File No. 33-31546
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 10
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
THE FIRST TRUST COMBINED SERIES 89
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : September 30, 1999
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 5
1,795 UNITS
PROSPECTUS
Part One
Dated September 28, 1999
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two and Part Three.
In the opinion of Counsel, interest income to the Trust and to Unit holders,
with certain exceptions, is exempt under existing law from all Federal income
taxes. In addition, the interest income is, in the opinion of Special
Counsel, exempt to the extent indicated from Florida State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Florida Trust,
Series 5 (the "Trust") is an insured and fixed portfolio of interest-bearing
obligations issued by or on behalf of municipalities and other governmental
authorities within the State of Florida, counties, municipalities, authorities
and political subdivisions thereof, the interest on which is, in the opinion
of recognized bond counsel to the issuing governmental authorities, exempt
from all Federal income taxes and from Florida State and local income taxes
under existing law. At August 16, 1999, each Unit represented a 1/1,795
undivided interest in the principal and net income of the Trust (see "The
Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.6% of the Public Offering Price (4.822%
of the amount invested). At August 16, 1999, the Public Offering Price per
Unit was $697.63 plus net interest accrued to date of settlement (three
business days after such date) of $6.74 and $13.71 for the monthly and semi-
annual distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.99% per annum on August 16, 1999, and 5.91% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 3.07% per annum on August 16, 1999, and 3.00%
under the monthly distribution plan. Estimated Current Return is calculated
by dividing the Estimated Net Annual Interest Income per Unit by the Public
Offering Price. Estimated Long-Term Return is calculated using a formula
which (1) takes into consideration and determines and factors in the relative
weightings of the market values, yields (which take into account the
amortization of premiums and the accretion of discounts) and estimated
retirements of all of the Bonds in the Trust and (2) takes into account a
compounding factor and the expenses and sales charge associated with each Unit
of the Trust. Since the market values and estimated retirements of the Bonds
and the expenses of the Trust will change, there is no assurance that the
present Estimated Current Return and Estimated Long-Term Return indicated
above will be realized in the future. Estimated Current Return and Estimated
Long-Term Return are expected to differ because the calculation of the
Estimated Long-Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculations include only Net
Annual Interest Income and Public Offering Price. The above figures are based
on estimated per Unit cash flows. Estimated cash flows will vary with changes
in fees and expenses, with changes in current interest rates, and with the
principal prepayment, redemption, maturity, call, exchange or sale of the
underlying Bonds. See "What are Estimated Current Return and Estimated Long-
Term Return?" in Part Two.
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Principal Amount of Bonds in the Trust $1,345,000
Number of Units 1,795
Fractional Undivided Interest in the Trust per Unit 1/1,795
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,194,638
Aggregate Value of Bonds per Unit $665.54
Sales Charge 4.822% (4.6% of Public Offering Price) $32.09
Public Offering Price per Unit $697.63*
Redemption Price and Sponsor's Repurchase Price per Unit
($32.09 less than the Public Offering Price per Unit) $665.54*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $631,000
</TABLE>
Date Trust Established November 15, 1989
Mandatory Termination Date December 31, 2038
Evaluator's Fee: $947 annually. Evaluations for purposes of sale, purchase
or redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to an affiliate Maximum of $.25
of the Sponsor per Unit annually
*Plus net interest accrued to date of settlement (three business days after
purchase) (see "Public Offering Price" herein and "Redemption of Units" and
"Purchase of Units by Sponsor" in Part Two).
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS
MULTI-STATE - FLORIDA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF AUGUST 16, 1999
Sponsor: Nike Securities L.P.
Evaluator: Securities Evaluation Service, Inc.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
PER UNIT INFORMATION BASED ON VARIOUS DISTRIBUTION PLANS
Semi-
Monthly Annual
<S> <C> <C>
Calculation of Estimated Net Annual Income:
Estimated Annual Interest Income $43.74 $43.74
Less: Estimated Annual Expense $2.50 $1.96
Estimated Net Annual Interest Income $41.24 $41.78
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $41.24 $41.78
Divided by 12 and 2, Respectively $3.44 $20.89
Estimated Daily Rate of Net Interest Accrual $.1146 $.1160
Estimated Current Return Based on Public
Offering Price 5.91% 5.99%
Estimated Long-Term Return Based on Public
Offering Price 3.00% 3.07%
</TABLE>
Trustee's Annual Fee: $1.05 and $.55 per $1,000 principal amount of Bonds for
those portions of the Trust under the monthly and semi-annual distribution
plans, respectively.
Computation Dates: Fifteenth day of the month as follows: monthly--each
month; semi-annual--June and December.
Distribution Dates: Last day of the month as follows: monthly--each month;
semi-annual--June and December.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 89, The First Trust of Insured Municipal
Bonds - Multi-State, Florida Trust, Series 5
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 89, The First
Trust of Insured Municipal Bonds - Multi-State, Florida Trust, Series 5 as of
May 31, 1999, and the related statements of operations and changes in net
assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Trust's Sponsor. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of May 31, 1999, by
correspondence with the Trustee. An audit also includes assessing the
accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The First Trust Combined
Series 89, The First Trust of Insured Municipal Bonds - Multi-State, Florida
Trust, Series 5 at May 31, 1999, and the results of its operations and changes
in its net assets for each of the three years in the period then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 7, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,135,962)
(Note 1) $1,222,293
Accrued interest 28,868
Receivable from investment transaction 76,500
__________
1,327,661
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 16,389
Accrued liabilities 91
Cash overdraft 490
__________
16,970
__________
Net assets, applicable to 1,810 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,135,962
Net unrealized appreciation (Note 2) 86,331
Distributable funds 88,398
__________
$1,310,691
==========
Net asset value per unit $724.14
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
PORTFOLIO - See notes to portfolio.
