SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST COMBINED
SERIES 273
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
CHAPMAN & CUTLER
Attention: Eric F. Fess
111 West Monroe Street
Chicago, Illinois 60603
E. Title of Securities
Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED FEBRUARY 28, 1997
AS AMENDED MARCH 14, 2002
Colorado Insured Series 16 Portfolio
The First Trust(R) Combined Series 273
The First Trust Combined Series 273 consists of a unit investment trust
known as Colorado Insured Series 16 Portfolio (the "Trust"). The Trust
invests in a portfolio of tax-exempt municipal bonds issued by or on
behalf of the State of Colorado (the "Bonds"). The Trust seeks to
provide investors with income exempt from federal and Colorado income
tax and to preserve capital.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
FIRST TRUST (R)
1-800-621-9533
The date of this prospectus is __________, 2002
Page 1
Table of Contents
Summary of Essential Information 3
Fee Table 4
Report of Independent Auditors 5
Statement of Net Assets 6
Schedule of Investments 7
The First Trust Combined Series 9
Portfolios 9
Insurance on the Bonds 10
Risk Factors 11
Public Offering 12
Distribution of Units 14
The Sponsor's Profits 14
The Secondary Market 14
How We Purchase Units 15
Expenses and Charges 15
Tax Status 15
Retirement Plans 19
Rights of Unit Holders 19
Interest and Principal Distributions 20
Redeeming Your Units 20
Removing Bonds from the Trust 21
Amending or Terminating the Indenture 22
Description of Bond Ratings 22
Information on the Sponsor, Trustee and Evaluator 24
Other Information 25
Page 2
Summary of Essential Information
Colorado Insured Series 16 Portfolio
The First Trust Combined Series 273
At the Opening of Business on the
Initial Date of Deposit of the Bonds-__________, 2002
Sponsor: Nike Securities L.P.
Trustee: JPMorgan Chase Bank
Evaluator: Securities Evaluation Service, Inc.
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Principal Amount (Par Value) of Bonds per Unit (1) $
Public Offering Price:
Aggregate Offering Price Evaluation of Bonds per Unit (2) $
Maximum Sales Charge of % of the Public Offering Price per Unit
( % of the net amount invested) $
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit (4) $
Redemption Price per Unit (based on aggregate underlying value of Bonds) (3) $
Weighted Average Maturity of the Bonds
First Settlement Date _________
Mandatory Termination Date (5) _________
Monthly Semi-Annual
Distribution Option Distribution Option
____________ ____________
Distributions (6):
Estimated Net Annual Interest Income per Unit $ $
Initial Distribution per Unit $ $
Partial Distribution per Unit $
N.A.
Estimated Regular Distribution per Unit $ $
Estimated Current Return (7) % %
Estimated Long-Term Return (7) % %
CUSIP
Security Code
____________
<FN>
NOTES TO SUMMARY OF ESSENTIAL INFORMATION
(1) Because certain of the Bonds may, in certain circumstances, be sold,
redeemed or mature in accordance with their terms, we cannot guarantee
that the Unit value at the Mandatory Termination Date will be equal to
the Principal Amount (Par Value) of Bonds per Unit stated above.
(2) Evaluations for purposes of sale, purchase or redemption of Units
are made as of the close of trading (generally 4:00 p.m. Eastern time)
on the New York Stock Exchange ("NYSE") on each day on which it is open
(the "Evaluation Time").
(3) The Public Offering Price shown above reflects the value of the Bonds
on the business day prior to the Initial Date of Deposit. No investor
will purchase Units at this price. The price you pay for your Units will
be based on their valuation at the Evaluation Time on the date you
purchase your Units. On the Initial Date of Deposit the Public Offering
Price per Unit will not include any accrued interest on the Bonds. After
the Initial Date of Deposit, the Public Offering Price per Unit will
include a pro rata share of any accrued interest on the Bonds. See "Fee
Table" and "Public Offering."
(4) Until the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period, the Sponsor's Initial Repurchase
Price per Unit and the Redemption Price per Unit will include the
estimated organization costs per Unit set forth under "Fee Table." After
such date, the Sponsor's Repurchase Price and Redemption Price per Unit
will not include such estimated organization costs. See "Redeeming Your
Units."
(5) See "Amending or Terminating the Indenture."
(6) You may elect to receive distributions either monthly or semi-
annually. Distributions will be paid on the last business day of a
payment month ("Distribution Date") to Unit holders of record on the
fifteenth day of such month ("Distribution Record Date"). The amount of
the Estimated Regular Distributions per Unit was calculated on the basis
of the Estimated Net Annual Interest Income per Unit less the estimated
annual expenses and divided by twelve for monthly distributions or two
for semi-annual distributions. The Initial and Partial Distributions per
Unit differ from estimated regular distributions because they do not
represent a full month or six-month period. Each Unit holder, regardless
of the distribution option chosen, will receive the Initial Distribution
per Unit on . Semi-annual Unit holders will receive the
Partial Distribution per Unit on . Estimated Regular
Distributions per Unit will occur monthly, beginning in
_________ for monthly Unit holders and will occur each June and
December, beginning _________for semi-annual Unit holders. The actual
distribution you receive will vary from that set forth above with
changes in the Trust's fees and expenses and with the sale or redemption
of Bonds. Distributions from the Principal Account will be made monthly
if the amount available for distribution equals at least $1.00 per 100
Units. Notwithstanding, distributions of funds in the Principal Account,
if any, will be made in December of each year. See "Expenses and
Charges" and "Interest and Principal Distributions."
(7) Estimated Current Return is calculated by dividing Estimated Net
Annual Interest Income per Unit by the Public Offering Price. Estimated
Long-Term Return is calculated using a formula which (1) factors in the
relative weightings of the market values, yields (which take into
account the amortization of premiums and the accretion of discounts) and
estimated retirements of the Bonds; and (2) takes into account a
compounding factor, the sales charge and expenses. There is no assurance
that the Estimated Current and Long-Term Returns set forth above will be
realized in the future because the various components used to calculate
these figures, such as Trust expenses, market values and estimated
retirements of the Bonds, will change. In addition, neither rate
reflects the true return you will receive, which will be lower, because
neither includes the effect of certain delays in distributions.
</FN>
Page 3
Fee Table
This Fee Table describes the fees and expenses that you may pay if you
buy and hold Units of the Trust and receive distributions either monthly
or semi-annually. See "Public Offering" and "Expenses and Charges."
Although the Trust has a term of approximately _____ years and is a unit
investment trust rather than a mutual fund, this information allows you
to compare fees.
Monthly Semi-Annual
Distribution Option Distribution Option
________ ________
Unit Holder Sales Fees
(as a percentage of public offering price)
Maximum sales charge imposed on purchase % $ % $
======== ======== ======== ========
Organization Costs
(as a percentage of public offering price)
Estimated organization costs %(a) $ %(a) $
======== ======== ======== ========
Estimated Annual Trust Operating Expenses(b)
(as a percentage of average net assets)
Portfolio supervision, bookkeeping, administrative
and evaluation fees % $ % $
Trustee's fee and other operating expenses %(c) %(c)
________ ________ ________ ________
Total % $ % $
======== ======== ======== ========
This example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other investment products. The
example assumes that you invest $10,000 in the Trust for the periods
shown and sell all your Units at the end of those periods. The example
also assumes a 5% return on your investment each year and that the
Trust's operating expenses stay the same. The example does not take into
consideration transaction fees which may be charged by certain
broker/dealers for processing redemption requests. Although your actual
costs may vary, based on these assumptions your costs under each
distribution option would be:
Monthly Semi-Annual
Distribution Option Distribution Option
___________ ___________
1 Year $ $
3 Years $ $
5 Years $ $
10 Years $ $
The example will not differ if you hold rather than sell your Units at
the end of each period.
____________
<FN>
(a) Estimated organization costs will be deducted from the assets of the
Trust at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period.
(b) Each of the fees listed herein is assessed on a fixed dollar amount
per Unit basis which, as a percentage of average net assets, will vary
over time.
(c) Other operating expenses include the costs incurred for annually
updating the Trust's registration statement, but do not include
brokerage costs and other portfolio transaction fees. In certain
circumstances the Trust may incur additional expenses not set forth
above. See "Expenses and Charges."
</FN>
Page 4
Report of Independent Auditors
The Sponsor, Nike Securities L.P., and Unit Holders
The First Trust Combined Series 273
We have audited the accompanying statement of net assets, including the
schedule of investments, of The First Trust Combined Series 273,
comprising Colorado Insured Series 16 Portfolio (the "Trust"), as of the
opening of business on __________, 2002 (Initial Date of Deposit). 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 auditing standards generally
accepted in the United States of America. 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 irrevocable letter of credit held by
JPMorgan Chase Bank, the Trustee, and deposited in the Trust for the
purchase of Securities, as shown in the statement of net assets as of
the opening of business on __________, 2002, by correspondence with the
Trustee. An audit also includes assessing the accounting principles used
and significant estimates made by the Trust's 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 The First
Trust Combined Series 273, comprising Colorado Insured Series 16
Portfolio, at the opening of business on __________, 2002 (Initial Date
of Deposit) in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Chicago, Illinois
__________, 2002
Page 5
Statement of Net Assets
Colorado Insured Series 16 Portfolio
The First Trust Combined Series 273
At the Opening of Business on the
Initial Date of Deposit-__________, 2002
NET ASSETS
Investment in Bonds represented by purchase contracts (1)(2) $
Accrued interest on underlying Bonds (2)(3)
________
$
Less liability for reimbursement to Sponsor for organization costs (4) ( )
Less distributions payable (3) ( )
________
Net assets $
========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (5) $
Less maximum sales charge (5) ( )
Less estimated reimbursement to Sponsor for organization costs (4) ( )
________
Net assets $
========
_____________
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Bonds listed under "Schedule of Investments"
for the Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit issued by JPMorgan Chase Bank, of
which $ will be allocated to the Trust in The First Trust Combined
Series 273, has been deposited with the Trustee as collateral, covering
the monies necessary for the purchase of the Bonds according to their
purchase contracts ($___), accrued interest to the Initial Date of
Deposit ($___) and accrued interest from the Initial Date of Deposit to
the expected dates of delivery of the Bonds ($___) for Colorado Insured
Series 16 Portfolio.
(3) The Trustee will advance to the Trust the amount of net interest
accrued to the First Settlement Date which will be distributed to the
Sponsor as Unit holder of record.
(4) A portion of the Public Offering Price consists of an amount
sufficient to reimburse the Sponsor for all or a portion of the costs of
establishing the Trust. These costs have been estimated at $ per Unit
for the Trust. A payment will be made as of the earlier of six months
after the Initial Date of Deposit or the end of the initial offering
period to an account maintained by the Trustee from which the obligation
of the investors to the Sponsor will be satisfied. To the extent that
actual organization costs are greater than the estimated amount, only
the estimated organization costs added to the Public Offering Price will
be reimbursed to the Sponsor and deducted from the assets of the Trust.
(5) The aggregate cost to investors in the Trust includes a maximum
sales charge computed at the rate of % of the Public Offering Price
per Unit (equivalent to % of the net amount invested), assuming no
reduction of sales charge as set forth under "Public Offering."
</FN>
Page 6
Schedule of Investments
Colorado Insured Series 16 Portfolio
The First Trust Combined Series 273
At the Opening of Business on the
Initial Date of Deposit-__________, 2002
Aggregate Issue Represented by Sponsor's Redemption Cost of Bonds
Principal Contracts to Purchase Bonds (1) Rating (3) Provisions (4) to the Trust (2)
__________ _________________________________________ _______ ____________ _________
$
Page 7
Schedule of Investments (cont'd.)
