File No. 33-38910
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 8
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 132
(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 : June 30, 1999
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
Pursuant to Rule 24f-2 under the Investment Company Act of
1940, the issuer has registered an indefinite amount of
securities. A 24f-2 Notice for the offering was last filed on
May 26, 1999.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
3,002 UNITS
PROSPECTUS
Part One
Dated June 29, 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 Colorado State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State Colorado Trust,
Series 9 (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 Colorado, 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 Colorado and local
income taxes under existing law. At May 17, 1999, each Unit represented a
1/3,002 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 3.7% of the Public Offering Price (3.842%
of the amount invested). At May 17, 1999, the Public Offering Price per Unit
was $371.10 plus net interest accrued to date of settlement (three business
days after such date) of $4.01 and $16.03 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 6.03% per annum on May 17, 1999, and 5.92% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.99% per annum on May 17, 1999, and 2.87% 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 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $1,135,000
Number of Units 3,002
Fractional Undivided Interest in the Trust per Unit 1/3,002
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,072,837
Aggregate Value of Bonds per Unit $357.37
Sales Charge 3.842% (3.7% of Public Offering Price) $13.73
Public Offering Price per Unit $371.10*
Redemption Price and Sponsor's Repurchase Price per Unit
($13.73 less than the Public Offering Price per Unit) $357.37*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $619,000
</TABLE>
Date Trust Established April 17, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $929 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 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $23.82 $23.82
Less: Estimated Annual Expense $1.86 $1.46
Estimated Net Annual Interest Income $21.96 $22.36
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $21.96 $22.36
Divided by 12 and 2, Respectively $1.83 $11.18
Estimated Daily Rate of Net Interest Accrual $.0610 $.0621
Estimated Current Return Based on Public
Offering Price 5.92% 6.03%
Estimated Long-Term Return Based on Public
Offering Price 2.87% 2.99%
</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 132, The First Trust of Insured Municipal
Bonds - Multi-State, Colorado Trust, Series 9
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 132, The First
Trust of Insured Municipal Bonds - Multi-State, Colorado Trust, Series 9 as of
February 28, 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 February 28, 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 132, The First Trust of Insured Municipal Bonds - Multi-State, Colorado
Trust, Series 9 at February 28, 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
June 4, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,518,812)
(Note 1) $1,592,006
Accrued interest 22,224
Cash 4,211
__________
1,618,441
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 13,451
Accrued liabilities 21
__________
13,472
__________
Net assets, applicable to 3,022 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,518,812
Net unrealized appreciation (Note 2) 73,194
Distributable funds 12,963
__________
$1,604,969
==========
Net asset value per unit $531.09
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
PORTFOLIO - See notes to portfolio.
February 28, 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>
Adams County, Colorado, Pollution Control Refunding
Revenue, 1986 Series A (Public Service 1999 @ 100
Company of Colorado Project) (FGIC Insured) (c) 7.375% 11/01/2009 2007 @ 100 S.F. AAA $480,000 480,221
Colorado Health Facilities Authority, Insured
Hospital Revenue (PSL Healthcare System 2001 @ 102
Project), Series 1991A (FSA Insured) (c) (e) 7.25 2/15/2016 2007 @ 100 S.F. AAA 500,000 542,445
Colorado Housing Finance Authority, Single Family
Revenue, 1985 Series A (MBIA Insured) (c) -(d) 9/01/2014 2005 @ 35.753 S.F. AAA 140,000 28,263
Pitkin County, Colorado, General Obligation Housing
and Refunding, Series 1991 (AMBAC Insured) (c) 7.05 12/01/2011 2001 @ 100 AAA 500,000 541,077
______________________
$1,620,000 1,592,006
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
NOTES TO PORTFOLIO
February 28, 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 91% of the aggregate
principal amount of the Bonds in the Trust is subject to call within
three years.
(b) The ratings shown are those effective at February 28, 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 April 3, 1985 at a price of 4.141% 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 Colorado.
One of the Bonds in the Trust, representing approximately 31% of the
aggregate principal amount of the Bonds in the Trust, is a general
obligation of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Health Care, 1; Electric, 1;
and Single Family Housing, 1. Approximately 31%,30% and 9% of the
aggregate principal amount of the Bonds consist of health care revenue
bonds, electric revenue bonds and single family residential mortgage
revenue bonds, respectively. Each of three Bond issues represents 10%
or more of the aggregate principal amount of the Bonds in the Trust or a
total of approximately 91%. The two largest such issues represent
approximately 31% each.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $130,520 193,981 209,446
Expenses:
Trustee's fees and related expenses (3,462) (3,810) (4,063)
Evaluator's fees (929) (929) (929)
Supervisory fees (762) (771) (789)
________________________________
Investment income - net 125,367 188,471 203,665
Net gain (loss) on investments:
Net realized gain (loss) (51,289) 4,842 1,470
Change in net unrealized appreciation
or depreciation 16,714 (54,771) (75,356)
________________________________
(34,575) (49,929) (73,886)
________________________________
Net increase in net assets resulting
from operations $90,792 138,542 129,779
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $125,367 188,471 203,665
Net realized gain (loss) on investments (51,289) 4,842 1,470
Change in net unrealized appreciation
or depreciation on investments 16,714 (54,771) (75,356)
__________________________________
90,792 138,542 129,779
Distributions to unit holders:
Investment income - net (137,478) (190,802) (216,868)
Principal from investment transactions (1,045,607) (255,757) -
__________________________________
(1,183,085) (446,559) (216,868)
Unit redemptions (25, 40 and 69 in 1999,
1998 and 1997, respectively):
Principal portion (16,442) (35,450) (67,914)
Net interest accrued (390) (691) (1,122)
__________________________________
(16,832) (36,141) (69,036)
__________________________________
Total increase (decrease) in net assets (1,109,125) (344,158) (156,125)
Net assets:
At the beginning of the year 2,714,094 3,058,252 3,214,377
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $12,963, $30,812
and $33,754 at February 28, 1999,
1998 and 1997, respectively) $1,604,969 2,714,094 3,058,252
==================================
Trust units outstanding at the end of
the year 3,022 3,047 3,087
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
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, April 17, 1991. 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 $929 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 February 28, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $85,751
Unrealized depreciation (12,557)
________
$73,194
========
</TABLE>
<PAGE>
3. Insurance
All issues of bonds in the portfolio are insured under insurance 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 February 28,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $45.03 61.64 69.09
Semi-annual 45.43 62.30 69.74
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended Feb. 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $42.98 63.10 67.00
Expenses (1.70) (1.79) (1.85)
_______________________________
Investment income - net 41.28 61.31 65.15
Distributions to unit holders:
Investment income - net (45.33) (62.16) (69.59)
Principal from investment transactions (344.21) (82.85) -
Net gain (loss) on investments (11.39) (16.25) (23.37)
_______________________________
Total increase (decrease) in
net assets (359.65) (99.95) (27.81)
Net assets:
Beginning of the year 890.74 990.69 1,018.50
_______________________________
End of the year $531.09 890.74 990.69
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
COLORADO TRUST, SERIES 9
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.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
2,217 UNITS
PROSPECTUS
Part One
Dated June 29, 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 Missouri State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Missouri Trust,
Series 12 (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 Missouri, 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 Missouri and local
income taxes under existing law. At May 17, 1999, each Unit represented a
1/2,217 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 5.6% of the Public Offering Price (5.932%
of the amount invested). At May 17, 1999, the Public Offering Price per Unit
was $722.81 plus net interest accrued to date of settlement (three business
days after such date) of $7.69 and $26.63 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 6.30% per annum on May 17, 1999, and 6.22% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 5.50% per annum on May 17, 1999, and 5.42% 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 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $1,430,000
Number of Units 2,217
Fractional Undivided Interest in the Trust per Unit 1/2,217
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,512,719
Aggregate Value of Bonds per Unit $682.33
Sales Charge 5.932% (5.6% of Public Offering Price) $40.48
Public Offering Price per Unit $722.81*
Redemption Price and Sponsor's Repurchase Price per Unit
($40.48 less than the Public Offering Price per Unit) $682.33*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $590,000
</TABLE>
Date Trust Established April 17, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $885 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 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $47.37 $47.37
Less: Estimated Annual Expense $2.44 $1.83
Estimated Net Annual Interest Income $44.93 $45.54
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $44.93 $45.54
Divided by 12 and 2, Respectively $3.74 $22.77
Estimated Daily Rate of Net Interest Accrual $.1248 $.1265
Estimated Current Return Based on Public Offering
Price 6.22% 6.30%
Estimated Long-Term Return Based on Public Offering
Price 5.42% 5.50%
</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 132, The First Trust of Insured Municipal
Bonds - Multi-State, Missouri Trust, Series 12
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 132, The First
Trust of Insured Municipal Bonds - Multi-State, Missouri Trust, Series 12 as
of February 28, 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 February 28, 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 132, The First Trust of Insured Municipal Bonds - Multi-State, Missouri
Trust, Series 12 at February 28, 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
June 4, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,495,592)
(Note 1) $1,520,763
Accrued interest 31,578
__________
1,552,341
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 7,759
Cash overdraft 519
Accrued liabilities 45
__________
8,323
__________
Net assets, applicable to 2,222 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,495,592
Net unrealized appreciation (Note 2) 25,171
Distributable funds 23,255
__________
$1,544,018
==========
Net asset value per unit $694.88
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
PORTFOLIO - See notes to portfolio.