May 31, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(f) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Flagler County, Florida, Sales Tax Improvement 1999 @ 100
Revenue (BIG Insured) (c) 7.35 % 10/01/2019 2001 @ 100 S.F. AAA $280,000 282,338
City of Gulf Breeze (Florida), Local Government
Loan Program, Demand Revenue, Series E 1999 @ 102
(FGIC Insured) (c) 7.75 12/01/2015 2006 @ 100 S.F. AAA 500,000 519,265
Hillsborough County Aviation Authority, Florida,
Tampa International Airport Revenue
1989 Series B (AMBAC Insured) (c) (e) 7.00 10/01/2019 1999 @ 102 AAA 285,000 293,647
The City of Miami, Florida, Special Revenue
Refunding, Series 1987 (MBIA Insured) (c) -(d) 1/01/2015 2009 @ 62.459 S.F. AAA 290,000 127,043
______________________
$1,355,000 1,222,293
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
NOTES TO PORTFOLIO
May 31, 1999
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in that year. Unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value), except for zero coupon
bonds which are redeemable at prices based on the issue price plus the
amount of original issue discount accreted to the redemption date plus,
if applicable, some premium, the amount of which will decline in
subsequent years. "S.F." indicates a sinking fund is established with
respect to an issue of bonds. In addition, certain bonds are sometimes
redeemable in whole or in part other than by operation of the stated
redemption or sinking fund provisions under specified unusual or
extraordinary circumstances. Approximately 79% of the aggregate
principal amount of the Bonds in the Trust is subject to call within one
year.
(b) The ratings shown are those effective at May 31, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on March 1, 1988 at a price of 12.186% of their original
principal amount.
(e) This issue of bonds is secured by, and payable from, escrowed U.S.
Government securities.
(f) The Trust consists of four obligations of issuers located in Florida.
None of the Bonds in the Trust are general obligations of a governmental
entity. All issues are revenue bonds payable from the income of a
specific project or authority and are divided by purpose of issue as
follows: Airport, 1; and Miscellaneous, 3. Approximately 21% of the
aggregate principal amount of the Bonds in the Trust consist of airport
revenue bonds. Each of the Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust. The largest such
issue represents approximately 37%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended May 31,
1999 1998 1997
<S> <C> <C> <C>
Interest income $90,760 103,880 108,570
Expenses:
Trustee's fees and related expenses (2,776) (3,020) (3,100)
Evaluator's fees (947) (947) (947)
Supervisory fees (511) (553) (572)
________________________________
Investment income - net 86,526 99,360 103,951
Net gain (loss) on investments:
Net realized gain (loss) 7,755 6,956 3,547
Change in net unrealized appreciation
or depreciation (35,694) (10,218) (19,045)
________________________________
(27,939) (3,262) (15,498)
________________________________
Net increase in net assets resulting
from operations $58,587 96,098 88,453
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended May 31,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $86,526 99,360 103,951
Net realized gain (loss) on investments 7,755 6,956 3,547
Change in net unrealized appreciation
or depreciation on investments (35,694) (10,218) (19,045)
___________________________________
58,587 96,098 88,453
Distributions to unit holders:
Investment income - net (85,993) (99,285) (103,774)
Principal from investment transactions - (38,963) -
___________________________________
(85,993) (138,248) (103,774)
Unit redemptions (235, 165 and 100 in
1999, 1998 and 1997, respectively):
Principal portion (170,130) (120,712) (75,277)
Net interest accrued (2,764) (1,796) (1,017)
___________________________________
(172,894) (122,508) (76,294)
___________________________________
Total increase (decrease) in net assets (200,300) (164,658) (91,615)
Net assets:
At the beginning of the year 1,510,991 1,675,649 1,767,264
___________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $88,398, $18,784 and
$13,532 at May 31, 1999, 1998 and
1997, respectively) $1,310,691 1,510,991 1,675,649
===================================
Trust units outstanding at the end of
the year 1,810 2,045 2,210
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
Bonds are stated at values as determined by Securities Evaluation Service,
Inc. (the Evaluator), certain shareholders of which are officers of the
Sponsor. The bond values are based on (1) current bid prices for the bonds
obtained from dealers or brokers who customarily deal in bonds comparable to
those held by the Trust, (2) current bid prices for comparable bonds, (3)
appraisal or (4) any combination of the above.
Security cost -
The Trust's cost of its portfolio is based on the offering prices of the bonds
on the Date of Deposit, November 15, 1989. The premium or discount (including
original issue discount) existing at the Date of Deposit is not being
amortized. Realized gain (loss) from bond transactions is reported on an
identified cost basis. Sales and redemptions of bonds are recorded on the
trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $1.05 and $.55 per $1,000 principal amount of Bonds for those
portions of the Trust under the monthly and semi-annual distribution plans,
respectively. Additionally, a fee of $947 annually is payable to the
Evaluator and the Trust pays all related expenses of the Trustee, recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at May 31, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $89,499
Unrealized depreciation (3,168)
_______
$86,331
=======
</TABLE>
<PAGE>
3. Insurance
All issues of bonds in the portfolio are insured under insurance coverage
obtained by the issuer of the bonds (see Note (c) to portfolio). Such
insurance coverage continues in force so long as the bonds are outstanding and
the insurer remains in business.
4. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the bonds on the date of an investor's purchase, plus a
sales charge of 5.5% of the public offering price which is equivalent to
approximately 5.820% of the net amount invested.
Distributions to unit holders -
Distributions of net interest income to unit holders are made monthly or semi-
annually. Such income distributions per unit, on an accrual basis, were as
follows:
<TABLE>
<CAPTION>
Type of Year ended May 31,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $44.47 45.41 46.20
Semi-annual 45.01 46.07 47.06
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended May 31,
1999 1998 1997
<S> <C> <C> <C>
Interest income $46.99 47.98 48.74
Expenses (2.19) (2.09) (2.07)
___________________________
Investment income - net 44.80 45.89 46.67
Distributions to unit holders:
Investment income - net (44.74) (45.92) (46.60)
Principal from investment transactions - (17.67) -
Net gain (loss) on investments (14.79) (1.64) (6.91)
___________________________
Total increase (decrease) in net assets (14.73) (19.34) (6.84)
Net assets:
Beginning of the year 738.87 758.21 765.05
___________________________
End of the year $724.14 738.87 758.21
===========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 89
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
FLORIDA TRUST, SERIES 5
PART ONE
Must be Accompanied by Part Two and Part Three
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any jurisdiction to any person to whom it is not
lawful to make such offer in such jurisdiction.
This Prospectus does not contain all the information set forth in the
registration statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
FLORIDA TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated May 28, 1999 PART ONE AND PART TWO
Federal Tax Status of Unit Holders
At the respective times of issuance of the Bonds, opinions relating to
the validity thereof and to the exclusion of interest thereon from
Federal gross income were rendered by bond counsel to the respective
issuing authorities. In addition, with respect to State Trusts, 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, Chapman and Cutler, nor any of the Special Counsel
to the Fund for State tax matters have made any special review for the
Fund of the proceedings relating to the issuance of the Bonds or of the
bases for the opinions rendered in connection therewith. 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 prior to the date on
which interest is determined to be taxable.
Gain realized on the sale or redemption of the Bonds by the Trustee or
of a Unit by a Unit holder is includable in gross income for Federal
income tax purposes and may be includable in gross income for state tax
purposes. (Such gain does not include any amounts received in respect of
accrued interest or accrued original issue discount, if any.) If a Bond
is acquired with accrued interest, that portion of the price paid for
the accrued interest is added to the tax basis of the Bond. When this
accrued interest is received, it is treated as a return of capital and
reduces the tax basis of the Bond. If a Bond is purchased for a premium,
the amount of the premium is added to the tax basis of the Bond. Bond
premium is amortized over the remaining term of the Bond, and the tax
basis of the Bond is reduced each tax year by the amount of the premium
amortized in that tax year.
For purposes of the following opinions, it is assumed that each asset of
the Trust is debt the interest on which is excluded from gross income
for Federal income tax purposes. At the time of the closing for each
Trust, Chapman and Cutler, Counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
(1) the Trusts are not associations taxable as corporations for
Federal income tax purposes and interest and accrued original issue
discount on Bonds which is excludable from gross income under the
Internal Revenue Code of 1986 (the "Code") will retain its status for
Federal income tax purposes, when received by the Trusts and distributed
to a Unit holder; however, such interest may be taken into account in
computing the alternative minimum tax and the additional tax on branches
of foreign corporations and the environmental tax if extended by
Congress (the "Superfund Tax"), as noted below. See "Certain Tax Matters
Applicable to Corporate Unit Holders";
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
(2) each Unit holder is considered to be the owner of a pro rata
portion of each asset of the respective Trust under subpart E,
subchapter J of chapter 1 of the Code and will have a taxable event when
the Trust disposes of a Bond, or when the Unit holder redeems or sells
his or her Units. If the Unit holder disposes of a Unit, he or she is
deemed thereby to have disposed of his or her entire pro rata interest
in all assets of the Trust involved including his or her pro rata
portion of all the Bonds represented by the Unit. The Taxpayer Relief
Act of 1997 (the "1997 Act") includes provisions that treat certain
transactions designed to reduce or eliminate risk of loss and
opportunities for gain (e.g. short sales, offsetting notional principal
contracts, futures or forward contracts or similar transactions) as
constructive sales for purposes of recognition of gain (but not loss)
and for purposes of determining the holding period. Unit holders should
consult their own tax advisors with regard to any such constructive sale
rules. Unit holders must reduce the tax basis of their Units for their
share of accrued interest received by the respective Trust, if any, on
Bonds before the date the Trust acquired ownership of the Bonds (and the
amount of this reduction may exceed the amount of accrued interest paid
to the seller) and, consequently, such Unit holders may have an increase
in taxable gain or reduction in capital loss upon the disposition of
such Units. Gain or loss upon the sale or redemption of Units is
measured by comparing the proceeds of such sale or redemption with the
adjusted basis of the Units. If the Trustee disposes of Bonds (whether
by sale, payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with the Unit holder's basis for his or her fractional
interest in the asset disposed of. In the case of a Unit holder who
purchases Units, such basis (before adjustment for accrued original
issue discount and amortized bond premium, if any) is determined by
apportioning the cost of the Units among each of the Trust assets
ratably according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders should consult their own tax
advisors with regard to the calculation of basis. The tax basis
reduction requirements of the Code relating to amortization of bond
premium may, under some circumstances, result in the Unit holder
realizing a taxable gain when his or her Units are sold or redeemed for
an amount equal to or less than his or her original cost; and
(3) any insurance proceeds paid under individual policies obtained by
issuers of Bonds which represent maturing interest on defaulted Bonds
held by the Trustee will be excludable from Federal gross income if, and
to the same extent as, such interest would have been so excludable if
paid in the normal course by the issuer of the defaulted Bonds 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.
