable Standard
& Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect
to a specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold
a security, inasmuch as it does not comment as to market price
or suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangements
under the laws of bankruptcy and other laws affecting creditors' rights.
AAA-Bonds rated AAA have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.**
______________
** Bonds insured by Financial Guaranty Insurance Company, AMBAC
Indemnity Corporation, Municipal Bond Investors Assurance Corporation,
Connie Lee Insurance Company, Financial Security Assurance and
Capital Guaranty Insurance Company are automatically rated "AAA"
by Standard & Poor's.
AA-Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues only
in small degree.
A-Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
Page 15
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.
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
Page 16
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
MISSOURI DISCLOSURE
Currently, Missouri has a population of over 5 million people.
Missouri's population has climbed steadily upward, averaging an
increase of approximately 6% each decade. Population projections
indicate by the year 2010, there will be about 5.5 million people
in Missouri, a continuation of the steady, moderate growth which
has been the trend.
Farming plays a vital role in Missouri's economy. Cash receipts
from sales of crops and livestock average $3.8 billion annually.
These cash receipts come from a variety of agricultural commodities
produced in the State. The largest portion of the State's agricultural
income comes from the production of meat animals (36.6%). Oil
crops account for 18.9%; feed crops 13.3%; dairy products 8.6%;
poultry and eggs 11.2%; food grains 4.0%; miscellaneous crops
3.3%; cotton 3.4% and miscellaneous 0.7%.
According to data obtained by the Missouri Division of Employment
Security, in 1993 over two million workers had nonagricultural
jobs in Missouri. Nearly 27% of these workers were employed in
services, approximately 24% were employed in wholesale and retail
trade, and 17% were employed in manufacturing. In the last ten
years, Missouri has experienced a significant increase in employment
in the service sector and in wholesale and retail trade.
In 1993, per capita personal income in Missouri was $19,463, a
2.6% increase over the 1992 figure of $18,970. For the United
States as a whole, per capita income in 1993 was $20,817, a 3.6%
increase over the 1992 per capita income of $20,105.
The total value of Missouri's annual mineral production in 1992
exceeded $1.1 billion. The State ranked first nationally in the
production of lime and lead. It ranked second in production of
crude iron oxide pigments; third in barite, fire clay and iron
pigments; fourth in zinc; fifth in portland cement; sixth in copper
and eighth in silver. Mining employment totaled 4,700 jobs. Missouri
ranks 11th in the nation in the production of non-fuel minerals.
Although the June 1993 revenue estimate had been revised downward
by $27.5 million, the State budget for Fiscal Year 1993 remained
balanced due primarily to delayed spending for desegregation capital
projects. The downward revision in revenues was considered necessary
because of weak economic performance, and more importantly an
economic outlook for the second half of Fiscal Year 1993 which
projected slower growth than was anticipated in June 1992.
For Fiscal Year 1994, the majority of revenues for the State of
Missouri were obtained from individual income taxes (53.1%), sales
and use taxes (30.0%), corporate income taxes (5.9%) and county
foreign insurance taxes (3.0%). Major expenditures for Fiscal
Year 1994 included elementary and secondary education (30.6%),
human services (25.4%), higher education (14.8%), desegregation
(8.9%), corrections and public safety (5.1%) and judiciary and
general assembly (2.7%).
The Fiscal Year 1994 budget balanced resources and obligations
based on the consensus revenue and refund estimate and an opening
balance resulting from continued withholdings and delayed spending
for desegregation capital projects. The total general revenue
operating budget for Fiscal Year 1994 exclusive of desegregation
was $3,844.6 million. The court-ordered desegregation estimate
was $377.7 million, an increase of $30.7 million over the revised
Fiscal Year 1993 estimate.
For Fiscal Year 1995 revenues are projected at $5,225.5 million.
This does not include $64 million in transfers or a carryover
balance of approximately $274.6 million. Expenditures are projected
at $5,270.8 million, including $158.0 million and $200.9 million
respectively for the St. Louis and Kansas City desegregation cases.
Expenditures also include $58 million reserved for supplemental
appropriations for Fiscal Year 1995.
Legislation enacted in 1989 requires any surplus resulting from
revenues raised net of refunds and revenues lost to be deposited
in the Budget Stabilization (Rainy Day) Fund. The fund was used
to pay general revenue costs associated with the floods of 1993
and will be replenished (subject to appropriation) to the pre-flood
level of $28.4 million.
Page A-1
Legislation enacted in 1983 and a Constitutional Amendment passed
in 1986 created a Cash Operating Reserve Fund to meet cash flow
requirements of the State. A total of $130 million in general
revenue was transferred to the Fund in Fiscal Year 1985 to provide
a balance equal to approximately 5% of general revenue obligations.
The Fiscal Year 1995 beginning balance was $202.2 million.
According to the United States Bureau of Labor Statistics, the
1993 unemployment rate in Missouri was 6.4% and the 1994 rate
was 4.9%. Although not strictly comparable, the preliminary seasonally
adjusted rate for July of 1995 was 5.2%.
Currently, Moody's Investors Service, Inc. rates Missouri general
obligation bonds "Aaa" and Standard & Poor's rates Missouri general
obligation bonds "AAA." Although these ratings indicate that the
State of Missouri is in relatively good economic health, there
can be, of course, no assurance that this will continue or that
particular bond issues may not be adversely affected by changes
in the State or local economic or political conditions.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact certain issuers of
Bonds and does not purport to be a complete or exhaustive description
of all adverse conditions to which the issuers of obligations
held by the Missouri Insured Trust are subject. Additionally,
many factors including national economic, social and environmental
policies and conditions, which are not within the control of the
issuers of the Bonds, could affect or could have an adverse impact
on the financial condition of the State and various agencies and
political subdivisions located in the State. The Sponsor is unable
to predict whether or to what extent such factors or other factors
may affect the issuers of the Bonds, the market value or marketability
of the Bonds or the ability of the respective issuers of the Bonds
acquired by the Missouri Insured Trust to pay interest on or principal
of the Bonds.
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