Colorado Insured Series 16 Portfolio
The First Trust Combined Series 273
At the Opening of Business on the
Initial Date of Deposit-__________, 2002
Aggregate Issue Represented by Sponsor's Redemption Cost of Bonds
Principal Contracts to Purchase Bonds (1) Rating (3) Provisions (4) to the Trust (2)
__________ _________________________________________ _______ ____________ _________
$
_________ _________
$ $
========= =========
__________
<FN>
(1) All Bonds are represented by regular way contracts to purchase such
Bonds which are backed by an irrevocable letter of credit deposited with
the Trustee. The Sponsor entered into purchase contracts for the Bonds
on __________, 2002 and the Sponsor expects that they will all settle on
or prior to __________, 2002.
(2) The cost of the Bonds to the Trust represents the aggregate
underlying value with respect to the Bonds acquired (generally
determined by the aggregate offering price of the Bonds at the
Evaluation Time on the business day before the Initial Date of Deposit).
The evaluation of the Bonds has been determined by the Evaluator. The
cost of the Bonds to the Sponsor and the Sponsor's profit or loss (which
is the difference between the cost of the Bonds to the Sponsor and the
cost of the Bonds to the Trust) are $ and $ , respectively. In
addition, the aggregate bid price of the Bonds at the Evaluation Time on
the business day before the Initial Date of Deposit and the annual
interest income to the Trust were $ and $ , respectively.
(3) Ratings are by Standard & Poor's and/or Moody's Investors Service,
Inc. and are unaudited. For a brief description of the rating symbols
and their related meanings see "Description of Bond Ratings." Such
ratings were obtained from an information reporting service other than
Standard & Poor's or Moody's.
(4) Certain Bonds may be redeemed before their stated maturity. This
column shows when a Security is initially redeemable and the redemption
price for that year. Bonds are redeemable at declining prices (but not
below par value) in subsequent years. Certain Bonds may also be redeemed
in whole or in part other than by operation of the stated redemption
provisions under certain circumstance detailed in the instruments
creating them. Such redemption provisions may result in a redemption
price less than the value of the Bonds on the Initial Date of Deposit.
Redemption pursuant to call provisions generally will occur at times
when the redeemed Bonds have an offering side valuation which represents
a premium over par. To the extent that Bonds were deposited in the Trust
at a price higher than the price at which they are redeemed, this will
represent a loss of capital when compared with the original Public
Offering Price of the Units. Distributions will generally be reduced by
the amount of the income which would otherwise have been paid with
respect to redeemed Bonds and Unit holders will receive a distribution
of 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). Estimated Current Return and Estimated Long-Term
Return may also be affected by such redemptions.
</FN>
Page 8
The First Trust Combined Series
The First Trust Combined Series Defined.
We, Nike Securities L.P. (the "Sponsor"), have created hundreds of
similar yet separate series of an investment company which we have named
the Combined Series. The series to which this prospectus relates,
Combined Series 273, consists of a single portfolio known as Colorado
Insured Trust, Series 16.
The Trust was created under the laws of the State of New York by a Trust
Agreement (the "Indenture") dated the Initial Date of Deposit. This
agreement, entered into between Nike Securities L.P., as Sponsor,
JPMorgan Chase Bank as Trustee, First Trust Advisors L.P. as Portfolio
Supervisor and Securities Evaluation Service, Inc. as Evaluator, governs
the operation of the Trust.
YOU MAY GET MORE SPECIFIC DETAILS ON SOME OF THE INFORMATION IN THIS
PROSPECTUS IN AN "INFORMATION SUPPLEMENT" BY CALLING THE TRUSTEE AT 1-
800-682-7520.
How We Created the Trust.
On the Initial Date of Deposit, we deposited municipal bonds (the
"Bonds") with the Trustee and in turn, the Trustee delivered documents
to us representing our ownership of the Trust, in the form of units
("Units").
With our deposit of Bonds on the Initial Date of Deposit we established
a percentage relationship among the Bonds in the Trust's portfolio, as
stated under "Schedule of Investments" for the Trust. After the Initial
Date of Deposit, we may deposit additional Bonds in the Trust, to create
new Units for sale. If we create additional Units, we will attempt, to
the extent practicable, to maintain the percentage relationship
established among the Bonds on the Initial Date of Deposit, and not the
actual percentage relationship existing on the day we are creating
Units, since the two may differ. This difference may be due to the sale,
redemption or liquidation of any of the Bonds.
Since the prices of the Bonds will fluctuate daily, the ratio of Bonds
in the Trust, 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 the Trust.
We cannot guarantee that the Trust will keep its present size and
composition for any length of time. Bonds may periodically be sold under
certain circumstances, and the proceeds from these sales will be used to
meet Trust obligations or distributed to Unit holders, but will not be
reinvested. However, Bonds will not be sold to take advantage of market
fluctuations or changes in anticipated rates of appreciation or
depreciation, or if they no longer meet the criteria by which they were
selected. You will not be able to dispose of or vote any of the Bonds in
the Trust. As the holder of the Bonds, the Trustee will vote all of the
Bonds and will do so based on our instructions.
Neither we nor the Trustee will be liable for a failure in any of the
Bonds. However, if a contract for the purchase of any of the Bonds
initially deposited in the Trust fails, unless we can purchase
substitute Bonds ("Replacement Bonds"), we will refund to you that
portion of the purchase price and sales charge resulting from the failed
contract on the next Distribution Date. Any Replacement Bond the Trust
acquires will be identical to those from the failed contract.
Portfolios
Objectives.
The objective of the Trust is to provide investors with income exempt
from federal and Colorado income tax and to preserve capital by
investing in tax-exempt municipal bonds issued by or on behalf of the
state of Colorado.
The Trust has an expected life of ____ years. A diversified portfolio
helps to offset the risks normally associated with such an investment,
although it does not eliminate them entirely. Of course, as with any
similar investments, there can be no guarantee that the objective of the
Trust will be achieved. See "Risk Factors" for a discussion of the risks
of investing in the Trust.
Bond Selection.
We considered the following factors, among others, in selecting the
Bonds for the Trust:
- - The price of the Bonds relative to other issues of similar quality
and maturity;
- - The present rating and credit quality of the issuer of the Bond and
potential for improvement;
- - The diversification of the Bonds;
- - The income to the Trust;
- - Whether the Bonds were issued after __________; and
- - The stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds were rated "Aaa" or
better by Moody's Investors Service, Inc. ("Moody's"), or "AAA" or
better by Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc. ("Standard & Poor's"). See "Description of Bond
Ratings." After the Initial Date of Deposit, a Bond's rating may be
lowered. This would not immediately cause the Bond to be removed from
Page 9
the Trust, but may be considered by us in determining whether to direct
the Trustee to dispose of such Bond. See "Removing Bonds from the Trust."
Insurance on the Bonds
The Bonds in the Trusts are covered by insurance policies obtained by
the issuers or underwriters of the bonds from Ambac, FGIC, FSA or MBIA
(the "Insurers"). The "Schedule of Investments" identifies the Insurer
of each Bond. Insurance guarantees the timely payment, when due, of all
principal and interest on the Bonds. Such insurance is effective so long
as the insured Bond is outstanding and the insurer remains in business.
Insurance relates only to the particular Bond and not to the Units
offered hereby or to their market value. The Bonds have received a
rating of "Aaa" by Moody's, and/or "AAA" by Standard & Poor's in
recognition of such insurance. There can be no assurance that any
Insurer listed will be able to satisfy its commitments in the event
claims are made in the future. However, Standard & Poor's, and/or
Moody's have rated the claims-paying ability of each Insurer "AAA" or
"Aaa" respectively. The following are brief descriptions of the Insurers.
Ambac Assurance Corporation. Ambac 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 all
50 states, the District of Columbia, the Territory of Guam and the
Commonwealth of Puerto Rico. Ambac is a wholly-owned subsidiary of Ambac
Financial Group, Inc., a 100% publicly-held company.
Financial Guaranty Insurance Company. FGIC is a wholly-owned subsidiary
of FGIC Corporation (the "Corporation"), a Delaware holding company. The
Corporation is a subsidiary of General Electric Capital Corporation ("GE
Capital"). Neither the Corporation nor GE Capital is obligated to pay
the debts of or the claims against FGIC. FGIC is a monoline financial
guaranty insurer domiciled in the State of New York and subject to
regulation by the State of New York Insurance Department. FGIC is
currently licensed to write insurance in all 50 states and the District
of Columbia.
Financial Security Assurance Inc. FSA is a monoline insurance company
incorporated under the laws of the State of New York. FSA is licensed to
engage in the financial guaranty insurance business in all 50 states,
the District of Columbia, Puerto Rico and the U.S. Virgin Islands. FSA
and its subsidiaries are engaged in the business of writing financial
guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. FSA and its subsidiaries principally
insure asset-backed, collateralized and municipal securities. FSA is a
wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.
("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a
publicly held Belgian corporation.
MBIA Insurance Corporation. 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. MBIA is domiciled
in the State of New York and is licensed to do business in and subject
to regulation under the laws of all 50 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 two European branches, one in the Republic
of France and the other in the Kingdom of Spain.
Insurance companies are subject to extensive regulation and supervision
where they do business by state insurance commissioners who regulate the
standards of solvency which must be maintained, the nature of and
limitations on investments, reports of financial condition, and
requirements regarding reserves for unearned premiums, losses and other
matters. A significant portion of the assets of insurance companies is
required by law to be held in reserve against potential claims on
policies and is not available to general creditors. Although the federal
government does not regulate the business of insurance, federal
initiatives including pension regulation, controls on medical care
costs. minimum standards for no-fault automobile insurance, national
health insurance, tax law changes affecting life insurance companies and
repeal of the antitrust exemption for the insurance business can
significantly impact the insurance business.
The above ratings are not recommendations to buy, sell or hold the
Bonds, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of
either or both ratings my have an adverse effect on the market price of
the Bonds.
Because the insurance on the Bonds, if any, will be effective so long as
the Bonds are outstanding, such insurance will be taken into account in
determining the market value of the Bonds and therefore some value
attributable to such insurance will be included in the value of the
Units of the Insured Portfolios. The insurance does not, however,
guarantee the market value of the Bonds or of the Units.
Page 10
Risk Factors
Price Volatility. The Trust invests in municipal bonds. The value of the
Bonds will decline with increases in interest rates, not only because
increases in rates generally decrease values, but also because increased
rates may indicate an economic slowdown. An economic slowdown, or a
reduction in an issuer's creditworthiness, may result in the issuer
being unable to maintain earnings at a level sufficient to maintain
interest and principal payments. The value of the Bonds will also
fluctuate with changes in investors' perceptions of an issuer's
financial condition or the general condition of the municipal bond
market, changes in inflation rates or when political or economic events
affecting the issuers occur.
Because the Trust is not managed, the Trustee will not sell Bonds in
response to or in anticipation of market fluctuations, as is common in
managed investments. As with any investment, we cannot guarantee that
the performance of the Trust will be positive over any period of time or
that you won't lose money. Units of the Trust are not deposits of any
bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Interest. There is no guarantee that the issuers of the Bonds will be
able to satisfy their interest payment obligations to the Trust over the
life of the Trust.
Alternative Minimum Tax. While distributions of interest from the Trust
are generally exempt from federal income taxes, a portion of such
interest may be taken into account in computing the alternative minimum
tax.
Municipal Bonds. The Trust invests in tax-exempt municipal bonds.
Municipal bonds are debt obligations issued by states or political
subdivisions or authorities of states. Municipal bonds are typically
designated as general obligation bonds, which are general obligations of
a governmental entity that are backed by the taxing power of such
entity, or revenue bonds, which are payable from the income of a
specific project or authority and are not supported by the issuer's
power to levy taxes. Municipal bonds are long-term fixed rate debt
obligations that generally decline in value with increases in interest
rates, when an issuer's financial condition worsens or when the rating
on a bond is decreased. Many municipal bonds may be called or redeemed
prior to their stated maturity, an event which is more likely to occur
when interest rates fall. In such an occurrence, you may not be able to
reinvest the money you receive in other bonds that have as high a yield
or as long a maturity.