February 28, 1999
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(e) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
The City of Lee's Summit, Missouri, Combined
Waterworks and Sewerage System, Refunding 2002 @ 100
Revenue, Series 1986 (AMBAC Insured) (c) 7.875% 7/01/2015 2012 @ 100 S.F. AAA $465,000 521,306
State Environmental Improvement and Energy
Resources Authority (Missouri), Resources
Improvement Revenue (Union Electric Company
Project), Series 1990A (AMBAC Insured) (c) 7.40 5/01/2020 2000 @ 102 AAA 500,000 528,565
Francis Howell R-III School District, St. Charles
County, Missouri, General Obligation,
Series 1991 (FGIC Insured) (c) (d) 6.90 3/01/2010 2000 @ 102 AAA 10,000 10,392
St. Louis (Missouri), Public School District
Building Corporation Insured Leasehold
Revenue, Series 1991A (St. Louis Public
School District Capital Improvements Project) 1999 @ 101
(FGIC Insured) (c) 6.75 4/01/2009 2003 @ 100 S.F. AAA 455,000 460,500
______________________
$1,430,000 1,520,763
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
NOTES TO PORTFOLIO
February 28, 1999
(a) Shown under this heading are the year in which each issue of Bonds is
initially redeemable and the redemption price in the year. Unless
otherwise indicated, each issue continues to be redeemable at declining
prices thereafter (but not below par value). "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. All of the Bonds in
the Trust are subject to call within four years.
(b) The ratings shown are those effective at February 28, 1999.
(c) Insurance has been obtained by the Bond issuer.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) The Trust consists of four obligations of issuers located in Missouri.
One of the Bonds in the Trust, representing approximately 1% of the
aggregate principal amount of the Bonds in the Trust, is a general
obligation of a governmental entity. The remaining issues are revenue
bonds payable from the income of a specific project or authority and are
divided by purpose of issue as follows: Water and Sewer, 1; University
and School, 1; and Electric, 1. Approximately 35%, 33% and 32% of the
aggregate principal amount of the Bonds consists of electric revenue
bonds, water and sewer revenue bonds and university and school revenue
bonds, respectively. Each of three Bond issues represents 10% or more
of the aggregate principal amount of the Bonds in the Trust or a total
of approximately 99%. The largest such issue represents approximately
35%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $130,453 169,221 178,591
Expenses:
Trustee's fees and related expenses (3,440) (3,830) (4,121)
Evaluator's fees (885) (885) (885)
Supervisory fees (615) (656) (701)
_______________________________
Investment income - net 125,513 163,850 172,884
Net gain (loss) on investments:
Net realized gain (loss) (14,007) (3,138) (43)
Change in net unrealized appreciation
or depreciation (32,907) (29,499) (67,508)
_______________________________
(46,914) (32,637) (67,551)
_______________________________
Net increase in net assets resulting
from operations $78,599 131,213 105,333
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $125,513 163,850 172,884
Net realized gain (loss) on investments (14,007) (3,138) (43)
Change in net unrealized appreciation
or depreciation on investments (32,907) (29,499) (67,508)
__________________________________
78,599 131,213 105,333
Distributions to unit holders:
Investment income - net (133,273) (161,182) (172,780)
Principal from investment transactions (574,192) - (3,385)
__________________________________
(707,465) (161,182) (176,165)
Unit redemptions (237, 167 and 177 in
1999, 1998 and 1997, respectively):
Principal portion (211,056) (160,516) (173,118)
Net interest accrued (3,697) (4,928) (2,310)
__________________________________
(214,753) (165,444) (175,428)
__________________________________
Total increase (decrease) in net assets (843,619) (195,413) (246,260)
Net assets:
At the beginning of the year 2,387,637 2,583,050 2,829,310
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $23,255, $32,612
and $31,524 at February 28, 1999,
1998 and 1997, respectively) $1,544,018 2,387,637 2,583,050
==================================
Trust units outstanding at the end of
the year 2,222 2,459 2,626
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
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, April 17, 1991. 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 $885 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 February 28, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $25,171
Unrealized depreciation -
_______
$25,171
=======
</TABLE>
<PAGE>
3. Insurance
The issuers of all bond issues in the Trust have acquired insurance coverage
which provides for the payment, when due, of all principal and interest on
those bonds (see Note (c) to Portfolio). Such insurance coverage acquired by
an issuer of bonds 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 February 28,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $57.78 63.48 63.61
Semi-annual 58.42 64.22 64.22
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $56.31 65.74 66.24
Expenses (2.13) (2.09) (2.12)
_______________________________
Investment income - net 54.18 63.65 64.12
Distributions to unit holders:
Investment income - net (57.83) (63.73) (64.03)
Principal from investment transactions (252.11) - (1.25)
Net gain (loss) on investments (20.34) (12.58) (24.59)
_______________________________
Total increase (decrease) in
net assets (276.10) (12.66) (25.75)
Net assets:
Beginning of the year 970.98 983.64 1,009.39
_______________________________
End of the year $694.88 970.98 983.64
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 12
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.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
2,410 UNITS
PROSPECTUS
Part One
Dated June 29, 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 Minnesota State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, Minnesota Trust, Series 4 (the "Trust") is a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within the State of
Minnesota, 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 Minnesota State and local income taxes under existing law. At May
17, 1999, each Unit represented a 1/2,410 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 3.0% of the Public Offering Price (3.093%
of the amount invested). At May 17, 1999, the Public Offering Price per Unit
was $624.59 plus net interest accrued to date of settlement (three business
days after such date) of $7.47 and $23.81 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 6.26% per annum on May 17, 1999, and 6.19% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.52% per annum on May 17, 1999, and 2.45% 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 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $1,475,000
Number of Units 2,410
Fractional Undivided Interest in the Trust per Unit 1/2,410
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,460,107
Aggregate Value of Bonds per Unit $605.85
Sales Charge 3.093% (3.0% of Public Offering Price) $18.74
Public Offering Price per Unit $624.59*
Redemption Price and Sponsor's Repurchase Price per Unit
($18.74 less than the Public Offering Price per Unit) $605.85*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $653,000
</TABLE>
Date Trust Established April 17, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $980 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 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $40.81 $40.81
Less: Estimated Annual Expense $2.13 $1.69
Estimated Net Annual Interest Income $38.68 $39.12
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $38.68 $39.12
Divided by 12 and 2, Respectively $3.22 $19.56
Estimated Daily Rate of Net Interest Accrual $.1074 $.1087
Estimated Current Return Based on Public
Offering Price 6.19% 6.26%
Estimated Long-Term Return Based on Public
Offering Price 2.45% 2.52%
</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 132, The First Trust Advantage,
Minnesota Trust, Series 4
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 132, The First
Trust Advantage, Minnesota Trust, Series 4 as of February 28, 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 February 28, 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 132, The First Trust Advantage, Minnesota Trust, Series 4 at February
28, 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
June 4, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,444,367)
(Note 1) $1,531,944
Accrued interest 22,612
Receivable from investment transaction 10,421
__________
1,564,977
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 6,606
Accrued liabilities 51
Cash overdraft 1,699
Unit redemptions payable 9,185
__________
17,541
__________
Net assets, applicable to 2,489 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,444,367
Net unrealized appreciation (Note 2) 87,577
Distributable funds 15,492
__________
$1,547,436
==========
Net asset value per unit $621.71
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
PORTFOLIO - See notes to portfolio.