Sections 1288 and 1272 of the Code provide a complex set of rules
governing the accrual of original issue discount. These rules provide
that original issue discount accrues either on the basis of a constant
compound interest rate or ratably over the term of the Bond, depending
on the date the Bond was issued. In addition, special rules apply if the
purchase price of a Bond exceeds the original issue price plus the
amount of original issue discount which would have previously accrued
based upon its issue price (its "adjusted issue price") to prior owners.
If a Bond is acquired with accrued interest, that portion of the price
paid for the accrued interest is added to the tax basis of the Bond.
When this accrued interest is received, it is treated as a return of
capital and reduces the tax basis of the Bond. If a Bond is purchased
for a premium, the amount of the premium is added to the tax basis of
the Bond. Bond premium is amortized over the remaining term of the Bond,
and the tax basis of the Bond is reduced each tax year by the amount of
the premium amortized in that tax year. The application of these rules
will also vary depending on the value of the Bond on the date a Unit
holder acquires his or her Unit, and the price the Unit holder pays for
his or her Unit. Unit holders should consult their tax advisors
regarding these rules and their application. See "Portfolio" appearing
in Part One for each Trust for information relating to Bonds, if any,
issued at an original issue discount.
The Revenue Reconciliation Act of 1993 (the "1993 Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
Page 2
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to statutory de minimis rule. Market discount can arise based on
the price a Trust pays for Bonds or the price a Unit holder pays for his
or her Units. Under the 1993 Tax Act, accretion of market discount is
taxable as ordinary income; under prior law the accretion had been
treated as capital gain. Market discount that accretes while a Trust
holds a Bond would be recognized as ordinary income by the Unit holders
when principal payments are received on the Bond, upon sale or at
redemption (including early redemption) or upon the sale or redemption
of his or her Units, unless a Unit holder elects to include market
discount in taxable income as it accrues. The market discount rules are
complex and Unit holders should consult their tax advisors regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
Also, under Section 265 of the Code, certain financial institutions that
acquire Units generally would not be able to deduct any of the interest
expense attributable to ownership of Units. Legislative proposals have
been made that would extend the financial institution rules to certain
other corporations including securities dealers and other financial
intermediaries. Investors with questions regarding these issues should
consult with their tax advisors.
In the case of certain of the Bonds in a Trust, the opinions of bond
counsel indicate that interest on such Bonds received by a "substantial
user" of the facilities being financed with the proceeds of these Bonds,
or persons related thereto, for periods while such Bonds are held by
such a user or related person, will not be excludable from Federal gross
income, although interest on such Bonds received by others would be
excludable from Federal gross income. "Substantial user" and "related
person" are defined under the Code and U.S. Treasury Regulations. Any
person who believes he or she may be a substantial user or related
person as so defined should contact his or her tax advisor.
ALL STATEMENTS OF LAW IN THE PROSPECTUS CONCERNING EXCLUSION FROM GROSS
INCOME FOR FEDERAL, STATE OR OTHER TAX PURPOSES ARE THE OPINIONS OF
COUNSEL AND ARE TO BE SO CONSTRUED.
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 are rendered by bond counsel to the respective
issuing authorities. Neither the Sponsor nor Chapman and Cutler has made
any special review for the Fund of the proceedings relating to the
issuance of the Bonds or of the basis for such opinions.
In general, Section 86 of the Code provides that 50% of Social Security
benefits are includable in gross income to the extent that the sum of
"modified adjusted gross income" plus 50% of the Social Security
benefits received exceeds the "base amount." The base amount is $25,000
for unmarried taxpayers, $32,000 for married taxpayers filing a joint
return and zero for married taxpayers who do not live apart at all times
during the taxable year and who file separate returns. Modified adjusted
gross income is adjusted gross income determined without regard to
certain otherwise allowable deductions and exclusions from gross income
and by including tax-exempt interest. To the extent that Social Security
benefits are includible in gross income, they will be treated as any
other item of gross income.
In addition, under the 1993 Tax Act, for taxable years beginning after
December 31 1993, up to 85% of Social Security benefits are includible
in gross income to the extent that the sum of "modified adjusted gross
income" plus 50% of Social Security benefits received exceeds an
"adjusted base amount." The adjusted base amount is $34,000 for
unmarried taxpayers, $44,000 for married taxpayers filing a joint
return, and zero for married taxpayers who do not live apart at all
times during the taxable year and who file separate returns.
Although tax-exempt interest is included in modified adjusted gross
income solely for the purpose of determining what portion, if any, of
Social Security benefits will be included in gross income, no tax-exempt
interest, including that received from a Trust, will be subject to tax.
A taxpayer whose adjusted gross income already exceeds the base amount
or the adjusted base amount must include 50% or 85%, respectively, of
his or her Social Security benefits in gross income whether or not he or
Page 3
she receives any tax-exempt interest. A taxpayer whose modified adjusted
gross income (after inclusion of tax-exempt interest) does not exceed
the base amount need not include any Social Security benefits in gross
income.