Many municipal bonds are subject to continuing requirements as to the
actual use of the 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. The market for municipal bonds
is generally less liquid than for other securities and therefore the
price of municipal bonds may be more volatile and subject to greater
price fluctuations than securities with greater liquidity. In addition,
an issuer's ability to make income distributions generally depends on
several factors including the financial condition of the issuer and
general economic conditions. Any of these factors may negatively impact
the price of municipal bonds held by the Trust and would therefore
impact the price of both the Bonds and the Units.
Acts of terrorism and any resulting damage may not be covered by
insurance on the bonds. Issuers of the bonds may therefore be at risk
of default due to losses sustained as a result of terrorist activities.
Colorado. Because the Trust is concentrated in the bonds of issuers
located in the State of Colorado, there may be more risk than if the
bonds were issued by issuers located in several states. The financial
condition of Colorado is affected by various national and local,
economic, social and environmental policies and conditions and may have
an effect on the value of the Units. Additionally, Constitutional and
statutory limitations imposed on the State and its local governments
concerning taxes, bond indebtedness and other matters may constrain the
revenue-generating capacity of the State and its local governments and,
therefore, the ability of the issuers of the bonds to satisfy their
obligations. Historically, the State experienced significant revenue
shortfalls. A somewhat ambiguous Constitutional Amendment requires voter
approval prior to tax increases, creation of debt, or mill levy or
valuation for assessment ratio increases. The Amendment also limits
increases in government spending and property tax revenues to specified
percentages. The economy of the State continues to be dependent on
tourism and its position as a transportation hub. These sectors tend to
be cyclical. In addition, the State is party to numerous lawsuits in
which an adverse final decision could materially affect the State's
governmental operations and consequently its ability to pay debt service
on its obligations.
Legislation/Litigation. From time to time, various legislative
initiatives are proposed which may have a negative impact on the prices
of certain of the municipal bonds represented in the Trust. In addition,
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litigation regarding any of the issuers of the municipal bonds, such as
litigation affecting the validity of certain municipal bonds or the tax-
free nature of the interest thereon, may negatively impact the share
prices of these Bonds. We cannot predict what impact any pending or
proposed legislation or pending or threatened litigation will have on
the prices of the Bonds or of the issuers.
Public Offering
The Public Offering Price.
You may buy Units at the Public Offering Price, the price per Unit of
which is comprised of the following:
- - The aggregate underlying value of the Bonds;
- - The amount of any cash in the Interest and Principal Accounts of the
Trust;
- - Net interest accrued but unpaid on the Bonds after the First
Settlement Date to the date of settlement; and
- - The sales charge.
The price you pay for your Units will differ from the amount stated
under "Summary of Essential Information" due to various factors,
including fluctuations in the prices of the Bonds, changes in the value
of the Interest and/or Principal Accounts and the accrual of interest on
the Bonds.
Although you are not required to pay for your Units until three business
days following your order (the "date of settlement"), you may pay before
then. You will become the owner of Units ("Record Owner") on the date of
settlement if payment has been received. If you pay for your Units
before the date of settlement, we may use your payment during this time
and it may be considered a benefit to us, subject to the limitations of
the Securities Exchange Act of 1934.
Organization Costs. Bonds purchased with the portion of the Public
Offering Price intended to be used to reimburse the Sponsor for the
Trust's organization costs (including costs of preparing the
registration statement, the Indenture and other closing documents,
registering Units with the Securities and Exchange Commission ("SEC")
and states, the initial audit of the Trust portfolio, legal fees and the
initial fees and expenses of the Trustee) will be purchased in the same
proportionate relationship as all the Bonds contained in the Trust.
Bonds will be sold to reimburse the Sponsor for the Trust's organization
costs at the earlier of six months after the Initial Date of Deposit or
the end of the initial offering period (a significantly shorter time
period than the life of the Trust). During the period ending with the
earlier of six months after the Initial Date of Deposit or the end of
the initial offering period, there may be a decrease in the value of the
Bonds. To the extent the proceeds from the sale of these Bonds are
insufficient to repay the Sponsor for the Trust organization costs, the
Trustee will sell additional Bonds to allow the Trust to fully reimburse
the Sponsor. In that event, the net asset value per Unit will be reduced
by the amount of additional Bonds sold. Although the dollar amount of
the reimbursement will remain fixed and will never exceed the per Unit
amount set forth in "Notes to Statement of Net Assets" for the Trust,
this will result in a greater effective cost per Unit to Unit holders
for the reimbursement to the Sponsor. To the extent actual organization
costs are less than the estimated amount, only the actual organization
costs will be deducted from the assets of the Trust. When Bonds are sold
to reimburse the Sponsor for organization costs, the Trustee will sell
such Bonds, to the extent practicable, which will maintain the same
proportionate relationship among the Bonds contained in the Trust as
existed prior to such sale.
Accrued Interest.
Accrued interest represents unpaid interest on a bond from the last day
it paid interest. Interest on the Bonds generally is paid semiannually,
although the Trust accrues such interest daily. Because the Trust always
has an amount of interest earned but not yet collected, the Public
Offering Price of Units will have added to it the proportionate share of
accrued interest to the date of settlement. You will receive the amount,
if any, of accrued interest you paid for on the next distribution date.
In addition, if you sell or redeem your Units you will be entitled to
receive your proportionate share of accrued interest from the purchaser
of your Units.
Minimum Purchase.
The minimum amount you can purchase of the Trust is $1,000 worth of
Units ($500 if you are purchasing Units for your Individual Retirement
Account or any other qualified retirement plan).
Sales Charges.
Initial Offering Period. The maximum sales charge during the initial
offering period equals % of the Public Offering Price (equivalent to
% of the net amount invested).
Secondary Market. The maximum sales charge during the secondary market
is determined based upon the number of years remaining to the maturity
of each Bond in the Trust, but in no event will the secondary market
sales charge exceed % of the Public Offering Price (equivalent to
% of the net amount invested). For purposes of computation, Bonds will
be deemed to mature either on their expressed maturity dates, or an
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earlier date if: (a) they have been called for redemption or funds have
been placed in escrow to redeem them on an earlier call date; or (b)
such Bonds are subject to a "mandatory tender." The effect of this
method of sales charge computation will be that different sales charge
rates will be applied to each of the Bonds, in accordance with the
following schedule:
Secondary
Market
Years to Maturity Sales Charge
_________________ ________________
Less than 1 %
1 but less than 2 %
2 but less than 3 %
3 but less than 4 %
4 but less than 5 %
5 but less than 6 %
6 but less than 7 %
7 but less than 8 %
8 or more %
Discounts for Certain Persons.
If you invest at least $ (except if you are purchasing for a
"wrap fee account" as described below), the maximum sales charge is
reduced, as follows:
Your maximumsales
If you invest charge
(in thousands):* will be:
______________ ____________
$ but less than $ %
$ but less than $ %
$ but less than $ %
$ or more %
* Breakpoint sales charges are also applied on a Unit basis utilizing a
breakpoint equivalent in the above table of $10 per Unit and will be
applied on whichever basis is more favorable to the investor. The
breakpoints will be adjusted to take into consideration purchase orders
stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
The reduced sales charge for quantity purchases will apply only to
purchases made by the same person on any one day from any one dealer. We
will consider Units you purchase in the name of your spouse or child
under 21 years of age to be purchases by you for determining the reduced
sales charge. The reduced sales charges will also apply to a trustee or
other fiduciary purchasing Units for a single trust estate or single
fiduciary account. You must inform your dealer of any combined purchases
before the sale in order to be eligible for the reduced sales charge.
Any reduced sales charge is the responsibility of the party making the
sale.
The following persons may purchase Units at the Public Offering Price
less the applicable dealer concession:
- - Employees, officers and directors of the Sponsor, our related
companies, dealers and their affiliates, and vendors providing services
to us.
- - Immediate family members of the above (spouses, children,
grandchildren, parents, grandparents, siblings, mothers-in-law, fathers-
in-law, sons-in-law and daughters-in-law, and trustees, custodians or
fiduciaries for the benefit of such persons).
If you purchase Units through registered broker/dealers who charge
periodic fees for financial planning, investment advisory or asset
management services or provide these services as part of an investment
account where a comprehensive "wrap fee" charge is imposed, you may
purchase Units at the Public Offering Price, subject only to the
Sponsor's retention of the sales charge. See "Distribution of Units-
Dealer Concessions."
The Value of the Bonds.
The Evaluator will appraise the aggregate underlying value of the Bonds
in the Trust as of the Evaluation Time on each business day and will
adjust the Public Offering Price of the Units according to this
valuation. This Public Offering Price will be effective for all orders
received before the Evaluation Time on each such day. If we or the
Trustee receive orders for purchases, sales or redemptions after that
time, or on a day which is not a business day, they will be held until
the next determination of price. The term "business day" as used in this
prospectus will exclude Saturdays, Sundays and holidays on which the
NYSE is closed.
The aggregate underlying value of the Bonds in the Trust will be
determined as follows:
a) On the basis of current market offering prices for the Bonds obtained
from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust;
b) If such prices are not available for any of the Bonds, on the basis
of current market offering prices of comparable bonds;
c) By determining the value of the Bonds on the offering side of the
market by appraisal; or
d) By any combination of the above.
After the initial offering period is over, the aggregate underlying
value of the Bonds will be determined as set forth above, except that
bid prices are used instead of ask prices when necessary. The offering
price of the Bonds may be expected to be greater than their bid price by
Page 13
approximately 1-2% of the aggregate principal amount of such Bonds.
Distribution of Units
We intend to qualify Units of the Trust for sale in a number of states.
All Units will be sold at the current Public Offering Price.
Dealer Concessions.
Dealers and other selling agents can purchase Units at prices which
reflect a concession or agency commission of % of the Public Offering
Price per Unit (or % of the maximum sales charge for secondary market
sales). Dealers and selling agents will receive an additional volume
concession or agency commission of % of the Public Offering Price if
they purchase at least $_______ worth of Units of the Trust on the
Initial Date of Deposit or $________ on any day thereafter or if they
were eligible to receive a similar concession in connection with sales
of similarly structured trusts sponsored by us which are currently in
the initial offering period.
We reserve the right to change the amount of concessions or agency
commissions from time to time. Certain commercial banks may be making
Units of the Trust available to their customers on an agency basis. A
portion of the sales charge paid by these customers is kept by or given
to the banks in the amounts shown above.
Award Programs.
From time to time we may sponsor programs which provide awards to our
dealers' registered representatives who have sold a minimum number of
Units during a specified time period. We may also pay fees to qualifying
dealers for services or activities which are meant to result in sales of
Units of the Trust. In addition, we will pay to dealers who sponsor
sales contests or recognition programs that conform to our criteria or
participate in our sales programs, amounts equal to no more than the
total applicable sales charges on Units sold by such persons during such
programs. We make these payments out of our own assets and not out of
Trust assets. These programs will not change the price you pay for your
Units.
Advertising and Investment Comparisons.
Advertising materials regarding the Trust may discuss several topics,
including: developing a long-term financial plan; working with your
financial professional; the nature and risks of various investment
strategies and unit investment trusts that could help you reach your
financial goals; the importance of discipline; how the Trust operates;
how securities are selected; various unit investment trust features such
as convenience and costs; and options available for certain types of
unit investment trusts. These materials may include descriptions of the
principal businesses of the companies represented in the Trust, research
analysis of why they were selected and information relating to the
qualifications of the persons or entities providing the research
analysis. In addition, they may include research opinions on the economy
and industry sectors included and a list of investment products
generally appropriate for pursuing those recommendations.
From time to time we may compare the estimated returns of the Trust
(which may show performance net of the expenses and charges the Trust
would have incurred) and returns over specified periods of other similar
trusts we sponsor in our advertising and sales materials, with (1)
returns on other taxable or tax-exempt investments such as the
securities comprising various investment indices, corporate or U.S.