February 28, 1999
<TABLE>
<CAPTION>
Coupon Standard &
interest Date of Redemption Poor's Principal Market
Name of issuer and title of bond(e) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Minneapolis, Minnesota and The Housing
and Redevelopment Authority of The City of
Saint Paul, Minnesota, Health Care System
Revenue (Health One Obligated Group),
Series 1990C (d) 8.00 % 8/15/2019 2000 @ 102 AAA $470,000 508,239
Minnesota Higher Education Facilities Authority,
Mortgage Revenue, Series Three-C
(University of St. Thomas) (d) 7.125 9/01/2014 2000 @ 101 NR 425,000 449,383
Hospital Facilities Revenue (Methodist Hospital
Project), Series 1990, City of St. Louis Park,
Minnesota (AMBAC Insured) (d) 7.25 7/01/2015 2000 @ 102 AAA 470,000 501,316
Independent School District No. 625, Saint Paul,
Minnesota, Full Faith and Credit
Certificates of Participation - (c) 1/01/2015 AA 160,000 73,006
______________________
$1,525,000 1,531,944
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
PORTFOLIO
February 28, 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). "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 90% of
the aggregate principal amount of the Bonds in the Trust is subject to
call within two years.
(b) The ratings shown are those effective at February 28, 1999 ("NR"
indicates no rating).
(c) 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 February 1, 1990 at a price of 17.580% of their original
principal amount.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) The Trust consists of four obligations of issuers located in Minnesota.
None of the Bonds in the Trust are general obligations of a governmental
entity. All of the issues are revenue bonds payable from the income of
a specific project or authority and are divided by purpose of issue as
follows: University and School, 2; and Health Care, 2. Approximately
62% and 38% of the aggregate principal amount of the Bonds consist of
health care revenue bonds and university and school revenue bonds,
respectively. Each of the Bond issues represents 10% or more of the
aggregate principal amount of the Bonds in the Trust. The two largest
such issues represent approximately 31% each.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $104,243 111,947 153,087
Expenses:
Trustee's fees and related expenses (3,332) (3,570) (4,294)
Evaluator's fees (980) (980) (980)
Supervisory fees (659) (682) (733)
________________________________
Investment income - net 99,252 106,715 147,080
Net gain (loss) on investments:
Net realized gain (loss) 3,195 (578) 13,349
Change in net unrealized appreciation
or depreciation (29,215) (19,093) (68,597)
________________________________
(26,020) (19,671) (55,248)
________________________________
Net increase in net assets resulting
from operations $73,252 87,044 91,832
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $99,272 106,715 147,080
Net realized gain (loss) on investments 3,195 (578) 13,349
Change in net unrealized appreciation
or depreciation on investments (29,215) (19,093) (68,597)
__________________________________
73,252 87,044 91,832
Distributions to unit holders:
Investment income - net (99,478) (112,355) (152,994)
Principal from investment transactions - (18,569) (808,727)
__________________________________
(99,478) (130,924) (961,721)
Unit redemptions (160, 78 and 233 in 1999,
1998 and 1997, respectively):
Principal portion (98,822) (49,334) (199,212)
Net interest accrued (2,076) (826) (5,064)
__________________________________
(100,898) (50,160) (204,276)
__________________________________
Total increase (decrease) in net assets (127,124) (94,040) (1,074,165)
Net assets:
At the beginning of the year 1,674,560 1,768,600 2,842,765
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $15,492, $26,404
and $30,127 at February 28, 1999,
1998 and 1997, respectively) $1,547,436 1,674,560 1,768,600
==================================
Trust units outstanding at the end of
the year 2,489 2,649 2,727
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
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, April 17, 1991. 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 $980 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 February 28, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $87,577
Unrealized depreciation -
_______
$87,577
=======
</TABLE>
<PAGE>
3. 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 February 28,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $39.12 41.41 54.79
Semi-annual 39.58 42.03 55.39
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $41.09 41.51 54.43
Expenses (1.96) (1.94) (2.14)
_______________________________
Investment income - net 39.13 39.57 52.29
Distributions to unit holders:
Investment income - net (39.41) (41.65) (55.04)
Principal from investment transactions - (7.01) (290.20)
Net gain (loss) on investments (10.16) (7.31) (18.89)
_______________________________
Total increase (decrease) in
net assets (10.44) (16.40) (311.84)
Net assets:
Beginning of the year 632.15 648.55 960.39
_______________________________
End of the year $621.71 632.15 648.55
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 4
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.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
2,248 UNITS
PROSPECTUS
Part One
Dated June 29, 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 Nebraska State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, Nebraska Trust, Series 8 (the "Trust") is a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within the State of
Nebraska, 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 Nebraska State and local income taxes under existing law. At May 17,
1999, each Unit represented a 1/2,248 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 3.0% of the Public Offering Price (3.093%
of the amount invested). At May 17, 1999, the Public Offering Price per Unit
was $686.05 plus net interest accrued to date of settlement (three business
days after such date) of $7.22 and $25.04 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 6.25% per annum on May 17, 1999, and 6.18% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 1.48% per annum on May 17, 1999, and 1.41% 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 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $1,430,000
Number of Units 2,248
Fractional Undivided Interest in the Trust per Unit 1/2,248
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,495,972
Aggregate Value of Bonds per Unit $665.47
Sales Charge 3.093% (3.0% of Public Offering Price) $20.58
Public Offering Price per Unit $686.05*
Redemption Price and Sponsor's Repurchase Price per Unit
($20.58 less than the Public Offering Price per Unit) $665.47*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $600,000
</TABLE>
Date Trust Established April 17, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $900 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 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $44.56 $44.56
Less: Estimated Annual Expense $2.15 $1.70
Estimated Net Annual Interest Income $42.41 $42.86
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $42.41 $42.86
Divided by 12 and 2, Respectively $3.53 $21.43
Estimated Daily Rate of Net Interest Accrual $.1178 $.1191
Estimated Current Return Based on Public Offering
Price 6.18% 6.25%
Estimated Long-Term Return Based on Public Offering
Price 1.41% 1.48%
</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 132, The First Trust Advantage,
Nebraska Trust, Series 8
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 132, The First
Trust Advantage, Nebraska Trust, Series 8 as of February 28, 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 February 28, 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 132, The First Trust Advantage, Nebraska Trust, Series 8 at February
28, 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
June 4, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,449,163)
(Note 1) $1,523,604
Accrued interest 30,870
__________
1,554,474
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 7,658
Cash overdraft 1,250
Accrued liabilities 41
__________
8,949
__________
Net assets, applicable to 2,258 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,449,163
Net unrealized appreciation (Note 2) 74,441
Distributable funds 21,921
__________
$1,545,525
==========
Net asset value per unit $684.47
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
PORTFOLIO - See notes to portfolio.
February 28, 1999
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption 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>
City of Lincoln, Nebraska, Water Revenue,
Series 1990 (e) 7.10% 11/01/2008 2000 @ 101 NR $370,000 394,497
Nebraska Investment Finance Authority, Hospital
Revenue (Nebraska Methodist Health
System, Inc.), Series 1991 (MBIA Insured) (e) 7.00 3/01/2006 2001 @ 102 AAA 455,000 493,042
Omaha Public Power District (Nebraska), Electric
System Revenue, 1989, Series A (e) 6.80 2/01/2017 2000 @ 101.5 AA 145,000 151,288
The University of Nebraska Facilities Corporation,
Hospital Revenue, Series 1990A (University of
Nebraska Medical Center Project) (d) (e) 7.00 7/01/2011 2000 @ 101 A1(c) 460,000 484,777
______________________
$1,430,000 1,523,604
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
NOTES TO PORTFOLIO
February 28, 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). "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. All of the Bonds in
the Trust are subject to call within approximately two years.
(b) The ratings shown are those effective at February 28, 1999. All ratings
are by Standard & Poor's Corporation unless otherwise indicated ("NR"
indicates no rating).
(c) Rating by Moody's Investors Service, Inc.
(d) These Bonds were issued at an original issue discount on May 15, 1990 at
a price of 94.728% 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 Nebraska.