For purposes of computing the alternative minimum tax for individuals
and corporations and the Superfund Tax for corporations, interest on
certain private activity bonds (which includes most industrial and
housing revenue bonds) issued on or after August 8, 1986 is included as
an item of tax preference. EXCEPT AS OTHERWISE NOTED IN PART ONE FOR
CERTAIN TRUSTS, THE TRUSTS DO NOT INCLUDE ANY SUCH PRIVATE ACTIVITY
BONDS ISSUED ON OR AFTER THAT DATE.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized from property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). 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. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes of determining the
holding period of the unit. Capital gains realized from assets held for
one year or less are taxed at the same rates as ordinary income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
Under the Code, taxpayers must disclose to the Internal Revenue Service
the amount of tax-exempt interest earned during the year.
Certain Tax Matters Applicable to Corporate Unit Holders. In the case of
certain corporations, the alternative minimum tax and the Superfund Tax
for taxable years beginning after December 31, 1986 depend upon the
corporation's alternative minimum taxable income ("AMTI"), which is the
corporation's taxable income with certain adjustments. One of the
adjustment items used in computing AMTI of a corporation (other than an
S Corporation, Regulated Investment Company, Real Estate Investment
Trust, REMIC or FASIT) 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 Trusts. Under
current Code provisions, the Superfund Tax does not apply to tax years
beginning on or after January 1, 1996. Legislative proposals have been
introduced that would reinstate the Superfund Tax for taxable years
beginning after December 31, 1997 and before January 1, 2009. Under the
provisions of Section 884 of the Code, a branch profits tax is levied on
the "effectively connected earnings and profits" of certain foreign
corporations which include tax-exempt interest such as interest on the
Bonds in the Trust. Unit holders should consult their tax advisors with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
Ownership of the Units may result in collateral federal income tax
consequences to certain taxpayers, 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
taxpayers who may be deemed to have incurred (or continued) indebtedness
to purchase or carry tax-exempt obligations. Prospective investors
should consult their tax advisors as to the applicability of any such
collateral consequences.
At the time of the closing, Winston & Strawn (previously named Cole &
Deitz), Special Counsel to Series 4-125 of the Fund for New York tax
matters, rendered an opinion under then existing income tax laws of the
State and City of New York, substantially to the effect that each Trust
in Series 4-125 of the Fund is not an association taxable as a
corporation and the income of each Trust in Series 4-125 of the Fund
will be treated as the income of the Unit holder in the same manner as
for Federal income tax purposes (subject to differences in accounting
for discount and premium to the extent the State and/or City of New York
do not conform to current Federal law).
At the time of the closing, Carter, Ledyard & Milburn, Special Counsel
to the Fund for New York tax matters for Series 126 and subsequent
Series of the Fund, rendered an opinion under then existing income tax
Page 4
laws of the State and City of New York, substantially to the effect that
each Trust will not constitute an association taxable as a corporation
under New York law, and accordingly will not be subject to the New York
State franchise tax or the New York City general corporation tax. Under
the income tax laws of the State and City of New York, the income of
each Trust will be considered the income of the holders of the Units.
All statements in the Prospectus concerning exclusion from gross income
for Federal, state or other are the opinions of Counsel and are to be so
construed.
Florida Tax Status of Unit Holders
The Internal Revenue Service Restructuring and Reform Act of 1998
provides that for taxpayers other than corporations, net capital gain
(which is defined as net long-term capital gain over net short-term
capital loss for the taxable year) realized from property (with certain
exclusions) is subject to a maximum marginal stated tax rate of 20% (10%
in the case of certain taxpayers in the lowest tax bracket). 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. The date on which a Unit is acquired (i.e., the "trade
date") is excluded for purposes for determining the holding period of
the Unit. Capital gains realized from assets held for one year or less
are taxed at the same rates as ordinary income.
The Bonds were accompanied by opinions of Bond Counsel to the respective
issuers thereof to the effect that the Bonds were exempt from the
Florida intangibles tax. Neither the Sponsor nor its counsel have
independently reviewed such opinions or examined the Bonds to be
deposited in and held by a Florida Trust and have assumed the
correctness as of the date of deposit of the opinions of Bond Counsel.
"Non-Corporate Unit holder" means a Unit holder of the Florida Trust who
is an individual not subject to the Florida state income tax on
corporations under Chapter 220, Florida Statutes and "Corporate Unit
holder" means a Unit holder of the Florida Trust that is a corporation,
bank or savings association or other entity subject to Florida state
income tax on corporations or franchise tax imposed on banks or savings
associations under Chapter 220, Florida Statutes.
At the time of the closing for each Florida Trust, Chapman and Cutler,
Special Counsel to the Fund for Florida tax matters, rendered an opinion
under then existing Florida income tax law applicable to taxpayers whose
income is subject to Florida income taxation substantially to the effect
that:
For Florida state income tax purposes, the Florida Trust will not be
subject to the Florida income tax imposed by Chapter 220, Florida
Statutes.
Because Florida does not impose an income tax on individuals, Non-
Corporate Unit holders residing in Florida will not be subject to any
Florida income taxation on income realized by the Florida Trust. Any
amounts paid to the Florida Trust or to Non-Corporate Unit holders under
an insurance policy issued to the Florida Trust or the Sponsor which
represent maturing interest on defaulted obligations held by the Trustee
will not be subject to the Florida income tax imposed by Chapter 220,
Florida Statutes.