Government bonds, bank CDs and money market accounts or funds, (2)
performance data from Morningstar Publications, Inc. or (3) information
from publications such as Money, The New York Times, U.S. News and World
Report, Business Week, Forbes or Fortune. The investment characteristics
of the Trust, which are described more fully elsewhere in this
prospectus, differ from other comparative investments. You should not
assume that these performance comparisons will be representative of the
Trust's future performance.
The Sponsor's Profits
We will receive a gross sales commission equal to the maximum sales
charge per Unit for the Trust less any reduction as stated in "Public
Offering." Also, any difference between our cost to purchase the Bonds
and the price at which we sell them to the Trust is considered a profit
or loss (see Note 2 of "Schedule of Investments"). During the initial
offering period, dealers and others may also realize profits or sustain
losses as a result of fluctuations in the Public Offering Price they
receive when they sell the Units.
In maintaining a market for the Units, any difference between the price
at which we purchase Units and the price at which we sell or redeem them
will be a profit or loss to us.
The Secondary Market
Although not obligated, we intend to maintain a market for the Units
after the initial offering period and continuously offer to purchase
Units at prices based on the Redemption Price per Unit.
Page 14
We will pay all expenses to maintain a secondary market, except the
Evaluator fees, Trustee costs to transfer and record the ownership of
Units and costs incurred in annually updating the Trust's registration
statement. We may discontinue purchases of Units at any time. IF YOU
WISH TO DISPOSE OF YOUR UNITS, YOU SHOULD ASK US FOR THE CURRENT MARKET
PRICES BEFORE MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
How We Purchase Units
The Trustee will notify us of any tender of Units for redemption. If our
bid at that time is equal to or greater than the Redemption Price per
Unit, we may purchase the Units. You will receive your proceeds from the
sale no later than if they were redeemed by the Trustee. We may tender
Units we hold to the Trustee for redemption as any other Units. If we
elect not to purchase Units, the Trustee may sell Units tendered for
redemption in the over-the-counter market, if any. However, the amount
you will receive is the same as you would have received on redemption of
the Units.
Expenses and Charges
The estimated annual expenses of the Trust are listed under "Fee Table."
If actual expenses of the Trust exceed the estimate, the Trust will bear
the excess. The Trustee will pay operating expenses of the Trust from
the Interest Account of the Trust if funds are available, and then from
the Principal Account. The Interest and Principal Accounts are
noninterest-bearing to Unit holders, so the Trustee may earn interest on
these funds, thus benefiting from their use.
First Trust Advisors L.P., an affiliate of ours, will be compensated for
providing bookkeeping and other administrative services to the Trust,
and, as Sponsor, we will receive brokerage fees when the Trust uses us
(or an affiliate of ours) as agent in buying or selling Bonds. Legal,
typesetting, electronic filing and regulatory filing fees and expenses
associated with updating the Trust's registration statement yearly are
now chargeable to the Trust. In addition, First Trust Advisors L.P. acts
as Portfolio Supervisor to the Trust and will receive the fees set forth
under "Fee Table" for providing portfolio supervisory services to the
Trust. In providing portfolio supervisory services, the Portfolio
Supervisor may purchase research services from a number of sources,
which may include underwriters or dealers of the Trust.
The fees payable to the Portfolio Supervisor, Evaluator and Trustee are
based on the largest aggregate number of Units of the Trust outstanding
at any time during the calendar year, except during the initial offering
period, in which case these fees are calculated based on the largest
number of Units outstanding during the period for which compensation is
paid. These fees may be adjusted for inflation without Unit holders'
approval, but in no case will the annual fees paid to us or our
affiliate for providing services to all unit investment trusts be more
than the actual cost of providing such services in such year.
In addition to the Trust's operating expenses, and the fees set forth
above, the Trust may also incur the following charges:
- - All legal and annual auditing expenses of the Trustee according to its
responsibilities under the Indenture;
- - The expenses and costs incurred by the Trustee to protect the Trust
and your rights and interests;
- - Fees for any extraordinary services the Trustee performed under the
Indenture;
- - Payment for any loss, liability or expense the Trustee incurred
without negligence, bad faith or willful misconduct on its part, in
connection with its acceptance or administration of the Trust;
- - Payment for any loss, liability or expenses we incurred without
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; and/or
- - All taxes and other government charges imposed upon the Bonds or any
part of the Trust.
The above expenses and the Trustee's annual fee are secured by a lien on
the Trust. We cannot guarantee that distributions from the Bonds will be
sufficient to meet any or all expenses of the Trust. If there is not
enough cash in the Interest or Principal Accounts of the Trust, the
Trustee has the power to sell Bonds to make cash available to pay these
charges. These sales may result in capital gains or losses to the Unit
holders. See "Tax Status."
The Trust will be audited annually. So long as we are making a secondary
market for Units, we will bear the cost of these annual audits to the
extent the cost exceeds $0.0050 per Unit. Otherwise, the Trust will pay
for the audit. You can request a copy of the audited financial
statements from the Trustee.
Tax Status
State Tax Status.
The assets of each Colorado Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Colorado ("Colorado")
Page 15
or counties, municipalities, authorities or political subdivisions
thereof (the "Colorado Bonds") the interest on which is expected to
qualify as exempt from Colorado income taxes.
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited and held in each Trust. However, it has assumed
that: (i) the Bonds were validly issued, (ii) the interest thereon is
excludable from gross income for Federal income tax purposes, and (iii)
interest on the Bonds, if received directly by a Unit holder, would be
exempt from the income tax imposed by the State that is applicable to
individuals and corporations. This opinion does not address the taxation
of persons other than full time residents of Colorado.
It is assumed that, at the respective times of issuance of the Bonds,
opinions relating to the validity thereof and to the exemption of
interest thereon from Federal income tax were rendered by bond counsel
to the respective issuing authorities. In addition, it is assumed that,
with respect to the Colorado Bonds, bond counsel to the issuing
authorities rendered opinions that the interest on the Colorado Bonds is
exempt from the Colorado Income Tax. Neither the Sponsor nor its counsel
has made any review for the Colorado Trust of the proceedings relating
to the issuance of the Bonds or of the bases for the opinions rendered
in connection therewith.
Because Colorado income tax law is based upon the Federal law, the Trust
is not an association taxable as a corporation for purposes of Colorado
income taxation.
With respect to Colorado Unit holders, in view of the relationship
between Federal and Colorado tax computations described above: (i) each
Colorado Unit holder will be treated as owning a pro rata share of each
asset of a Colorado Trust for Colorado income tax purposes in the
proportion that the number of Units of such Trust held by the Unit
holder bears to the total number of outstanding Units of a Colorado
Trust, and the income of a Colorado Trust will therefore be treated as
the income of each Colorado Unit holder under Colorado law in the
proportion described and an item of income of the Colorado Trust will
have the same character in the hands of a Colorado Unit holder as it
would have if the Colorado Unit holder directly owned the assets of a
Colorado Trust; (ii) interest on Bonds that would not be includable in
income for Colorado income tax purposes when paid directly to a Colorado
Unit holder will be exempt from Colorado income taxation when received
by a Colorado Trust and attributed to such Colorado Unit holder and when
distributed to such Colorado Unit holder; (iii) any proceeds paid under
an insurance policy or policies, if any, issued to a Colorado Insured
Trust with respect to the Bonds in a Colorado Trust which represent
maturing interest on defaulted Bonds held by the Trustee will be
excludable from Colorado adjusted gross income if, and to the same
extent as, such interest is so excludable for federal income tax
purposes if paid in the normal course by the issuer notwithstanding that
the source of payment is from insurance proceeds provided that, at the
time such policies are purchased, the amounts paid for such policies are
reasonable, customary, and consistent with the reasonable expectation
that the issuer of the Bonds, rather than the insurer, will pay debt
service on the Bonds; (iv) each Colorado Unit holder will realize
taxable gain or loss when a Colorado Trust disposes of a Bond (whether
by sale, exchange, redemption, or payment at maturity) or when the
Colorado Unit holder redeems or sells Units at a price that differs from
original cost as adjusted for amortization of bond discount or premium
and other basis adjustments (including any basis reduction that may be
required to reflect a Colorado Unit holder's share of interest, if any,
accruing on Bonds during the interval between the Colorado Unit holder's
settlement date and the date such Bonds are delivered to a Colorado
Trust, if later); (v) tax basis reduction requirements relating to
amortization of bond premium may, under some circumstances, result in
Colorado Unit holders realizing taxable gain when their Units are sold
or redeemed for an amount equal to or less than their original cost; and
(vi) if interest on indebtedness incurred or continued by a Colorado
Unit holder to purchase Units in a Colorado Trust is not deductible for
federal income tax purposes, it also will be non-deductible for Colorado
income tax purposes.
Unit holders should be aware that all tax-exempt interest, including
their share of interest on the Bonds paid to a Colorado Trust, is taken
into account for purposes of determining eligibility for the Colorado
Property Tax/Rent/Heat Rebate.
Ownership of the Units may result in collateral Colorado tax
consequences to certain taxpayers. Prospective investors should consult
with tax advisors as to the applicability of any such collateral
consequences.Federal Tax Status.
Federal Tax Status.
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as
of the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally
do not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe your state or foreign taxes.
Page 16
As with any investment, you should consult your own tax professional
about your particular consequences. In addition, the Internal Revenue
Service issued new withholding and reporting regulations effective
January 1, 2001. Foreign investors should consult their own tax
advisors regarding the tax consequences of these regulations.
Assets of the Trust.
The Trust will hold various debt obligations (the "Bonds") of state and
local governmental entities. All of the assets held by a Trust
constitute the "Trust Assets." For purposes of this federal tax
discussion, it is assumed that the Bonds constitute debt the interest on
which is excluded from gross income for federal income tax purposes.
Trust Status.
The Trust will not be taxed as a corporation for federal income tax
purposes. As a Unit owner, you will be treated as the owner of a pro
rata portion of the assets of your trust, and as such you will be
considered to have received a pro rata share of income (e.g., accruals
of market discount and capital gains, if any) from the Trust Assets when
such income would be considered to be received by you if you directly
owned the Trust Assets. This is true even if you elect to have your
distributions automatically reinvested into additional Units. In
addition, the income from the Trust Assets which you must take into
account for federal income tax purposes is not reduced by amounts used
to pay Trust expenses (including the deferred sales charge, if any).
Exclusion from Gross Income of Interest.
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, based on certain representations and subject to
compliance with certain covenants. In addition, with respect to a State
Trust, where applicable, bond counsel to the issuing authorities
rendered opinions as to the exemption of interest on such Bonds when
held by residents of the State in which the issuers of such Bonds are
located, from State income taxes and certain state or local intangibles
and local income taxes. Neither the Sponsor, its counsel, 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, the bases for the bond counsel opinions, or compliance with the
covenants required for tax-exemption. The Internal Revenue Service (the
"Service") has an ongoing program of auditing tax-exempt obligations to
determine whether, in the view of the Service, interest on such tax-
exempt obligations is includible in the gross income of the owners
thereof for federal income tax purposes. It cannot be predicted whether
or not the Service will commence an audit of any of the Bonds. If an
audit is commenced, under current procedures of the Service, Unitholders
may have no right to participate in such procedure. If the 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 both prior to and after
the date on which interest is determined to be taxable.
Your pro rata share of interest on the Bonds will be excluded from your
gross income for federal income tax purposes to the same extent that
such interest would be excluded from your gross income if you directly
owned the Bonds. However, such interest may be taken into account in
computing the alternative minimum tax, and the branch profits tax
imposed on certain foreign corporations.
Ownership of the Units may result in collateral federal income tax
consequences to certain Unitholders, including, without limitation,
corporations subject to the branch profits tax, financial institutions,
certain insurance companies, certain S corporations, individual
recipients of Social Security or Railroad Retirement benefits and
Unitholders who may be deemed to have incurred (or continued)
indebtedness to purchase or carry tax-exempt obligations.