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: Water, 1; Electric, 1; and Health Care, 2. Approximately 64%
and 26% of the aggregate principal amount of the Bonds consist of health
care revenue bonds and water revenue bonds, respectively. 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
32%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $104,428 119,381 154,108
Expenses:
Trustee's fees and related expenses (3,033) (3,301) (4,006)
Evaluator's fees (900) (900) (900)
Supervisory fees (611) (646) (708)
_______________________________
Investment income - net 99,884 114,534 148,494
Net gain (loss) on investments:
Net realized gain (loss) 5,962 7,556 14,189
Change in net unrealized appreciation
or depreciation (34,234) (36,832) (57,594)
_______________________________
(28,272) (29,276) (43,405)
_______________________________
Net increase in net assets resulting
from operations $71,612 85,258 105,089
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $99,884 114,534 148,494
Net realized gain (loss) on investments 5,962 7,556 14,189
Change in net unrealized appreciation
or depreciation on investments (34,234) (36,832) (57,594)
__________________________________
71,612 85,258 105,089
Distributions to unit holders:
Investment income - net (98,669) (119,401) (151,183)
Principal from investment transactions - (465,181) -
__________________________________
(98,669) (584,582) (151,183)
Unit redemptions (188, 138 and 246 in 1999,
1998 and 1997, respectively):
Principal portion (127,976) (99,234) (217,136)
Net interest accrued (2,841) (1,749) (4,601)
__________________________________
(130,817) (100,983) (221,737)
__________________________________
Total increase (decrease) in net assets (157,874) (600,307) (267,831)
Net assets:
At the beginning of the year 1,703,399 2,303,706 2,571,537
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $21,921, $15,137 and
$24,207 at February 28, 1999, 1998
and 1997, respectively) $1,545,525 1,703,399 2,303,706
==================================
Trust units outstanding at the end
of the year 2,258 2,446 2,584
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
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, April 17, 1991. 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 $900 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 February 28, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $74,441
Unrealized depreciation -
_______
$74,441
=======
</TABLE>
<PAGE>
3. 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 February 28,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $42.33 46.90 56.05
Semi-annual 42.83 47.59 56.66
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $44.36 47.08 56.81
Expenses (1.93) (1.91) (2.07)
______________________________
Investment income - net 42.43 45.17 54.74
Distributions to unit holders:
Investment income - net (42.35) (47.22) (56.30)
Principal from investment transactions - (181.64) -
Net gain (loss) on investments (12.01) (11.44) (15.58)
______________________________
Total increase (decrease) in
net assets (11.93) (195.13) (17.14)
Net assets:
Beginning of the year 696.40 891.53 908.67
______________________________
End of the year $684.47 696.40 891.53
==============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
NEBRASKA TRUST, SERIES 8
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.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
1,517 UNITS
PROSPECTUS
Part One
Dated June 29, 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 Virginia State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust Advantage, Virginia Trust, Series 5 (the "Trust") is a fixed
portfolio of interest-bearing obligations issued by or on behalf of
municipalities and other governmental authorities within the State of
Virginia, 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 Virginia State and local income taxes under existing law. At May 17,
1999, each Unit represented a 1/1,517 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 3.0% of the Public Offering Price (3.093%
of the amount invested). At May 17, 1999, the Public Offering Price per Unit
was $980.98 plus net interest accrued to date of settlement (three business
days after such date) of $10.94 and $37.60 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 6.48% per annum on May 17, 1999, and 6.42% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 1.69% per annum on May 17, 1999, and 1.63% 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 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $1,360,000
Number of Units 1,517
Fractional Undivided Interest in the Trust per Unit 1/1,517
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,443,505
Aggregate Value of Bonds per Unit $951.55
Sales Charge 3.093% (3.0% of Public Offering Price) $29.43
Public Offering Price per Unit $980.98*
Redemption Price and Sponsor's Repurchase Price per Unit
($29.43 less than the Public Offering Price per Unit) $951.55*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $617,000
</TABLE>
Date Trust Established April 17, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $926 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 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF MAY 17, 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 $65.65 $65.65
Less: Estimated Annual Expense $2.64 $2.08
Estimated Net Annual Interest Income $63.01 $63.57
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $63.01 $63.57
Divided by 12 and 2, Respectively $5.25 $31.79
Estimated Daily Rate of Net Interest Accrual $.1750 $.1766
Estimated Current Return Based on Public
Offering Price 6.42% 6.48%
Estimated Long-Term Return Based on Public
Offering Price 1.63% 1.69%
</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 132, The First Trust Advantage,
Virginia Trust, Series 5
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 132, The First
Trust Advantage, Virginia Trust, Series 5 as of February 28, 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 February 28, 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 132, The First Trust Advantage, Virginia Trust, Series 5 at February
28, 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
June 4, 1999
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,404,350)
(Note 1) $1,465,990
Accrued interest 33,812
__________
1,499,802
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 5,204
Cash overdraft 7,488
Accrued liabilities 24
__________
12,716
__________
Net assets, applicable to 1,521 outstanding units of
fractional undivided interest:
Cost of Trust assets (Note 1) $1,404,350
Net unrealized appreciation (Note 2) 61,640
Distributable funds 21,096
__________
$1,487,086
==========
Net asset value per unit $977.70
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
PORTFOLIO - See notes to portfolio.
February 28, 1999
<TABLE>
<CAPTION>
Coupon
interest Date of Redemption Principal Market
Name of issuer and title of bond(e) rate maturity provisions(a) Rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Hampton Roads Sanitation District, Virginia,
Primary Pledge Sewer Revenue, Series 1989 (d) 7.20% 7/01/2009 1999 @ 102 AAA $10,000 10,284
Industrial Development Authority of the City
of Norfolk (Virginia), Hospital Revenue
(Sentara Hospitals - Norfolk Project),
Series 1991 (d) 7.00 11/01/2020 2000 @ 102 AA 500,000 537,025
Industrial Development Authority of the City of
Roanoke, Virginia, Hospital Revenue (Community
Hospital of Roanoke Valley and Franklin Memorial
Hospital Project), Series 1990 (MBIA Insured) (d) 7.25 7/01/2017 2000 @ 102 AAA 155,000 165,537
Russell County, Virginia, Industrial Development
Authority Pollution Control Revenue,
Appalachian Power Company Project, Series G 7.70 11/01/2007 2000 @ 102 Baa1 (c) 500,000 537,630
Industrial Development Authority of the County
of Prince William (Virginia), Commuter Parking
Facilities Lease Revenue (Prince William County
Project) Series 1991 (d) 7.25 3/01/2011 2000 @ 102 NR 195,000 205,261
Virginia Resource Authority, Water and Sewer
System Revenue, 1989 Series A (d) 7.50 5/01/2020 1999 @ 102 NR 10,000 10,253
______________________
$1,370,000 1,465,990
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
NOTES TO PORTFOLIO
February 28, 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). "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. All of the Bonds in
the Trust are subject to call within two years.
(b) The ratings shown are those effective at February 28, 1999. All ratings
are by Standard & Poor's Corporation unless otherwise indicated ("NR"
indicates no rating).
(c) Rating by Moody's Investors Services, Inc.
(d) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(e) The Trust consists of six obligations of issuers located in Virginia.