Corporate Unit holders with commercial domiciles in Florida will be
subject to Florida income or franchise taxation on income realized by
the Florida Trust and on payments of interest pursuant to any insurance
policy to the extent such income constitutes "non-business income" as
defined by Chapter 220 or is otherwise allocable to Florida under
Chapter 220. Other Corporate Unit holders will be subject to Florida
income or franchise taxation on income realized by the Florida Trust (or
on payments of interest pursuant to any insurance policy) only to the
extent that the income realized does not constitute "non-business
income" as defined by Chapter 220 and if such income is otherwise
allocable to Florida under Chapter 220.
Units will be subject to Florida estate tax only if held by Florida
residents. However, the Florida estate tax is limited to the amount of
the credit for state death taxes provided for in Section 2011 of the
Internal Revenue Code.
Neither the Bonds nor the Units will be subject to the Florida ad
valorem property tax, the Florida intangible personal property tax or
the Florida sales or use tax.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Florida law. Ownership of the Units may
result in collateral Florida tax consequences to certain taxpayers.
Page 5
Prospective investors should consult their tax advisors as to the
applicability of any such collateral consequences.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER
TAX MATTERS, SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?"
Certain Considerations
Economic Outlook. In 1980, Florida was the seventh most populous state
in the U.S. The state has grown dramatically since then and as of April
1, 1997, ranks fourth with an estimated population of 14.7 million.
Florida's attraction, as both a growth and retirement state, has kept
net migration at an average of 224,240 new residents a year from 1987
through 1996, with a low of 138,000 in 1992. The U.S. average population
increase since 1984 is about 1% annually, while Florida's average annual
rate of increase is about 1.8%. Florida continues to be one of the
fastest growing of the large states. This strong population growth is
one reason the state's economy is performing better than the nation as a
whole. In addition to attracting senior citizens to Florida as a place
for retirement, the state is also recognized as attracting a significant
number of working age individuals. Since 1987, the prime working age
population (18-44) has grown at an average annual rate of more than
2.0%. The share of Florida's total working age population (18-64) to
total state population is approximately 60%. This share is not expected
to change appreciably into the twenty-first century.
The state's personal income has been growing strongly the last several
years and has generally outperformed both the U.S. as a whole and the
southeast in particular, according to the U.S. Department of Commerce
and the Florida Consensus Economic Estimating Conference. This is
because Florida's population has been growing at a very strong pace, and
since the early 1970s, the state's economy has diversified so as to
provide a broader economic base. As a result, Florida's real per capita
personal income has tracked closely with the national average and has
surpassed the southeast. From 1992 to 1997, Florida's total nominal
personal income grew by 36.6% and per capita income expanded
approximately 25.9%. For the nation, total and per capita personal
income increased by 30.2% and 24.1%, respectively.
Because Florida has a proportionately greater retirement age population,
property income (dividends, interest and rent) and transfer payments
(Social Security and pension benefits, among other sources of income)
are relatively more important sources of income. Transfer payments are
typically less sensitive to the business cycle than employment income
and, therefore, act as stabilizing forces in weak economic periods.
Personal income is frequently used to make comparisons among the states.
However, using personal income to compare Florida to other states can be
misleading, because Florida's personal income is systematically
underestimated. Current contributions by employers to pension plans are
included in personal income, while payments from pension plans are
excluded to avoid double accounting. Because Florida retirees are more
likely to be collecting on benefits earned in another state, Florida
personal income is underestimated as a result.
The state's per capita personal income in 1997 of $24,795 was slightly
below the national average of $25,298 and significantly ahead of that
for the southeast United States, which was $22,776. Real personal income
in the state is forecasted to increase 4.9% in 1998-99 and 3.5% in 1999-
00. Real personal income per capita in the state is projected to grow at
3.1% in 1998-99 and 1.8% in 1999-00. The Florida economy appears to be
growing in line with, but stronger than, the U.S. economy and is
expected to experience steady if unspectacular growth over the next
couple years.
Since 1991, the state's population has increased an estimated 11.5%,
while the number of employed persons increased 13.3%. In that same
period, Florida's total non-farm employment has grown approximately
21.2%. Since 1991, the non-farm job creation rate in the state is more
than twice that of the nation as a whole. Contributing to the state's
rapid rate of growth in employment and income is international trade.
Overall changes to its economy have also contributed to the state's
strong performance. The state is gradually becoming less dependent on
employment related to construction, agriculture or manufacturing and
more dependent on employment related to trade and services. Presently,
services constitute 34.9% and trade 25.6% of the state's total non-farm
jobs. While the southeast and the nation have a greater proportion of
manufacturing jobs, which tend to pay higher wages, service jobs tend to
be less sensitive to swings in the business cycle. The state has a
concentration of manufacturing jobs in high-tech and high value-added
Page 6
sectors, such as electrical and electronic equipment, as well as
printing and publishing. These types of manufacturing jobs tend to be
less cyclical. The state's unemployment rate throughout the 1980's
tracked below or about the same as the nation's. In the 1990s, the trend
was reversed, until 1995, when the state's unemployment rate again
tracked below the nation's. According to the U.S. Department of
Commerce, the Florida Department of Labor and Employment Security, and
the Florida Consensus Economic Estimating Conference (together the
"Organization") the state's unemployment rate was 4.8% during 1997,
while the national average was 4.9%. As of October 1997, the
Organization estimates that the unemployment rate will be 4.5% in 1998-
99 and 4.7% in 1999-00.