If you are a "substantial user" of the facilities financed with the
proceeds of certain Bonds, or a related person to a substantial user,
you will not be able to exclude from your gross income interest with
respect to these Bonds. "Substantial user" and "related person" are
defined under federal income tax law.
For purposes of computing the alternative minimum tax for individuals
and corporations, interest on certain bonds is included as an item of
tax preference. EXCEPT AS OTHERWISE PROVIDED, THE TRUST DOES NOT INCLUDE
ANY SUCH BONDS.
In the case of certain corporations, the alternative minimum tax depends
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 S Corporations, Regulated Investment Companies, Real Estate
Investment Trusts, REMICs or FASITs) is an amount equal to 75% of the
excess of such corporation's "adjusted current earnings" over an amount
equal to its AMTI (before such adjustment item and the alternative tax
net operating loss deduction). "Adjusted current earnings" includes all
tax-exempt interest, including interest on all of the Bonds in the
Trust. In addition, a branch profits tax is levied on the "effectively
Page 17
connected earnings and profits" of certain foreign corporations, which
include tax-exempt interest, such as interest on the Bonds in the Trust.
Your Tax Basis and Income or Loss Upon Disposition.
If your Trust disposes of Trust Assets, you will generally recognize
gain or loss. If you dispose of your Units or redeem your Units for
cash, you will also generally recognize gain or loss. To determine the
amount of this gain or loss, you must subtract your tax basis in the
related Trust Assets from your share of the total amount received in the
transaction. You can generally determine your initial tax basis in each
Trust Asset by apportioning the cost of your Units, generally including
sales charges, among each Trust Asset ratably according to their value
on the date you purchase your Units. In certain circumstances, however,
you may have to adjust your tax basis after you purchase your Units (for
example, in the case of accruals of original issue discount, market
discount, premium and accrued interest, as discussed below).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the 10% and
15% tax brackets). The 20% rate is reduced to 18% and the 10% rate is
reduced to 8% for long-term gains from most property acquired after
December 31, 2000, with a holding period of more than five years.
Net capital gain equals net long-term capital gain minus net short-term
capital loss for the taxable year. Capital gain or loss is long-term if
the holding period for the asset is more than one year and is short-term
if the holding period for the asset is one year or less. You must
exclude the date you purchase your Units to determine your holding
period. The tax rates for capital gains realized from assets held for
one year or less are generally the same as for ordinary income. The
Internal Revenue Code, however, treats certain capital gains as ordinary
income in special situations.
Discount, Accrued Interest and Premium on Debt Obligations.
Some Bonds may have been sold with original issue discount. This
generally means that the Bonds were originally issued at a price below
their face (or par) value. Original issue discount accrues on a daily
basis and generally is treated as interest income for federal income tax
purposes. Thus, the accrual of original discount will be excluded from
your gross income for federal income tax purposes to the same extent as
interest on the Bonds, as discussed above. Your basis of each Bond
which was issued with original issue discount must be increased as
original issue discount accrues.
Some Bonds may have been purchased by you or the Trust at a market
discount. Market discount is generally the excess of the stated
redemption price at maturity for the Bonds over the purchase price of
the Bond. Market discount can arise based on the price a Trust pays for
a Bond or on the price you pay for your Units. Market discount is taxed
as ordinary income. You will recognize this income when your Trust
receives principal payments on the Bond, when the Bond is disposed of or
redeemed, or when you sell or redeem your Units. Alternatively, you may
elect to include market discount in taxable income as it accrues.
Whether or not you make this election will affect how you calculate your
basis and the timing of certain interest expense deductions.
Alternatively, some Bonds may have been purchased by you or your Trust
at a premium. Generally, if the tax basis of your pro rata portion of
any Bond, generally including sales charges, exceeds the amount payable
at maturity, such excess is considered premium. You must amortize bond
premium on a constant yield basis over the remaining term of the Bond in
a manner that takes into account potential call dates and call prices.
You cannot deduct amortized bond premium relating to a Bond. The
amortized bond premium is treated as a reduction in the tax-exempt
interest received. As bond premium is amortized, it reduces your basis
in the Bond. The tax basis reduction requirement may result in your
realizing a taxable gain when your Units are sold or redeemed for an
amount equal to or less than your cost.
If the price of your Units includes accrued interest on a Bond, you must
include the accrued interest in your tax basis in that Bond. When your
Trust receives this accrued interest, you must treat it as a return of
capital and reduce your tax basis in the Bond.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
may differ from the discussion set forth above in the case of Bonds that
were issued with original issue discount.
Exchanges and Rollovers.
If you elect to reinvest amounts received from the Trust into a future
trust, it is considered a sale for federal income tax purposes, and any
gain on the sale will be treated as a capital gain, and any loss will be
treated as a capital loss. However, any loss you incur in connection
with the exchange of your Units of your Trust for units of a future
trust will generally be disallowed with respect to this deemed sale and
subsequent deemed repurchase, to the extent the two trusts have
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substantially identical assets under the wash sale provisions of the
Internal Revenue Code.
Limitations on the Deductibility of Trust Expenses.
Generally, for federal income tax purposes, you must take into account
your full pro rata share of your Trust's income, even if some of that
income is used to pay Trust expenses. You may deduct your pro rata
share of each expense paid by the Trust to the same extent as if you
directly paid the expense. You may, however, be required to treat some
or all of the expenses of your Trust as miscellaneous itemized
deductions. Individuals may only deduct certain miscellaneous itemized
deductions to the extent they exceed 2% of adjusted gross income. Your
ability to deduct Trust expenses is also limited to the extent the
expenses are allocable to tax-exempt interest from the Trust.
Retirement Plans
You may purchase Units of the Trust for:
- - Individual Retirement Accounts,
- - Keogh Plans,
- - Pension funds, and
- - Other tax-deferred retirement plans.
Generally, the federal income tax on capital gains and income received
in each of the above plans is deferred until you receive distributions.
These distributions are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred rollover
treatment. If you are considering participating in a plan like this, you
should review the tax laws regarding these plans and consult your
attorney or tax adviser. Brokerage firms and other financial
institutions offer these plans with varying fees and charges.
Rights of Unit Holders
Unit Ownership.
The Trustee will treat as Record Owner of Units persons registered as
such on its books. It is your responsibility to notify the Trustee when
you become Record Owner, but normally your broker/dealer provides this
notice. You may elect to hold your Units in either certificated or
uncertificated form.
Certificated Units. When you purchase your Units you can request that
they be evidenced by certificates, which will be delivered shortly after
your order. 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. You can transfer or redeem your
certificated Units by endorsing and surrendering the certificate to the
Trustee, along with a written instrument of transfer. You must sign your
name exactly as it appears on the face of the certificate with your
signature guaranteed by an eligible institution. In certain cases the
Trustee may require additional documentation before they will transfer
or redeem your Units.
You may be required to pay a nominal fee to the Trustee for each
certificate reissued or transferred, and to pay any government charge
that may be imposed for each transfer or exchange. If a certificate gets
lost, stolen or destroyed, you may be required to furnish indemnity to
the Trustee to receive replacement certificates. You must surrender
mutilated certificates to the Trustee for replacement.
Uncertificated Units. You may also choose to hold your Units in
uncertificated form. If you choose this option, the Trustee will
establish an account for you and credit your account with the number of
Units you purchase. Within two business days of the issuance or transfer
of Units held in uncertificated form, the Trustee will send you:
- - A written initial transaction statement containing a description of
your Trust;
- - The number of Units issued or transferred;
- - Your name, address and Taxpayer Identification Number ("TIN");
- - A notation of any liens or restrictions of the issuer and any adverse
claims; and
- - The date the transfer was registered.
Uncertificated Units may be transferred the same way as certificated
Units, except that no certificate needs to be presented to the Trustee.
Also, no certificate will be issued when the transfer takes place unless
you request it. You may at any time request that the Trustee issue
certificates for your Units.
Unit Holder Reports.
In connection with each distribution, the Trustee will provide you with
a statement detailing the per Unit amount of interest (if any)
distributed. After the end of each calendar year, the Trustee will
provide you with the following information:
- - The amount of interest received by the Trust less deductions for
payment of applicable taxes, fees and Trust expenses, redemption of
Units and the balance remaining on the last business day of the calendar
year;
- - The dates Bonds were sold and the net proceeds received from such
sales less deduction for payment of applicable taxes, fees and Trust
expenses, redemption of Units and the balance remaining on the last
business day of the calendar year;
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- - The Bonds held and the number of Units outstanding on the last
business day of the calendar year;
- - The Redemption Price per Unit on the last business day of the
calendar year; and
- - The amounts actually distributed during the calendar year from the
Interest and Principal Accounts, separately stated.
You may request from the Trustee copies of the evaluations of the Bonds
as prepared by the Evaluator to enable you to comply with federal and
state tax reporting requirements.
Interest and Principal
Distributions
You will begin receiving distributions on your Units only after you
become a Record Owner. The Trustee will credit interest received on the
Trust's Bonds to the Interest Account of the Trust. All other receipts,
such as return of capital, are credited to the Principal Account of the
Trust.
After deducting the amount of accrued interest the Trustee advanced to
us as Unit holder of record as of the First Settlement Date, the Trustee
will distribute an amount substantially equal to your pro rata share of
the balance of the Interest Account calculated on the basis of one-
twelfth (one-half in the case of Unit holders electing semi-annual
distributions) of the estimated annual amount of interest received in
the Income Account after deducting estimated expenses on or near the
Distribution Dates to Unit holders of record on the preceding
Distribution Record Date. See "Summary of Essential Information" for the
Trust. Because interest is not received by the Trust at a constant rate
throughout the year, the distributions you receive may be more or less
than the amount credited to the Interest Account as of the Distribution
Record Date. In order to minimize fluctuations in distributions, the
Trustee is authorized to advance such amounts as may be necessary to
provide distributions of approximately equal amounts. The Trustee will
be reimbursed, without interest, for any such advances from funds in the
Interest Account at the next Distribution Record Date. The Trustee will
distribute amounts in the Principal Account on the last day of each
month to Unit holders of record on the fifteenth day of each month
provided the amount equals at least $1.00 per 100 Units. If the Trustee
does not have your TIN, it is required to withhold a certain percentage
of your distribution and deliver such amount to the Internal Revenue
Service ("IRS"). You may recover this amount by giving your TIN to the
Trustee, or when you file a tax return. However, you should check your
statements to make sure the Trustee has your TIN to avoid this "back-up
withholding."
You will receive interest distributions monthly unless you elect to
receive them semi-annually. Your plan of distribution will remain in
effect until changed. During May of each year the Trustee will provide
you with information on how to change your distribution election.
Within a reasonable time after the Trust is terminated you will receive
the pro rata share of the money from the disposition of the Bonds.
The Trustee may establish reserves (the "Reserve Account") within the
Trust to cover anticipated state and local taxes or any governmental
charges to be paid out of the Trust.
Universal Distribution Option. You may elect to have your principal and
interest distributions automatically distributed to any other investment
vehicle of which you have an existing account. If you elect this option,
the Trustee will notify you of each distribution made pursuant to this
option. You may elect to terminate your participation at any time by
notifying the Trustee in writing.
Redeeming Your Units
You may redeem all or a portion of your Units at any time by sending the
certificates representing the Units you want to redeem to the Trustee at
its unit investment trust office. If your Units are uncertificated, you
need only deliver a request for redemption to the Trustee. In either
case, the certificates or the redemption request must be properly
endorsed with proper instruments of transfer and signature guarantees as
explained in "Rights of Unit Holders-Unit Ownership" (or by providing
satisfactory indemnity if the certificates were lost, stolen, or
destroyed). No redemption fee will be charged, but you are responsible
for any governmental charges that apply. Certain broker/dealers may
charge a transaction fee for processing redemption requests. Units
redeemed directly through the Trustee are not subject to such
transaction fees. Three business days after the day you tender your
Units (the "Date of Tender") you will receive cash in an amount for each
Unit equal to the Redemption Price per Unit calculated at the Evaluation
Time on the Date of Tender.