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: Health Care, 2; Water and Sewer, 2; Electric, 1; and
Miscellaneous, 1. Approximately 48% and 36% of the aggregate principal
amount of the Bonds consist of health care revenue bonds and electric
revenue bonds, respectively. Each of four Bond issues represents 10% or
more of the aggregate principal amount of the Bonds in the Trust or a
total of approximately 99%. The two largest such issues represent 36%
each.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $106,563 113,212 130,950
Expenses:
Trustee's fees and related expenses (2,660) (2,905) (3,363)
Evaluator's fees (926) (926) (926)
Supervisory fees (422) (426) (518)
_______________________________
Investment income - net 102,555 108,955 126,143
Net gain (loss) on investments:
Net realized gain (loss) 3,309 15,358 9,366
Change in net unrealized appreciation
or depreciation (34,541) (36,364) (63,560)
_______________________________
(31,232) (21,006) (54,194)
_______________________________
Net increase in net assets resulting
from operations $71,323 87,949 71,949
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA TRUST, SERIES 5
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $102,555 108,955 126,143
Net realized gain (loss) on investments 3,309 15,358 9,366
Change in net unrealized appreciation
or depreciation on investments (34,541) (36,364) (63,560)
__________________________________
71,323 87,949 71,949
Distributions to unit holders:
Investment income - net (101,239) (108,596) (125,794)
Principal from investment transactions (27,396) - -
__________________________________
(128,635) (108,596) (125,794)
Unit redemptions (167, 73 and 356 in 1999,
1998 and 1997, respectively):
Principal portion (162,407) (73,159) (361,608)
Net interest accrued (3,645) (1,438) (5,532)
__________________________________
(166,052) (74,597) (367,140)
__________________________________
Total increase (decrease) in net assets (223,364) (95,244) (420,985)
Net assets:
At the beginning of the year 1,710,450 1,805,694 2,226,679
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $21,096, $51,398 and
$23,010 at February 28, 1999,
1998 and 1997, respectively) $1,487,086 1,710,450 1,805,694
==================================
Trust units outstanding at the end
of the year 1,521 1,688 1,761
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA 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, April 17, 1991. 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 $926 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 February 28, 1999 follows:
<TABLE>
<S> <C>
Unrealized appreciation $61,923
Unrealized depreciation (283)
________
$61,640
========
</TABLE>
<PAGE>
3. 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 February 28,
distribution
plan 1999 1998 1997
<S> <C> <C> <C>
Monthly $63.56 63.16 63.84
Semi-annual 64.10 63.88 64.54
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended February 28,
1999 1998 1997
<S> <C> <C> <C>
Interest income $65.48 66.18 66.44
Expenses (2.46) (2.49) (2.44)
__________________________________
Investment income - net 63.02 63.69 64.00
Distributions to unit holders:
Investment income - net (63.64) (63.71) (64.05)
Principal from investment transactions (16.23) - -
Net gain (loss) on investments (18.75) (12.06) (26.38)
__________________________________
Total increase (decrease) in
net assets (35.60) (12.08) (26.43)
Net assets:
Beginning of the year 1,013.30 1,025.38 1,051.81
__________________________________
End of the year $977.70 1,013.30 1,025.38
==================================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 132
THE FIRST TRUST ADVANTAGE
VIRGINIA 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.
The First Trust (registered trademark) Combined Series
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated May 28, 1999 AND PART THREE
IN THE OPINION OF COUNSEL, INTEREST INCOME TO THE TRUSTS AND TO THE UNIT
HOLDERS, WITH CERTAIN EXCEPTIONS, IS EXEMPT UNDER EXISTING LAW FROM ALL
FEDERAL INCOME TAXES. IN ADDITION, THE INTEREST INCOME TO THE TRUSTS IS,
IN THE OPINION OF SPECIAL COUNSEL, EXEMPT TO THE EXTENT INDICATED FROM
STATE AND LOCAL TAXES WHEN HELD BY RESIDENTS OF THE STATE IN WHICH THE
ISSUERS OF THE BONDS IN SUCH TRUSTS ARE LOCATED. CAPITAL GAINS, IF ANY,
ARE SUBJECT TO TAX.
THE FIRST TRUST COMBINED SERIES (the "Fund") consists of underlying
separate unit investment trusts (the "Trusts"). The various trusts are
collectively referred to herein as the "Trusts" while all Trusts that
are not designated as "The First Trust Advantage" are sometimes
collectively referred to herein as the "Insured Trusts" and a Trust with
the name designation of "The First Trust of Insured Municipal Bonds,
Discount Trust" or "The First Trust Advantage: Discount Trust" is
sometimes referred to herein as a "Discount Trust." Each Trust consists
of a portfolio of interest-bearing obligations, issued by or on behalf
of states and territories of the United States, and political
subdivisions and authorities thereof, the interest on which is, in the
opinion of recognized bond counsel to the issuing governmental
authorities, exempt from all Federal income taxes under existing law
although interest on certain Bonds in certain Arkansas, Idaho, Kansas,
Maine, Mississippi and Nebraska Trusts will be a preference item for
purposes of the Alternative Minimum Tax. In addition, the interest
income of each Trust is, in the opinion of Special Counsel, exempt to
the extent indicated from state and local income taxes when held by
residents of the state in which the issuers of the Bonds in such Trust
are located. The securities in a Discount Trust are acquired at prices
which result in a Discount Trust portfolio, as a whole, being purchased
at a deep discount from the aggregate par value of such Securities
although a substantial portion of the Securities in a Discount Trust
portfolio may be acquired at a premium over the par value of such
Securities. All of the Bonds in an Intermediate Trust mature within 8 to
12 years of the Initial Date of Deposit. All of the Bonds in a Short
Intermediate Trust mature within 3 to 6 years of the Initial Date of
Deposit. All of the Bonds in a Long Intermediate Trust mature within 10
to 15 years of the Initial Date of Deposit. The portfolio for each
Trust, essential information based thereon and financial statements,
including a report of independent auditors relating to the series of the
Fund offered hereby, are contained in Part One to which reference should
be made for such information.
INSURANCE GUARANTEEING THE SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST
ON ALL BONDS IN THE PORTFOLIO OF EACH INSURED TRUST HAS BEEN OBTAINED
FROM FINANCIAL GUARANTY INSURANCE COMPANY AND/OR Ambac Assurance
CORPORATION (FORMERLY KNOWN AS AMBAC INDEMNITY CORPORATION) BY THE
INSURED TRUSTS OR WAS DIRECTLY OBTAINED BY THE BOND ISSUER, THE
UNDERWRITERS, THE SPONSOR OR OTHERS PRIOR TO THE INITIAL DATE OF DEPOSIT
FROM FINANCIAL GUARANTY INSURANCE COMPANY, Ambac Assurance CORPORATION,
OR OTHER INSURERS (THE "PREINSURED BONDS"). INSURANCE OBTAINED BY AN
INSURED TRUST APPLIES ONLY WHILE BONDS ARE RETAINED IN SUCH TRUST, WHILE
INSURANCE ON PREINSURED BONDS IS EFFECTIVE SO LONG AS SUCH BONDS ARE
OUTSTANDING. PURSUANT TO AN IRREVOCABLE COMMITMENT OF FINANCIAL GUARANTY
INSURANCE COMPANY, AND/OR Ambac Assurance CORPORATION IN THE EVENT OF A
SALE OF A BOND INSURED UNDER AN INSURANCE POLICY OBTAINED BY AN INSURED
TRUST, THE TRUSTEE HAS THE RIGHT TO OBTAIN PERMANENT INSURANCE FOR SUCH
BOND UPON THE PAYMENT OF A SINGLE PREDETERMINED INSURANCE PREMIUM FROM
THE PROCEEDS OF THE SALE OF SUCH BOND. THE INSURANCE, IN EITHER CASE,
RELATES ONLY TO THE BONDS IN THE INSURED TRUSTS AND NOT TO THE UNITS
OFFERED HEREBY. AS A RESULT OF SUCH INSURANCE, THE UNITS OF EACH INSURED
TRUST HAVE RECEIVED A RATING OF "AAA" BY STANDARD & POOR'S RATINGS
GROUP, A DIVISION OF MCGRAW-HILL, INC. ("STANDARD & POOR'S"). SEE "WHY
AND HOW ARE THE INSURED TRUSTS INSURED?" ON PAGE 10. NO REPRESENTATION
IS MADE AS TO ANY INSURER'S ABILITY TO MEET ITS COMMITMENTS.
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
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
For convenience the Prospectus is divided into sections which give
general information about the Fund and specific information such as the
public offering price, distributions and tax status for each Trust.
The Objectives of the Fund are conservation of capital through
investment in portfolios of tax-exempt bonds and income exempt from
Federal and applicable state and local income taxes although interest on
certain Bonds in certain Arkansas, Idaho, Kansas, Maine, Mississippi and
Nebraska Trusts will be a preference item for purposes of the Federal
Alternative Minimum Tax. ACCORDINGLY, CERTAIN ARKANSAS, IDAHO, KANSAS,
MAINE, MISSISSIPPI AND NEBRASKA TRUSTS MAY BE APPROPRIATE ONLY FOR
INVESTORS WHO ARE NOT SUBJECT TO THE ALTERNATIVE MINIMUM TAX. CERTAIN
BONDS IN THE OKLAHOMA TRUSTS ARE SUBJECT TO OKLAHOMA STATE INCOME TAXES.
The payment of interest and the preservation of principal are, of
course, dependent upon the continuing ability of the issuers, obligors
and/or insurers to meet their respective obligations.
Distributions to Unit holders may be reinvested as described herein. See
"Rights of Unit Holders-How Can Distributions to Unit Holders be
Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain a
market for the Units at prices based upon the aggregate bid price of the
Bonds in the portfolio of each Trust. In the absence of such a market, a
Unit holder will nonetheless be able to dispose of the Units through
redemption at prices based upon the bid prices of the underlying Bonds.