The state's economy is expected to grow at a moderate rate along with
the nation, but is expected to outperform the nation as a whole. Total
non-farm employment in Florida is expected to increase 3.4% in 1998-99
and 2.9% in 1999-00. Trade and services, the two largest, account for
more than half of the total non-farm employment. Employment in the
service sectors should experience an increase of 5.5% in 1998-99, while
growing 4.4% in 1999-00. Trade is expected to expand 2.8% in 1999 and
2.8% in 2000. The service sector is now the state's largest employment
category.
The state's economy has in the past been highly dependent on the
construction industry and construction related manufacturing. This
dependency has declined in recent years and continues to do so as a
result of continued diversification of the state's economy. For example,
in 1980, total contract construction employment as a share of total non-
farm employment was about 7.5%, and in 1997, the share had edged
downward to 5.7%. This trend is expected to continue as the state's
economy continues to diversify. Florida, nevertheless, has a dynamic
construction industry, with single and multi-family housing starts
accounting for about 9.2% of total U.S. housing starts in 1997 while the
state's population is 5.5% of the nation's. Florida's housing starts in
1997 were 132,813.
A driving force behind the state's construction industry has been the
state's rapid rate of population growth. Although the state currently is
the fourth most populous state, its annual population growth is now
projected to slow somewhat as the number of people moving into the state
is expected to average 257,000 a year throughout the 1990s. This
population trend should provide fuel for business and home builders to
keep construction activity lively in Florida in the next few years.
However, other factors do influence the level of construction in the
state. For example, federal tax reform in 1986 and other changes to the
federal income tax code have eliminated tax deductions for owners of
more than two residential real estate properties and have lengthened
depreciation schedules on investment and commercial properties. Economic
growth and existing supplies of homes and buildings also contribute to
the level of construction in the state.
Single and multi-family housing starts in 1989-99 are projected to reach
a combined level of 144,000, decreasing slightly to 143,000 next year.
Total construction expenditures are forecasted to increase 8.6% this
year and increase 2.5% next year.
Tourism is one of state's most important industries. Approximately 47
million tourists visited the state in 1997, as reported by the Florida
Department of Commerce. In terms of business activities and state tax
revenues, tourists in Florida in 1996 represented an estimated 4.8
million additional residents. Visitors to the state tend to arrive
slightly more by air than by auto. The state's tourist industry over the
years has become more sophisticated, attracting visitors year-round and,
to a degree, reducing its seasonality. Tourist arrivals are forecasted
to increase by 2.0% in 1998-99 and 1.7% the next fiscal year. Tourist
arrivals to Florida by air are expected to increase by 4.1% this year
and increase by 3.9% next year, while arrivals by car are expected to
increase by 0.6% this year and decrease 1.0% next year. By the end of
the state's current fiscal year, 49.7 million domestic and international
tourists are expected to have visited the state. In 1990-00, tourist
arrivals should approximate 50.6 million.
Revenues and Expenditures. Estimated fiscal year 1998-99 General Revenue
plus Working Capital and Budget Stabilization funds available to the
state total $19.46 billion, a 5.1% increase over 1997-98. Of the total
General Revenue plus Working Capital and Budget Stabilization funds
available to the state, $17.69 billion is Estimated Revenues
representing an increase of 4.4% over the previous year's Estimated
Revenues. With effective General Revenues plus Working Capital Fund and
Budget Stabilization appropriations at $18.19 billion, including a
$100.9 million transfer to the Budget Stabilization Fund, unencumbered
reserves at the end of 1998-99 are estimated at $1.38 billion. Estimated
fiscal year 1999-00 General Revenue plus Working Capital and Budget
Stabilization funds available total $19.92 billion, a 2.4% increase over
Page 7
1998-99. The $18.39 billion in Estimated Revenues represents an increase
of 3.9% over the previous year's Estimated Revenues.
In fiscal year 1996-97, approximately 67% of the state's total direct
revenue to its three operating funds were derived from state taxes and
fees, with Federal grants and other special revenue accounting for the
balance. State sales and use tax, corporate income tax, intangible
personal property tax, beverage tax and estate tax amounted to 68%, 8%,
4%, 3% and 3%, respectively, of total General Revenue Funds available
during fiscal 1996-97. In that same year, expenditures for education,
health and welfare, and public safety amounted to approximately 53%, 26%
and 14%, respectively, of total expenditures from the General Revenue
Fund.
The state's sales and use tax (6%) currently accounts for the state's
single largest source of tax receipts. Slightly less than 10% of the
state's sales and use tax is designated for local governments and is
distributed to the respective counties in which it is collected for use
by the counties and the municipalities therein. In addition to this
distribution, local government may (by referendum) assess a 0.5% or a
1.0% discretionary sales surtax within their county. Proceeds from this
local option sales tax are earmarked for funding local infrastructure
programs and acquiring land for public recreation or conservation or
protection of natural resources as provided under applicable Florida
law. Certain charter counties have other taxing powers in addition, and
non-consolidated counties with a population in excess of 800,000 may
levy a local option sales tax to fund indigent health care. It alone
cannot exceed 0.5% and, when combined with the infrastructure surtax,
cannot exceed 1.0%. For the fiscal year ended June 30, 1997, sales and
use tax receipts (exclusive of the tax on gasoline and special fuels)
totalled $12.1 billion, an increase of 5.5% over fiscal year 1995-96.
The second largest source of state tax receipts is the tax on motor
fuels. However, these revenues are almost entirely dedicated trust funds
for specific purposes and are not included in the state's General
Revenue Fund.
The state imposes an alcoholic beverage, wholesale tax (excise tax) on
beer, wine and liquor. This tax is one of the state's major tax sources,
with revenues totalling $447.2 million in the fiscal year ending June
30, 1997. Ninety-eight percent of the revenues collected from this tax
are deposited into the state's General Revenue Fund.