The Date of Tender is considered to be the date on which the Trustee
receives your certificates or redemption request (if such day is a day
the NYSE is open for trading). However, if your certificates or
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redemption request are received after 4:00 p.m. Eastern time (or after
any earlier closing time on a day on which the NYSE is scheduled in
advance to close at such earlier time), the Date of Tender is the next
day the NYSE is open for trading.
Any amounts paid on redemption representing interest will be withdrawn
from the Interest Account of the Trust if funds are available for that
purpose, or from the Principal Account. All other amounts paid on
redemption will be taken from the Principal Account of the Trust.
The IRS requires the Trustee to withhold a portion of your redemption
proceeds if the Trustee does not have your TIN, as generally discussed
under "Income and Capital Distributions."
The Trustee may sell Bonds in the Trust to make funds available for
redemption. If Bonds are sold, the size and diversification of the Trust
will be reduced. These sales may result in lower prices than if the
Bonds were sold at a different time.
Your right to redeem Units (and therefore, your right to receive
payment) may be delayed:
- - If the NYSE is closed (other than customary weekend and holiday
closings);
- - If the SEC determines that trading on the NYSE is restricted or that
an emergency exists making sale or evaluation of the Bonds not
reasonably practical; or
- - For any other period permitted by SEC order.
The Trustee is not liable to any person for any loss or damage which may
result from such a suspension or postponement.
The Redemption Price.
The Redemption Price per Unit is determined by the Trustee by:
adding
1. cash in the Interest and Principal Accounts of the Trust not
designated to purchase Bonds;
2. the aggregate underlying value of the Bonds held in the Trust; and
3. accrued interest on the Bonds; and
deducting
1. any applicable taxes or governmental charges that need to be paid out
of the Trust;
2. any amounts owed to the Trustee for its advances;
3. estimated accrued expenses of the Trust, if any;
4. cash held for distribution to Unit holders of record of the Trust as
of the business day before the evaluation being made; and
5. other liabilities incurred by the Trust; and
dividing
1. the result by the number of outstanding Units of the Trust.
Until the earlier of six months after the Initial Date of Deposit or the
end of the initial offering period, the Redemption Price per Unit will
include estimated organization costs as set forth under "Fee Table."
Removing Bonds from the Trust
The portfolio of the Trust is not managed. However, we may, but are not
required to, direct the Trustee to dispose of a Bond in certain limited
circumstances, including situations in which:
- - The issuer of the Bond has defaulted in the payment of principal or
interest on the Bond;
- - Any action or proceeding seeking to restrain or enjoin the payment of
principal or interest on the Bond has been instituted;
- - The issuer of the Bond has breached a covenant which would affect the
payment of principal or interest on the Bond, the issuer's credit
standing, or otherwise damage the sound investment character of the Bond;
- - The issuer has defaulted on the payment of any other of its
outstanding obligations;
- - The Bond is the subject of an advanced refunding;
- - Such factors arise which, in our opinion, adversely affect the tax or
exchange control status of the Bond; or
- - The price of the Bond has declined to such an extent, or such other
credit factors exist, that in our opinion keeping the Bond would be
harmful to the Trust.
If a Bond defaults in the payment of principal or interest and no
provision for payment is made, the Trustee must notify us of this fact
within 30 days. If we fail to instruct the Trustee whether to sell or
hold the Bond within 30 days of our being notified, the Trustee may, in
its discretion, sell any defaulted Bonds and will not be liable for any
depreciation or loss incurred thereby.
Except in the limited instance in which the Trust acquires Replacement
Bonds as described in "The First Trust Combined Series," the Trust may
not acquire any bonds or other property other than the Bonds. The
Trustee, on behalf of the Trust, will reject any offer for new or
exchanged bonds or property in exchange for a Bond, except that we may
instruct the Trustee to accept such an offer or to take any other action
with respect thereto as we may deem proper if the issuer is in default
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with respect to such Bonds or in our written opinion the issuer will
likely default in respect to such Bonds in the foreseeable future. Any
obligations 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 in the Trust. We may get advice
from the Portfolio Supervisor before reaching a decision regarding the
receipt of new or exchange securities or property. The Trustee may
retain and pay us or an affiliate of ours to act as agent for the Trust
to facilitate selling Bonds, exchanged bonds or property from the Trust.
If we or our affiliate act in this capacity, we will be held subject to
the restrictions under the Investment Company Act of 1940, as amended.
The Trustee may sell Bonds designated by us, or, absent our direction,
at its own discretion, in order to meet redemption requests or pay
expenses. We will maintain a list with the Trustee of which Bonds should
be sold. We may consider sales of units of unit investment trusts which
we sponsor in making recommendations to the Trustee on the selection of
broker/dealers to execute the Trust's portfolio transactions, or when
acting as agent for the Trust in acquiring or selling Bonds on behalf of
the Trust.
Amending or Terminating the Indenture
Amendments. The Indenture may be amended by us and the Trustee without
your consent:
- - To cure ambiguities;
- - To correct or supplement any defective or inconsistent provision;
- - To make any amendment required by any governmental agency; or
- - To make other changes determined not to be materially adverse to your
best interests (as determined by us and the Trustee).
Termination. As provided by the Indenture, the Trust will terminate on
the Mandatory Termination Date. The Trust may be terminated prior to the
Mandatory Termination Date:
- - Upon the consent of 100% of the Unit holders;
- - If the value of the Bonds owned by the Trust as shown by any
evaluation is less than 20% of the aggregate principal amount of Bonds
deposited in the Trust during the initial offering period
("Discretionary Liquidation Amount"); or
- - In the event that Units of the Trust not yet sold aggregating more
than 60% of the Units of such Trust are tendered for redemption by
underwriters, including the Sponsor.
Prior to termination, the Trustee will send written notice to all
registered account holders which will specify how you should tender your
certificates, if any, to the Trustee. If the Trust is terminated due to
this last reason, we will refund your entire sales charge. For various
reasons, the Trust may be reduced below the Discretionary Liquidation
Amount and could therefore be terminated before the Mandatory
Termination Date.
Unless terminated earlier, the Trustee will begin to sell Bonds in
connection with the termination of the Trust during the period beginning
nine business days prior to, and no later than, the Mandatory
Termination Date. We will determine the manner and timing of the sale of
Bonds. Because the Trustee must sell the Bonds within a relatively short
period of time, the sale of Bonds as part of the termination process may
result in a lower sales price than might otherwise be realized if such
sale were not required at this time.
You will receive a cash distribution from the sale of the remaining
Bonds, along with your interest in the Interest and Principal Accounts
of the Trust, within a reasonable time after the Trust is terminated.
Regardless of the distribution involved, the Trustee will deduct from
the Trust any accrued costs, expenses, advances or indemnities provided
for by the Indenture, including estimated compensation of the Trustee
and costs of liquidation and any amounts required as a reserve to pay
any taxes or other governmental charges.
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 follows:
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
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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.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposure to adverse conditions.
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 or
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.
A brief description of the applicable Moody's rating symbols and their
meanings follows:
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
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giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
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.
Information on the Sponsor, Trustee and Evaluator
The Sponsor.
We, Nike Securities L.P., specialize in the underwriting, trading and
wholesale distribution of unit investment trusts under the "First Trust"
brand name and other securities. An Illinois limited partnership formed
in 1991, we act as Sponsor for successive series of:
- - The First Trust Combined Series
- - FT Series (formerly known as The First Trust Special Situations Trust)
- - The First Trust Insured Corporate Trust
- - The First Trust of Insured Municipal Bonds
- - The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $40 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 2001, the total partners' capital of
Nike Securities L.P. was $17,560,001 (audited).
This information refers only to us and not to the Trust or to any series
of the Trust or to any other dealer. We are including this information
only to inform you of our financial responsibility and our ability to
carry out our contractual obligations. We will provide more detailed
financial information on request.
Code of Ethics. The Sponsor and the Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to the Trust.
The Trustee.
The Trustee is JPMorgan Chase Bank, with its principal executive office
located at 270 Park Avenue, New York, New York 10017 and its unit
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investment trust office at 4 New York Plaza, 6th Floor, New York, New
York, 10004-2413. If you have questions regarding the Trust, you may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
supervised by the Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System.
The Trustee has not participated in selecting the Bonds; it only
provides administrative services.
Limitations of Liabilities of Sponsor and Trustee.
Neither we nor the Trustee will be liable for taking any action or for
not taking any action in good faith according to the Indenture. We will
also not be accountable for errors in judgment. We will only be liable
for our own willful misfeasance, bad faith, gross negligence (ordinary
negligence in the Trustee's case) or reckless disregard of our
obligations and duties. The Trustee is not liable for any loss or
depreciation when the Bonds are sold. If we fail to act under the
Indenture, the Trustee may do so, and the Trustee will not be liable for
any action it takes in good faith under the Indenture.
The Trustee will not be liable for any taxes or other governmental
charges or interest on the Bonds which the Trustee may be required to
pay under any present or future law of the United States or of any other
taxing authority with jurisdiction. Also, the Indenture states other
provisions regarding the liability of the Trustee.
If we do not perform any of our duties under the Indenture or are not
able to act or become bankrupt, or if our affairs are taken over by
public authorities, then the Trustee may:
- - Appoint a successor sponsor, paying them a reasonable rate not more
than that stated by the SEC;
- - Terminate the Indenture and liquidate the Trust; or
- - Continue to act as Trustee without terminating the Indenture.
The Evaluator.
The Evaluator is Securities Evaluation Service, Inc. The Evaluator's
address is 531 East Roosevelt Road, Suite 200, Wheaton, Illinois 60187.
The Trustee, Sponsor and Unit holders may rely on the accuracy of any
evaluation prepared by the Evaluator. The Evaluator will make
determinations in good faith based upon the best available information,
but will not be liable to the Trustee, Sponsor or Unit holders for
errors in judgment.
Other Information
Legal Opinions.
Our counsel is Chapman and Cutler, 111 W. Monroe St., Chicago, Illinois,
60603. They have passed upon the legality of the Units offered hereby
and certain matters relating to federal and Colorado tax law. Carter,
Ledyard & Milburn acts as the Trustee's counsel, as well as special New
York tax counsel for the Trust.
Experts.
The Trust's statement of net assets, including the schedule of
investments, as of the opening of business on the Initial Date of
Deposit included in this prospectus and elsewhere in the registration
statement has been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in
the registration statement, and is included in reliance upon the report
of such firm given upon their authority as experts in accounting and
auditing.
Supplemental Information.
If you write or call the Trustee, you will receive free of charge
supplemental information about this Series, which has been filed with
the SEC and to which we have referred throughout. This information
states more specific risk information about the Trust.
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First Trust(R)
THE FIRST TRUST COMBINED SERIES 273
COLORADO INSURED SERIES 16 PORTFOLIO
Sponsor:
NIKE SECURITIES L.P.
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
JPMorgan Chase Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
24-Hour Pricing Line:
1-800-446-0132
This prospectus contains information relating to The First Trust
Combined Series 273, but does not contain all of the information about
this investment company as filed with the Securities and Exchange
Commission in Washington, D.C. under the:
- - Securities Act of 1933 (file no. 333-22617) and
- - Investment Company Act of 1940 (file no. 811-05903)
Information about the Trust, including its Code of Ethics, can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington D.C. Information regarding the operation of
the Commission's Public Reference Room may be obtained by calling the
Commission at
1-202-942-8090.
Information about the Trust is available on the EDGAR Database on the
Commission's Internet site at
http://www.sec.gov.
To obtain copies at prescribed rates -
Write: Public Reference Section of the Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0102
e-mail address: publicinfo@sec.gov
__________, 2002
PLEASE RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE
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First Trust (R)
The First Trust (R) Combined Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of the unit investment trust
contained in The First Trust Combined Series 273 not found in the
prospectus for the Trust. This Information Supplement is not a
prospectus and does not include all of the information that you should
consider before investing in the Trust. This Information Supplement
should be read in conjunction with the prospectus for the Trust in which
you are considering investing.