See "Rights of Unit Holders-How May Units be Redeemed?" With respect to
each Insured Trust, neither the bid nor offering prices of the
underlying Bonds or of the Units, absent situations in which Bonds are
in default in payment of principal or interest or in significant risk of
such default, include value attributable to the portfolio insurance
obtained by such Trust. See "Why and How are the Insured Trusts Insured?"
Page 2
THE FIRST TRUST COMBINED SERIES
What is The First Trust Combined Series?
The First Trust Combined Series (the "Fund") is one of a series of
investment companies created by the Sponsor under the name of The First
Trust Combined Series, all of which are generally similar but each of
which is separate and is designated by a different series number. This
Series consists of underlying separate unit investment trusts (such
Trusts being collectively referred to herein as the "Fund"). Each Series
was created under the laws of the State of New York pursuant to a Trust
Agreement (the "Indenture"), dated the Initial Date of Deposit, with
Nike Securities L.P., as Sponsor, The Chase Manhattan Bank, as Trustee,
Securities Evaluation Service, Inc., as Evaluator and First Trust
Advisors L.P., as Portfolio Supervisor. Only Units of a National Trust
may be offered for sale to residents of the State of Illinois. Only
Units of an Indiana Trust and/or a National Trust may be offered for
sale to residents of the State of Indiana. Only Units of a Virginia
Trust and/or a National Trust may be offered for sale to residents of
the State of Virginia. Only Units of a Washington Trust and/or a
National Trust may be offered for sale to residents of Washington. On
the Initial Date of Deposit, the Sponsor deposited with the Trustee
interest-bearing obligations, including delivery statements relating to
contracts for the purchase of certain such obligations and irrevocable
letters of credit issued by a financial institution in the amounts
required for such purchases (the "Bonds"). The Trustee thereafter
credited the account of the Sponsor for Units of each Trust representing
the entire ownership of the Fund which Units are being offered hereby.
The objectives of the Fund are Federal tax-exempt income and state and
local tax-exempt income and conservation of capital through investment
in portfolios of interest-bearing obligations issued by or on behalf of
the state for which such Trust is named (collectively, the "State
Trusts"), and counties, municipalities, authorities and political
subdivisions thereof, the Commonwealth of Puerto Rico and other
territories or municipalities of the United States, or authorities or
political subdivisions thereof, the interest on which obligations is, in
the opinion of recognized bond counsel to the issuing governmental
authorities, exempt from all Federal income tax and, where applicable,
state and local taxes under existing law although interest on certain
Bonds in certain Arkansas, Idaho, Kansas, Maine, Mississippi and
Nebraska Trusts will be a preference item for purposes of the
Alternative Minimum Tax and certain Bonds in the Oklahoma Trusts are
subject to Oklahoma State Income Taxes. The current market value of
certain of the obligations in a Discount Trust were significantly below
face value when the obligations were acquired by such Trust. The prices
at which the obligations are acquired result in a Discount Trust's
portfolio, as a whole, being purchased at a deep discount from the
aggregate par value of such Securities although a substantial portion of
the Securities in a Discount Trust portfolio may be acquired at a
premium over the par value of such Securities. Insurance guaranteeing
the scheduled payment of all principal and interest on Bonds in the
Trusts with the name designation of "The First Trust of Insured
Municipal Bonds," "The First Trust of Insured Municipal Bonds-
Intermediate" or "The First Trust of Insured Municipal Bonds-Multi-
State" (the "Insured Trusts") has been obtained by such Trusts from
Financial Guaranty Insurance Company ("Financial Guaranty") and/or Ambac
Assurance Corporation ("Ambac Assurance") or was obtained directly by
the Bond issuer, the underwriters, the Sponsor or others prior to the
Initial Date of Deposit from Financial Guaranty, Ambac Assurance, or
other insurers (the "Preinsured Bonds"). NO PORTFOLIO INSURANCE POLICY
HAS BEEN OBTAINED BY THE TRUSTS WITH THE NAME DESIGNATION OF "THE FIRST
TRUST ADVANTAGE" (THE "ADVANTAGE TRUSTS"). The portfolio insurance
obtained by the Insured Trusts is effective only while the Bonds thus
insured are held in such Trusts, while insurance on Preinsured Bonds is
effective so long as such Bonds are outstanding. See "Why and How are
the Insured Trusts Insured?" THERE IS, OF COURSE, NO GUARANTEE THAT THE
FUND'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT IN THE FUND SHOULD BE
MADE WITH AN UNDERSTANDING OF THE RISKS WHICH AN INVESTMENT IN FIXED
RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL, INCLUDING THE RISK THAT THE
VALUE OF THE UNITS WILL DECLINE WITH INCREASES IN INTEREST RATES.
Neither the Public Offering Price of the Units of an Insured Trust nor
any evaluation of such Units for purposes of repurchases or redemptions
reflects any element of value for the insurance obtained by such Trust
unless Bonds are in default in payment of principal or interest or in
significant risk of such default. See "Public Offering-How is the Public
Offering Price Determined?" On the other hand, the value of insurance
Page 3
obtained by the Bond issuer, the Sponsor or others is reflected and
included in the market value of such Bonds.
Insurance obtained by an Insured Trust or by the Bond issuer, the
Sponsor or others is not a substitute for the basic credit of an issuer,
but supplements the existing credit and provides additional security
therefor. If an issue is accepted for insurance, a noncancelable policy
for the scheduled payment of interest and principal on the Bonds is
issued by the insurer. A single premium is paid by the Bond issuer, the
underwriters, the Sponsor or others for Preinsured Bonds and a monthly
premium is paid by each Insured Trust for the insurance obtained by such
Trust except for Bonds in such Trust which are insured by the Bond
issuer, the underwriters, the Sponsor or others in which case no
premiums for insurance are paid by such Trust. Upon the sale of a Bond
insured under the insurance policy obtained by an Insured Trust, the
Trustee has the right to obtain permanent insurance from Financial
Guaranty and/or Ambac Assurance with respect to such Bond upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust of the
Fund is eligible to be sold on an insured basis. Standard & Poor's and
Moody's Investors Service, Inc. have rated the claims-paying ability of
Financial Guaranty and Ambac Assurance "AAA" and "Aaa," respectively.
See "Why and How are the Insured Trusts Insured?"
In selecting Bonds, the following facts, among others, were considered:
(i) the Standard & Poor's rating or Fitch Investors Service, Inc.'s
rating of the Bonds was in no case less than "BBB" in the case of an
Insured Trust (or an Arkansas, Kansas or Maine Advantage Trust) and "A-"
in the case of other Advantage Trusts, or the Moody's Investors Service,
Inc. rating of the Bonds was in no case less than "Baa" in the case of
an Insured Trust (or an Arkansas, Kansas or Maine Advantage Trust) and
"A" in the case of other Advantage Trusts, including provisional or
conditional ratings, respectively, or, if not rated, the Bonds had, in
the opinion of the Sponsor, credit characteristics sufficiently similar
to the credit characteristics of interest-bearing tax-exempt obligations
that were so rated as to be acceptable for acquisition by the Fund (see
"Description of Bond Ratings"); (ii) the prices of the Bonds relative to
other bonds of comparable quality and maturity; (iii) with respect to
the Insured Trusts, the availability and cost of insurance of the
principal and interest on the Bonds and (iv) the diversification of
Bonds as to purpose of issue and location of issuer. Subsequent to the
Initial Date of Deposit, a Bond may cease to be rated or its rating may
be reduced below the minimum required as of the Initial Date of Deposit.
Neither event requires elimination of such Bond from the portfolio, but
may be considered in the Sponsor's determination as to whether or not to
direct the Trustee to dispose of the Bond. See "Rights of Unit Holders-
How May Bonds be Removed from the Fund?" The Portfolio appearing in Part
One contains Bond ratings, when available, for the Bonds listed at the
date shown.
Certain of the Bonds in the Trusts may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
Trust were lower than the current market interest rates for newly issued
bonds of comparable rating and type. The market discount of previously
issued bonds will increase when interest rates for newly issued
comparable bonds increase and decrease when such interest rates fall,
other things being equal. A discount bond held to maturity will have a
larger portion of its total return in the form of taxable income and
capital gain and less in the form of tax-exempt interest income than a
comparable bond newly issued at current market rates. See "What is the
Federal Tax Status of Unit Holders?" appearing in Part Three for each
Trust.
Certain of the Bonds in the Trusts may be original issue discount bonds.