The state imposes a corporate income tax. All receipts of the corporate
income tax are credited to the General Revenue Fund. For the fiscal year
ended June 30, 1997, receipts from this source were $1.36 billion, an
increase of 17.2% from fiscal year 1995-96.
The state imposes a documentary stamp tax on deeds and other documents
relating to realty, corporate shares, bonds, certificates of
indebtedness, promissory notes, wage assignments and retail charge
accounts. The documentary stamp tax collections totalled $844.2 million
during fiscal year 1996-97, an 8.9% increase from the previous fiscal
year. For fiscal year 1996-97, 62.63% of these taxes were deposited to
the General Revenue Fund.
The state imposes a gross receipts tax on electric, natural gas and
telecommunications services. All gross receipts utilities tax
collections are credited to the state's Public Education Capital Outlay
and Debt Service Trust Fund. In fiscal year 1996-97, this amounted to
$575.7 million, an increase of 6.0% over the previous fiscal year.
The state imposes an intangible personal property tax on stocks, bonds
(including bonds secured by liens in Florida real property) notes,
governmental leaseholds and certain other intangibles not secured by a
lien on Florida real property. The annual rate of tax is 2 mils (a mil
is $1.00 of tax per $1,000.00 of property value). Second, the state
imposes a non-recurring 2 mil tax on mortgage and other obligations
secured by liens on Florida real property. In fiscal year 1996-97, total
intangible personal property tax collections were $952.4 million, a 6.3%
increase from the prior year. Of the net tax proceeds, 66.5% are
distributed to the General Revenue Fund.
The state imposes an estate tax on the estate of a decedent for the
privilege of transferring property at death. All receipts of the estate
tax are credited to the General Revenue Fund. For the fiscal year that
ended June 30, 1997, receipts from this source were $546.9 million, an
increase of 30% from fiscal year 1995-96.
The state began its own lottery in 1988. State law requires that lottery
revenues be distributed 50% to the public in prizes, 38.0% for use in
Page 8
enhancing education and the balance of 12.0% for costs of administering
the lottery. Fiscal year 1996-97 lottery ticket sales totalled $2.09
billion, providing education with approximately $792.3 million.
Debt Management. At the end of fiscal 1997, approximately $7.89 billion
in principal amount of debt secured by the full faith and credit of the
state was outstanding. In addition, since July 1, 1997, the state issued
about $1.65 billion in principal amount of full faith and credit bonds.
The State Constitution and statutes mandate that the state budget, as a
whole, and each separate fund within the state budget, be kept in
balance from currently available revenues each fiscal year. If the
Governor or Comptroller believes a deficit will occur in any state fund,
by statute, he must certify his opinion to the Administrative
Commission, which then is authorized to reduce all state agency budgets
and releases by a sufficient amount to prevent a deficit in any fund.
Additionally, the State Constitution prohibits issuance of state
obligations to fund state operations.
Litigation. Currently under litigation are several issues relating to
state actions or state taxes that put at risk a portion of General
Revenue Fund monies. There is no assurance that any of such matters,
individually or in the aggregate, will not have a material adverse
affect on the state's financial position. A brief summary of these
matters follows.
Nathan M. Hameroff, M.D., et al. v. Agency for Healthcare
Administration, et al. The plaintiff challenged the constitutionality of
Florida's Public Medical Assistance Trust Fund annual assessment on net
operating revenue of free standing outpatient facilities offering
sophisticated radiology services. The trial has not been scheduled. If
the state is unsuccessful in its action, the potential refund liability
could approximate $70 million.
The Florida Casualty Insurance Risk Management Trust Fund has deficit
retained earnings of approximately $567 million. These represent long
term liabilities of the state as a whole. These liabilities include
claims pertaining to state employee Workers' Compensation, federal civil
rights and general and automotive liability.
Ratings. The state maintains a bond rating of Aa, AA, and AA from
Moody's Investors Service, Standard & Poor's Corporation and Fitch,
respectively, on the majority of its general obligation bonds, although
the rating of a particular series of revenue bonds relates primarily to
the project, facility, or other revenue source from which such series
derives funds for repayment. While these ratings and some of the
information presented above indicate that the state is in satisfactory
economic health, there can be no assurance that there will not be a
decline in economic conditions or that particular Florida Municipal
Obligations held by a Trust will not be adversely affected by any such
changes.
The sources for the information presented above include official
statements and financial statements of the State of Florida. While the
Sponsor has not independently verified this information, the Sponsor has
no reason to believe that the information is not correct in all material
respects.
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 Florida Trusts 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 Florida Trusts to pay interest on or principal
of the Bonds.
Page 9
Florida Trust Series
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 10
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 89, certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on September 30, 1999.
THE FIRST TRUST COMBINED SERIES 89
(Registrant)
ByNIKE SECURITIES L.P.
(Depositor)
ByRobert M. Porcellino
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
Robert D. Van Kampen Director of )
Nike Securities )
Corporation, ) September 30, 1999
the General Partner )
of Nike Securities L.P. )
)
David J. Allen Director of Nike ) Robert M. Porcellino
Securities Corporation, ) Attorney-in-Fact**
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 the Amendment No. 1 to Form S-6 of The First Trust
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated September 7, 1999 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Combined Series dated
September 28, 1999.
ERNST & YOUNG LLP
Chicago, Illinois
September 27, 1999