This Information Supplement is dated __________, 2002. Capitalized terms
have been defined in the prospectus.
Table of Contents
Risk Factors 1
Municipal Bonds 5
Healthcare Revenue Bonds 5
Single Family Mortgage Revenue Bonds 5
Multi-Family Mortgage Revenue Bonds 6
Water and Sewerage Revenue Bonds 6
Electric Utility Revenue Bonds 6
Lease Obligation Revenue Bonds 6
Industrial Revenue Bonds 7
Transportation Facility Revenue Bonds 7
Educational Obligation Revenue Bonds 7
Resource Recovery Facility Revenue Bonds 7
Discount Bonds 8
Original Issue Discount Bonds 8
Zero Coupon Bonds 8
Premium Bonds 8
Risk Factors.
The Trust will invest most of its net assets in securities issued by or
on behalf of (or in certificates of participation in lease-purchase
obligations of) the State of Colorado. The Trust is therefore
susceptible to general or particular economic, political or regulatory
factors that may affect issuers of Colorado obligations. The following
information constitutes only a brief summary of some of the many complex
factors that may have an effect. The information does not apply to
"conduit" obligations on which the public issuer itself has no financial
responsibility. This information is derived from official statements of
certain National issuers published in connection with their issuance of
securities and from other publicly available information, and is
believed to be accurate. No independent verification has been made of
any of the following information.
Generally, creditworthiness of Colorado obligations of issuers is
unrelated to that of obligations of the state itself, and the state has
no responsibility to make payments on those local obligations. There may
be specific factors that at particular times apply in connection with
investment in particular Colorado obligations or in those obligations of
particular Colorado issuers. However, the information below is intended
only as a general summary, and is not intended as a discussion of any
specific factors that may affect any particular obligation or issuer.
The timely payment of principal of and interest on Colorado obligations
has been guaranteed by bond insurance purchased by the issuers or other
parties.
Colorado's Economic Outlook. According to the September 2001 Colorado
Economic Perspective ("September 2001 Forecast"), published by the
Governor's Office of State Planning and Budgeting, through the first
half of 2001, Colorado's economy appeared to be doing much better than
the national economy and, despite numerous layoff announcements and
slower retail sales growth, continues to perform better than many other
states. However, the forecast for Colorado for the next six years
anticipates much slower economic growth than the state has experienced
in the past decade.
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The September 2001 Forecast anticipates nonfarm employment will grow to
2.8% in 2001 and then slow to 2.4%. Thereafter, nonfarm employment
growth will average 2.7% per year. Unemployment is expected to average
only 3.1% in 2001 but then steadily increase to 3.7% by 2006. Personal
income in Colorado is expected to increase 8.2% in 2001 due to
increasing wages and salaries as well as the number of jobs available.
Thereafter, growth in personal income will slow to 5.6% in 2002 as
nonfarm employment growth slows.
Colorado's construction sector is integral to the state's economic
growth. In the mid-to-late 1990s, in response to the many new people and
firms locating in Colorado, both residential and nonresidential
construction boomed. The construction industry was also a growing
employer for the state, employing as many as 162,000 workers. The
September 2001 Forecast anticipates slowing in the construction
industry. Through July 2001, the residential home market still grew
significantly, but the number of homes on the market has since increased
and prices are beginning to stabilize. Moreover, the value of
nonresidential construction (excluding nonbuilding projects like roads)
is relatively flat for the year and the vacancy rate in the office
market is rising. Overall, there are signs of excess beginning to be
seen in both the residential and nonresidential markets.
The economic impact of the September 11 terrorist attacks on the World
Trade Center and Pentagon is unclear. One impact of the attacks,
however, is the detrimental effect on state budgets. The recent
volatility in the stock markets and consumer spending will likely make
things worse for states attempting to maintain balanced budgets. The
decline in travel and tourism may also have serious implications for tax
revenues in states such as Colorado. The State may be impacted more than
others in the short term as the winter months are relatively busy
tourist periods.
Revenues and Expenditures. The State Constitution requires that
expenditures for any fiscal year not exceed revenues for such fiscal
year. By statute, the amount of General Fund revenues available for
appropriation is based upon revenue estimates which, together with other
available resources, must exceed annual appropriations by the amount of
the unappropriated reserve (the "Unappropriated Reserve"). For fiscal
years 1994 and thereafter, the Unappropriated Reserve requirement is set
at 4%. In addition to the Unappropriated Reserve, a constitutional
amendment approved by Colorado voters in 1992 requires the State and
local government to reserve a certain percentage of its fiscal year
spending (excluding bonded debt service) for emergency use (the
"Emergency Reserve"). The minimum Emergency Reserve is set at 3% for
1995 and later years. For fiscal year 1992 and thereafter, General Fund
appropriations are also limited by statute to an amount equal to the
cost of performing certain required reappraisals of taxable property
plus an amount equal to the lesser of (i) 5% of Colorado personal income
or (ii) 106% of the total General Fund appropriations for the previous
fiscal year. This restriction does not apply to any General Fund
appropriations which are required as a result of a new federal law, a
final state or federal court order or moneys derived from the increase
in the rate or amount of any tax or fee approved by a majority of the
registered electors of the State voting at any general election. In
addition, the statutory limit on the level of General Fund
appropriations may be exceeded for a given fiscal year upon the
declaration of a State fiscal emergency by the State General Assembly.
On November 3, 1992, voters in Colorado approved a constitutional
amendment (the "Amendment") which, in general, became effective December
31, 1992, and restricts the ability of the State and local governments
to increase revenues and impose taxes. The Amendment applies to the
State and all local governments, including home rule entities
("Districts"). Enterprises, defined as government-owned businesses
authorized to issue revenue bonds and receiving under 10% of annual
revenue in grants from all Colorado state and local governments
combined, are excluded from the provisions of the Amendment.
The provisions of the Amendment are unclear and have required judicial
interpretation. Among other provisions, beginning November 4, 1992, the
Amendment requires voter approval prior to tax increases, creation of
debt, or mill levy or valuation for assessment ratio increases. The
Amendment also limits increases in government spending and property tax
revenues to specified percentages. The Amendment requires that District
property tax revenues yield no more than the prior year's revenues
adjusted for inflation, voter approved changes and (except with regard
to school districts) local growth in property values according to a
formula set forth in the Amendment. School districts are allowed to
adjust tax levies for changes in student enrollment. Pursuant to the
Amendment, local government spending is to be limited by the same
formula as the limitation for property tax revenues. The basis for
spending and revenue limits for each fiscal year is the prior fiscal
year's spending and property taxes collected in the prior calendar year.
Debt service changes, reductions and voter-approved revenue changes are
excluded from the calculation bases. The Amendment also prohibits new or
increased real property transfer tax rates, new state real property
taxes and local district income taxes. There is also a statutory
restriction on the amount of annual increases in taxes that the various
taxing jurisdictions in Colorado can levy without electoral approval.
This restriction does not apply to taxes levied to pay general
obligation debt.
Litigation concerning several issues relating to the Amendment was filed
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in the Colorado courts. The litigation dealt with three principal
issues: (i) whether Districts can increase mill levies to pay debt
service on general obligation bonds without obtaining voter approval;
(ii) whether a multi-year lease purchase agreement subject to annual
appropriations is an obligation which requires voter approval prior to
execution of the agreement; and (iii) what constitutes an "enterprise"
which is excluded from the provisions of the Amendment. In September
1994, the Colorado Supreme Court held that Districts can increase mill
levies to pay debt service on general obligation bonds issued after the
effective date of the Amendment; in June, 1995, the Colorado Supreme
Court validated mill levy increases to pay general obligation bonds
issued prior to the Amendment. In late 1994, the Colorado Court of
Appeals held that multi-year lease-purchase agreements subject to annual
appropriation do not require voter approval. The time to file an appeal
in that case has expired. Finally, in May, 1995, the Colorado Supreme
Court ruled that entities with the power to levy taxes may not
themselves be "enterprises" for purposes of the Amendment; however, the
Court did not address the issue of how valid enterprises may be created.
Litigation in the "enterprise" arena may be filed in the future to
clarify these issues.
The Taxpayer's Bill of Rights ("TABOR"), Article X, Section 20 of the
Colorado State Constitution, limits the state's revenue growth to the
sum of inflation plus population growth in the previous calendar year.
The state first exceed the TABOR limit in FY 1996-97. Since then, the
amount of the TABOR surplus surged, reaching $927.2 million in FY 2000-
01. A healthy economy and the prolonged national economic expansion of
the 1990s generated strong growth in General Fund revenues. The robust
revenue growth coupled with the low TABOR limit, led to large TABOR
surpluses. The September 2001 Forecast projects that the state will not
continue to enjoy the large TABOR surpluses of recent years. Indeed, the
TABOR surplus is expected to range from only $93.2 million to $142.6
million in the next six years. There are several reasons for the decline
in TABOR surplus. First, two measures passed by Colorado voters in the
November 2000 election lower surplus revenues: Amendment 23, which
provides increased public school funding, exempted roughly $330 million
from the TABOR surplus; and Referendum A, which provides property tax
relief for senior citizens, lowers the amount of the surplus by $44
million. Second, since 2000 was a federal census year, the state now has
an accurate count of its population reflecting a higher population
growth thus increasing the TABOR limit. Third, Colorado's economy is
expected to grow at slower rates resulting in lower General Fund revenue
growth. Fourth, tax relief packages enacted in the last three years
allow Coloradoans to keep more of their income. Finally, the 2001
federal tax relief will lower Colorado revenues.
According to September 2001 Forecast, General Fund revenues increased
6.3% in FY 2000-01, much lower than FY 1999-00's 8.8% pace. General Fund
revenues are forecast to increase 1.8% in FY 2001-02 and 6.7% in FY 2002-
2003.
The monies in excess of the General Fund reserve are typically used for
capital expenditures and tax relief. In FY 2001-2002, the fiscal year-
end General Fund reserve is forecast to be $224.9 million, which is
exactly equal to the four percent statutory requirement. The need to
provide funds to complete capital projects begun in previous years, the
passage of Amendment 23, the large sales tax over-refund, and a decrease
in projected revenues lowered the FY 2001-02 reserve level.
The September 2001 Forecast predicts that the total amount of cash fund
revenues in FY 2001-02 will be approximately $2,366 million. Cash fund
revenues are forecast to increase 2.1% in FY 2001-02 and to increase
7.6% in FY 2002-03. From FY 2001-02 through FY 2006-07, cash fund
revenues will increase at a compound annual average rate of 5.3%. It is
anticipated that by FY 2006-07, the fiscal year-end General Fund reserve
will be $2,196.3 million.
Debt Management. Under its constitution, the State of Colorado is not
permitted to issue general obligation bonds secured by the full faith
and credit of the State. However, certain agencies and instrumentalities
of the State are authorized to issue bonds secured by revenues from
specific projects and activities. The State enters into certain lease
transactions which are subject to annual renewal at the option of the
State. In addition, the State is authorized to issue short-term revenue
anticipation notes. Local governmental units in the State are also
authorized to incur indebtedness. The major source of financing for such
local government indebtedness is an ad valorem property tax. In
addition, in order to finance public projects, local governments in the
State can issue revenue bonds payable from the revenues of a utility or
enterprise or from the proceeds of an excise tax, or assessment bonds
payable from special assessments. Colorado local governments can also
finance public projects through leases which are subject to annual
appropriation at the option of the local government. Local governments
in Colorado also issue tax anticipation notes. The Amendment requires
prior voter approval for the creation of any multiple fiscal year debt
or other financial obligation whatsoever, except for refundings at a
lower rate or obligations of an enterprise.