Under current law, the original issue discount, which is the difference
between the stated redemption price at maturity and the issue price of
the Bonds, is deemed to accrue on a daily basis and the accrued portion
is treated as tax-exempt interest income for Federal income tax
purposes. On sale or redemption, any gain realized that is in excess of
the earned portion of original issue discount will be taxable as capital
gain unless the gain is attributable to market discount in which case
the accretion of market discount is taxable as ordinary income. See
"What is the Federal Tax Status of Unit Holders?" appearing in Part
Three for each Trust. The current value of an original discount bond
reflects the present value of its stated redemption price at maturity.
The market value tends to increase in greater increments as the Bonds
approach maturity.
Certain of the original issue discount bonds may be Zero Coupon Bonds
(including bonds known as multiplier bonds, money multiplier bonds,
Page 4
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 bond features include (1) not paying interest on a
semi-annual basis and (2) providing for the reinvestment of the bond's
semi-annual earnings at the bond's stated yield to maturity. While Zero
Coupon Bonds are frequently marketed on the basis that their fixed rate
of return minimizes reinvestment risk, this benefit can be negated in
large part by weak call protection.
Certain of the Bonds in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased and deposited in the
Trusts were higher than the current market interest rates for newly
issued bonds of comparable rating and type. 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. Redemptions are more likely to occur at times when
the Bonds have an offering side valuation which represents a premium
over par, or for original issue discount Bonds, a premium over the
accreted value. To the extent that the Bonds were deposited in the Fund
at a price higher than the price at which they are redeemed, this will
represent a loss of capital when compared to the original Public
Offering Price of the Units. Because premium bonds generally pay a
higher rate of interest than bonds priced at or below par, the effect of
the redemption of premium bonds would be to reduce Estimated Net Annual
Unit Income by a greater percentage than the par amount of such bonds
bears to the total par amount of Bonds in the Trust. Although the actual
impact of any such redemptions that may occur will depend upon the
specific Bonds that are redeemed, it can be anticipated that the
Estimated Net Annual Unit Income will be significantly reduced after the
dates on which such Bonds are eligible for redemption. The Trust may be
required to sell Zero Coupon Bonds prior to maturity (at their current
market price which is likely to be less than their par value) in order
to pay expenses of the Trust or in case the Trust is terminated. See
"Rights of Unit Holders-How May Bonds be Removed from the Fund?" and
"Other Information-How May the Indenture be Amended or Terminated?"
Certain of the Bonds in the Trusts may be general obligations of a
governmental entity that are backed by the taxing power of such entity.
All other Bonds in the Trusts are revenue bonds payable from the income
of a specific project or authority and are not supported by the issuer's
power to levy taxes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds, on the other hand, are payable
only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source. There are, of course, variations in
the security of the different Bonds in the Fund, both within a
particular classification and between classifications, depending on
numerous factors.
Certain of the Bonds in the Trusts may be healthcare revenue bonds.
Healthcare revenue bonds are obligations of issuers whose revenues are
primarily derived from services provided by hospitals or other
healthcare facilities, including nursing homes. A healthcare issuer's
ability to make debt service payments on these obligations is dependent
on various factors, including occupancy levels of the facility, demand,
government regulations, wages of employees, overhead expenses,
competition from other similar providers, malpractice insurance costs
and the degree of governmental competition from other similar providers,
malpractice insurance costs and the degree of governmental financial
assistance, including Medicare and Medicaid and other similar third-
party payer programs.
Certain of the Bonds in the Trusts may be housing revenue bonds. Housing
revenue bonds are obligations of issuers whose revenues are primarily
derived from mortgage loans on single family residences or housing
projects for low to moderate income families. Housing revenue bonds are
generally payable at any time and therefore their average life will
ordinarily be less than their stated maturities. The ability of such
issuers to make debt service payments on these obligations is dependent
on various factors, including occupancy levels, rental income, mortgage
default rates, taxes, operating expenses, governmental regulations and
the appropriation of subsidies.
Page 5
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are derived from the sale of water and/or sewerage services.
Water and sewerage bonds are generally payable from user fees. Problems
faced by such issuers include the ability to obtain timely and adequate
rate increases, population decline resulting in decreased user fees, the
difficulty of financing large construction programs, the limitations on
operations and increased costs and delays attributable to environmental
considerations, the increasing difficulty of obtaining or discovering
new supplies of fresh water, the effect of conservation programs and the
impact of "no-growth" zoning ordinances.
Certain of the Bonds in the Trusts may be obligations of issuers whose
revenues are primarily derived from the sale of electric energy.
Utilities are generally subject to extensive regulation by state utility
commissions which, among other things, establish the rates which may be
charged and the appropriate rate of return. The problems faced by such
issuers include the difficulty in obtaining approval for timely and
adequate rate increases from the governing public utility commission,
the difficulty in financing large construction programs, increased
federal, state and municipal government regulations, the limitations on
operations and increased costs and delays attributable to environmental
considerations, increased competition, recent reductions in estimates of
future demand for electricity in certain areas of the country, the
difficulty of the capital market in absorbing utility debt, the
difficulty in obtaining fuel at reasonable prices and the effect of
energy conservation.
Certain of the Bonds in the Trusts may be lease obligations issued
primarily by governmental authorities that have no taxing power or other
means of directly raising revenues. Rather, the governmental authorities
are financing vehicles created solely for the construction of buildings
(i.e., schools, administrative offices, convention centers and prisons)
or the purchase of equipment (i.e., police cars and computer systems)
that will be used by a state or local government (the "lessee"). These
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt service
on the obligations. Lease obligations are subject, in almost all cases,
to annual appropriation risk, i.e., the lessee government is not legally
obligated to budget and appropriate for the rental payments beyond the
current fiscal year, or construction and abatement risk-rental
obligations cease in the event that delays in building, damage,
destruction or condemnation of the project prevents its use by the
lessee.
Certain of the Bonds in the Trusts may be industrial revenue bonds
("IRBs"), tax-exempt securities issued by states, municipalities, public
authorities or similar entities to finance the cost of acquiring,
constructing or improving various industrial projects. Debt service
payments on IRBs are dependent on various factors, including the
creditworthiness of the corporate operator of the project and, if
applicable, corporate guarantor, revenues generated from the project
and, if applicable, corporate guarantor, revenues generated from the
project and regulatory and environmental restrictions.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the ownership and operation of
facilities such as airports, bridges, turnpikes, port authorities,
convention centers and arenas. The ability of issuers to make debt
service payments on airport obligations is dependent on the capability
of airlines to meet their obligations under use agreements. Due to
increased competition, deregulation, increased fuel costs and other
factors, many airlines may have difficulty meeting their obligations
under these use agreements. Similarly, payment on Bonds related to other
facilities is dependent on revenues from the projects, such as user fees
from ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in revenues
due to such factors as increased cost of maintenance, decreased use of a
facility, lower cost of alternative modes of transportation, scarcity of
fuel and reduction or loss of rents.
Certain of the Bonds in the Trusts may be obligations of issuers which
govern the operation of schools, colleges and universities and whose
revenues are derived mainly from ad valorem taxes. 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.
Certain of the Bonds in the Trusts may be obligations which are payable
from and secured by revenues derived from the operation of resource
recovery facilities. Resource recovery facilities are designed to
Page 6
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.
Certain Trusts may contain Bonds of issuers located in the Commonwealth
of Puerto Rico or issuers which will be affected by general economic
conditions of Puerto Rico. Puerto Rico's unemployment rate remains
significantly higher than the U.S. unemployment rate. Furthermore, the
economy is largely dependent for its development upon U.S. policies and
programs that are being reviewed and may be eliminated.
Economic activity in Puerto Rico increased again during 1998. The growth
in Puerto Rico's gross domestic product (GDP) was 3%, with an additional
2.7% growth expected in 1999. The main driving force behind this growth
was manufacturing, Puerto Rico's largest and most quickly developing
economic sector, accounting for more than 55% of the territory's GDP
during 1998. Manufacturing exports have increased more than 35% during
the past five years to $23.4 billion in 1998, due in part to increasing
emphasis on rebuilding Puerto Rico's infrastructure, including the
upcoming renovation of the Port of San Juan.
Puerto Rico's unemployment, although at relatively low historical
levels, remains above the average for the United States. Average total
employment increased from 1.01 million in 1993 to 1.14 million in 1998,
with 11.4% growth during this five-year period. Non-farm employment (not
seasonally adjusted) for January 1999 reached 1,158,138, its highest
recorded level. The average unemployment rate decreased from 17.0% in
1993 to 13.3% in 1998 and dropped further to 12.7% in March 1999. The
U.S. average in 1998 was 4.5%.