The Trust is susceptible to political, economic or regulatory factors
affecting issuers of Colorado municipal obligations (the "Colorado
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Municipal Obligations"). These include the possible adverse effects of
certain Colorado constitutional amendments, legislative measures, voter
initiatives and other matters. The information provided is only a brief
summary of the complex factors affecting the financial situation in
Colorado and is derived from sources that are generally available to
investors and are believed to be accurate. No independent verification
has been made of the accuracy or completeness of any of the preceding
information. It is based in part on information obtained from various
State and local agencies in Colorado or contained in Official Statements
for various Colorado Municipal Obligations.
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 Bonds held by the 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 issuers. 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 Trust to pay interest on or principal of the Bonds.
Federal 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 2002 marginal federal tax rates
and marginal state tax rates currently available and scheduled to be in
effect. 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 $137,300. 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 43.5% for taxpayers filing a joint return and entitled to
four personal exemptions and to approximately 39.8% 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.
Combined National and Colorado State Tax Equivalent Table
Taxable Income ($1,000's) Tax-Exempt Estimated Current Return
------------------------- --------------------------------------------------------------------------
Single Joint Tax 4.5% 5% 5.5% 6% 6.5% 7% 7.5%
Return Return Bracket Equivalent Taxable Estimated Current Return
$ 0-6 $ 0-12 14.20% 5.24% 5.83% 6.41% 6.99% 7.58% 8.16% 8.74%
6-27.95 12-46.70 18.90% 5.55% 6.17% 6.78% 7.40% 8.01% 8.63% 9.25%
27.95-67.70 46.70-112.85 30.40% 6.47% 7.18% 7.90% 8.62% 9.34% 10.06% 10.78%
67.70-141.25 112.85-171.95 33.20% 6.74% 7.49% 8.23% 8.98% 9.73% 10.48% 11.23%
141.25-307.05 171.95-307.05 38.00% 7.26% 8.06% 8.87% 9.68% 10.48% 11.29% 12.10%
Over307.05 Over307.05 41.40% 7.68% 8.53% 9.39% 10.24% 11.09% 11.95% 12.80%
Municipal Bonds
Certain of the bonds may be general obligations of a governmental entity
that are backed by the taxing power of such entity. Other bonds in the
funds may be 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 funds, both within a particular
classification and between classifications, depending on numerous
factors. A description of certain types of revenue bonds follows.
Healthcare Revenue Bonds. Certain of the bonds may be healthcare revenue
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bonds. Ratings of bonds issued for healthcare 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 may be single
family mortgage revenue bonds, which are issued for the purpose of
acquiring from originating financial institutions notes secured by
mortgages on residences located within the issuer's boundaries and owned
by persons of low or moderate income. Mortgage loans are generally
partially or completely prepaid prior to their final maturities as a
result of events such as sale of the mortgaged premises, default,
condemnation or casualty loss. Because these bonds are subject to
extraordinary mandatory redemption in whole or in part from such
prepayments of mortgage loans, a substantial portion of such bonds will
probably be redeemed prior to their scheduled maturities or even prior
to their ordinary call dates. The redemption price of such issues may be
more or less than the offering price of such bonds. Extraordinary
mandatory redemption without premium could also result from the failure
of the originating financial institutions to make mortgage loans in
sufficient amounts within a specified time period or, in some cases,
from the sale by the bond issuer of the mortgage loans. Failure of the
originating financial institutions to make mortgage loans would be due
principally to the interest rates on mortgage loans funded from other
sources becoming competitive with the interest rates on the mortgage
loans funded with the proceeds of the single family mortgage revenue
bonds. Additionally, unusually high rates of default on the underlying
mortgage loans may reduce revenues available for the payment of
principal of or interest on such mortgage revenue bonds. Single family
mortgage revenue bonds issued after December 31, 1980 were issued under
Section 103A of the Internal Revenue Code, which Section contains
certain ongoing requirements relating to the use of the proceeds of such
bonds in order for the interest on such bonds to retain its tax-exempt
status. In each case, the issuer of the bonds has covenanted to comply
with applicable ongoing requirements and bond counsel to such issuer has
issued an opinion that the interest on the bonds is exempt from Federal
income tax under existing laws and regulations. There can be no
assurances that the ongoing requirements will be met. The failure to
meet these requirements could cause the interest on the bonds to become
taxable, possibly retroactively from the date of issuance.
Multi-Family Mortgage Revenue Bonds. Certain of the bonds 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.
Water and Sewerage Revenue Bonds. Certain of the bonds 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
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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 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 may be lease
obligations issued for the most part by governmental authorities that
have no taxing power or other means of directly raising revenues.
Rather, the governmental authorities are financing vehicles created
solely for the construction of buildings (schools, administrative
offices, convention centers and prisons, for example) or the purchase of
equipment (police cars and computer systems, for example) that will be
used by a state or local government (the "lessee"). Thus, these
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt service
on the obligations. Lease obligations are subject, in almost all cases,
to the annual appropriation risk, i.e., the lessee government is not
legally obligated to budget and appropriate for the rental payments
beyond the current fiscal year. These obligations are also subject to
construction and abatement risk in many states-rental obligations cease
in the event that delays in building, damage, destruction or
condemnation of the project prevents its use by the lessee. In these
cases, insurance provisions designed to alleviate this risk become
important credit factors. In the event of default by the lessee
government, there may be significant legal and/or practical difficulties
involved in the re-letting or sale of the project. Some of these issues,
particularly those for equipment purchase, contain the so-called
"substitution safeguard," which bars the lessee government, in the event
it defaults on its rental payments, from the purchase or use of similar
equipment for a certain period of time. This safeguard is designed to
insure that the lessee government will appropriate, even though it is
not legally obligated to do so, but its legality remains untested in
most, if not all, states.
Industrial Revenue Bonds. Certain of the bonds 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 fund 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 funds prior
to the stated maturity of such bonds.
Transportation Facility Revenue Bonds. Certain of the bonds may be
obligations which are payable from and secured by revenues derived from
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the ownership and operation of facilities such as airports, bridges,
turnpikes, port authorities, convention centers and arenas. The major
portion of an airport's gross operating income is generally derived from
fees received from signatory airlines pursuant to use agreements which
consist of annual payments for leases, occupancy of certain terminal
space and service fees. Airport operating income may therefore be
affected by the ability of the airlines to meet their obligations under
the use agreements. The air transport industry is experiencing
significant variations in earnings and traffic, due to increased
competition, excess capacity, increased costs, deregulation, traffic
constraints and other factors, and several airlines are experiencing
severe financial difficulties. The Sponsor cannot predict what effect
these industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines and
their usage of the particular airport facility. Similarly, payment on
bonds related to other facilities is dependent on revenues from the
projects, such as user fees from ports, tolls on turnpikes and bridges
and rents from buildings. Therefore, payment may be adversely affected
by reduction in revenues due to such factors as increased cost of
maintenance, decreased use of a facility, lower cost of alternative
modes of transportation, scarcity of fuel and reduction or loss of rents.
Educational Obligation Revenue Bonds. Certain of the bonds may be
obligations of issuers which are, or which govern the operation of,
schools, colleges and universities and whose revenues are derived mainly
from ad valorem taxes, or for higher education systems, from tuition,
dormitory revenues, grants and endowments. General problems relating to
school bonds include litigation contesting the state constitutionality
of financing public education in part from ad valorem taxes, thereby
creating a disparity in educational funds available to schools in
wealthy 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 funds. 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 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 funds prior to the stated maturity of the Bonds.
Discount Bonds. Certain of the bonds may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
funds were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly
issued comparable bonds increase, the market discount of previously
issued bonds will become greater, and if such interest rates for newly
issued comparable bonds decline, the market discount of previously
issued bonds will be reduced, other things being equal. Investors should
also note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium if
interest rates decrease. Conversely, if interest rates increase, the
value of bonds purchased at a market discount will decrease faster than
bonds purchased at a market premium. In addition, if interest rates
rise, the prepayment risk of higher yielding, premium bonds and the
prepayment benefit for lower yielding, discount bonds will be reduced. A
discount bond held to maturity will have a larger portion of its total
return in the form of taxable income and capital gain and less in the
form of tax-exempt interest income than a comparable bond newly issued
at current market rates. 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 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. The current value of an original issue discount bond
Page 7
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 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 by the fund 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.
Page 8
MEMORANDUM
Re: The First Trust Combined Series 273
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between The
First Trust Combined Series 269, which is the current fund, and
The First Trust Combined Series 273, the filing of which this
memorandum accompanies, is the change in the series number. The
list of bonds comprising the Fund, the evaluation, record and
distribution dates and other changes pertaining specifically to
the new series, such as size and number of Units in the Fund and
the statement of condition of the new Fund, will be filed by
amendment.
1940 Act
Forms N-8A and N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of The First Trust of Insured Municipal Bonds,
Series 1 (File No. 811-2541) related also to the subsequent
series of the Fund.
1933 Act
Prospectus
The only significant changes in the Prospectus from the
Series 269 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
Item A. Bonding Arrangements of Depositor
Nike Securities L.P. is covered by a Brokers' Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
Item B. This Registration Statement comprises the following
papers and documents:
See "Exhibit Index" on page S-5.
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 273, has duly
caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Lisle and State of Illinois on
March 14, 2002.
THE FIRST TRUST COMBINED SERIES 273
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
David J. Allen Director )
of Nike Securities )
Corporation, the ) March 14, 2002
General Partner of )
Nike Securities L.P.)
)
Judith M. Van Kampen Director )
of Nike Securities ) Robert M. Porcellino
Corporation, the ) Attorney-in-Fact**
General Partner of )
Nike Securities L.P.)
Karla M. Van Kampen-Pierre Director )
of Nike Securities )
Corporation, the )
General Partner of )
Nike Securities L.P.)
David G. Wisen Director )
of Nike Securities )
Corporation, the )
General Partner of )
Nike Securities L.P.)
* The title of the person named herein represents his
capacity in and relationship to Nike Securities L.P.,
Depositor.
** An executed copy of the related power of attorney
was filed with the Securities and Exchange Commission in
connection with Amendment No. 1 to Form S-6 of FT 597
(File No. 333-76518) and the same is hereby incorporated
herein by this reference.
S-3
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as
Exhibits 3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF DELOITTE & TOUCHE LLP
The consent of Deloitte & Touche LLP to the use of its name
and to the reference to such firm in the Prospectus included in
this Registration Statement will be filed by amendment.
CONSENT OF SECURITIES EVALUATION SERVICE, INC.
The consent of Securities Evaluation Service, Inc. to the
use of its name in the Prospectus included in the Registration
Statement is filed as Exhibit 4.1 to the Registration Statement
CONSENT OF STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-
HILL, INC.
The consent of Standard & Poor's Ratings Group, A Division
of McGraw-Hill, Inc. to the use of its name in the Prospectus
included in this Registration Statement will be filed as Exhibit
4.2 to the Registration Statement.
S-4
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Combined Series 145 and subsequent Series
effective October 16, 1991, among Nike Securities L.P.,
as Depositor, United States Trust Company of New York, as
Trustee, Securities Evaluation Service, Inc., as
Evaluator, and Nike Financial Advisory Services L.P. as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-3289] filed on
behalf of The First Trust Combined Series 145).
1.1.1* Form of Trust Agreement for Series 273 among Nike
Securities L.P., as Depositor, JPMorgan Chase Bank, as
Trustee, Securities Evaluation Service, Inc., as
Evaluator, and First Trust Advisors L.P., as Portfolio
Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, General Partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporation, General
Partner of Nike Securities L.P., Depositor (incorporated
by reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.6 Master Agreement Among Underwriters (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
43289] filed on behalf of The First Trust Combined
Series 145).
S-5
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
securities being registered.
3.3* Opinion of counsel to New York tax status of securities
being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of Securities Evaluation Service, Inc.
4.2* Consent of Standard & Poor's Ratings Group, A Division of
McGraw-Hill, Inc.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Directors listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File
No. 333-76518] filed on behalf of FT 597).
_________________
* To be filed by amendment.
S-6