The territory has experienced $1.9 billion in general fund revenue
growth during the past five years, totaling a $1.9 billion increase
between fiscal 1994 and fiscal 1998. During fiscal 1998, more than 67%
of Puerto Rico's $5.9 billion in general fund receipts were due to the
income tax, with excise taxes accounting for another 22%. Long-term debt
for the territory reached $14.7 billion at the end of fiscal 1998 (ended
June 30, 1998). Outstanding general obligation debt accounted for $4.8
billion of this amount, while revenue bonds represented $5.2 billion.
The foregoing information constitutes only a brief summary of some of
the financial difficulties which may impact certain issuers of Bonds and
does not purport to be a complete or exhaustive description of all
adverse conditions to which the issuers of the Bonds are subject.
Additionally, many factors including national economic, social and
environmental policies and conditions, which are not within the control
of the issuers of Bonds, could affect or could have an adverse impact on
the financial condition of Puerto Rico and various agencies and
political subdivisions located in Puerto Rico. The Sponsor is unable to
predict whether or to what extent such factors or other factors may
affect the issuers of Bonds, the market value or marketability of the
Bonds or the ability of the respective issuers of the Bonds acquired by
the Trusts to pay interest on or principal of the Bonds.
Interest on certain of the Bonds in certain Arkansas, Idaho, Kansas,
Maine, Mississippi and Nebraska Trusts will be an item of tax preference
for purposes of the Alternative Minimum Tax ("AMT"). The investment by
non-AMT individual taxpayers in AMT municipal bonds generally results in
a higher yield to such bondholders than non-AMT municipal bonds. Since a
portion of the interest from certain Arkansas, Idaho, Kansas, Maine,
Mississippi and Nebraska Trusts is an AMT preference item, certain
Arkansas, Idaho, Kansas, Maine, Mississippi and Nebraska Trusts may be
more appropriate for investors who are not subject to AMT.
Investors should be aware that many of the Bonds in the Trusts are
subject to continuing requirements such as the actual use of Bond
proceeds or manner of operation of the project financed from Bond
proceeds that may affect the exemption of interest on such Bonds from
Federal income taxation. Although at the time of issuance of each of the
Bonds in the Trusts an opinion of bond counsel was rendered as to the
exemption of interest on such obligations from Federal income taxation,
there can be no assurance that the respective issuers or other obligors
Page 7
on such obligations will fulfill the various continuing requirements
established upon issuance of the Bonds. A failure to comply with such
requirements may cause a determination that interest on such obligations
is subject to Federal income taxation, perhaps even retroactively from
the date of issuance of such Bonds, thereby reducing the value of the
Bonds and subjecting Unit holders to unanticipated tax liabilities.
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with
their terms and because the proceeds from such events will be
distributed to Unit holders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
Certain of the Bonds contained in the Trusts may be subject to being
called or redeemed in whole or in part prior to their stated maturities
pursuant to optional redemption provisions, sinking fund provisions,
special or extraordinary redemption provisions or otherwise. A bond
subject to optional call is one which is subject to redemption or
refunding prior to maturity at the option of the issuer. A bond subject
to sinking fund redemption is one which is subject to partial call from
time to time at par or, in the case of a zero coupon bond, at the
accreted value from a fund accumulated for the scheduled retirement of a
portion of an issue prior to maturity. Special or extraordinary
redemption provisions may provide for redemption at par (or for original
issue discount bonds at issue price plus the amount of original issue
discount accreted to redemption date plus, if applicable, some premium)
of all or a portion of an issue upon the occurrence of certain
circumstances. The exercise of redemption or call provisions will
(except to the extent the proceeds of the called Bonds are used to pay
for Unit redemptions) result in the distribution of principal and may
result in a reduction in the amount of subsequent interest
distributions; it may also affect the long-term return and the current
return on Units of each Trust. Redemption pursuant to call provisions is
more likely to occur, and redemption pursuant to sinking fund provisions
may occur, when the Bonds have an offering side valuation which
represents a premium over par or for original issue discount bonds a
premium over the accreted value. Unit holders may recognize capital gain
or loss upon any redemption or call.
Like other investment companies, financial and business organizations
and individuals around the world, the Fund could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Fund do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Fund's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Fund. The Sponsor is
unable to predict what impact, if any, the Year 2000 Problem will have
on issuers of the Bonds contained in the Fund.
To the best knowledge of the Sponsor, there is no litigation pending as
of the date hereof in respect of any Bonds which might reasonably be
expected to have a material adverse effect upon the Trusts. At any time
after the date hereof, litigation may be initiated on a variety of
grounds with respect to Bonds in a Trust. Such litigation, as for
example suits challenging the issuance of pollution control revenue
bonds under recently-enacted environmental protection statutes, may
affect the validity of such Bonds or the tax-free nature of the interest
thereon. While the outcome of litigation of such nature can never be
entirely predicted, the Fund has received opinions of bond counsel to
the issuing authority of each Bond on the date of issuance to the effect
that such Bonds have been validly issued and that the interest thereon
is exempt from Federal income taxes and state and local taxes. In
addition, other factors may arise from time to time which potentially
may impair the ability of issuers to meet obligations undertaken with
respect to the Bonds.
What are Estimated Long-Term Return and Estimated Current Return?
At the date of this Prospectus, the Estimated Current Return and the
Estimated Long-Term Return, under the monthly, quarterly (if applicable)
and semi-annual (if applicable) distribution plans, are as set forth in
Part One attached hereto for each Trust. Estimated Current Return is
computed by dividing the Estimated Net Annual Interest Income per Unit
by the Public Offering Price. Any change in either amount will result in
Page 8
a change in the Estimated Current Return. For each Trust, the Public
Offering Price will vary in accordance with fluctuations in the prices
of the underlying Bonds and the Net Annual Interest Income per Unit will
change as Bonds are redeemed, paid, sold or exchanged in certain
refundings or as the expenses of each Trust change. Therefore, there is
no assurance that the Estimated Current Return indicated in Part One for
each Trust will be realized in the future. Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration and
determines and factors in the relative weightings of the market values,
yields (which 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, the expenses
and sales charge associated with each Unit of a Trust. Since the market
values and estimated retirements of the Bonds and the expenses of the
Trust will change, there is no assurance that the Estimated Long-Term
Return indicated in Part One for each Trust will be realized in the
future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of Estimated Long-Term Return
reflects the estimated date and amount of principal returned while
Estimated Current Return calculations include only Net Annual Interest
Income and Public Offering Price. Neither rate reflects the true return
to Unit holders, which is lower, because neither includes the effect of
certain delays in distributions to Unit holders.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on the Trust and
returns over specified periods on other similar Trusts sponsored by Nike
Securities L.P. with returns on taxable investments such as corporate or
U.S. Government bonds, bank CDs and money market accounts or money
market funds, each of which has investment characteristics that may
differ from those of the Trust.
How are Purchased Interest and Accrued Interest Treated?
Purchased Interest. For The First Trust Combined Series 198-208, each
Trust contains an amount of Purchased Interest. Purchased Interest is a
portion of the unpaid interest that has accrued on the Bonds from the
later of the last payment date on the Bonds or the date of issuance
thereof through the First Settlement Date and is included in the
calculation of the Public Offering Price. Purchased Interest will be
distributed to Unit holders as Units are redeemed or Securities are
sold, mature or are called. See "Summary of Essential Information"
appearing in Part One for each Trust for the amount of Purchased
Interest per Unit for each Trust. Purchased Interest is an element of
the determination of the price Unit holders will receive in connection
with the sale or redemption of Units prior to the termination of the
Trust.
Accrued Interest. Accrued interest is the accumulation of unpaid
interest on a bond from the last day on which interest thereon was paid.
Interest on Bonds generally is paid semi-annually, although each Trust
accrues such interest daily. Because of this, a Trust always has an
amount of interest earned but not yet collected by the Trustee. For this
reason, with respect to sales settling subsequent to the First
Settlement Date, the Public Offering Price of Units will have added to
it the proportionate share of accrued interest to the date of
settlement. Unit holders will receive on the next distribution date of
the Trust the amount, if any, of accrued interest paid on their Units.
For The First Trust Combined Series 1-197, except through an advancement
of its own funds, the Trustee has no cash for distribution to Unit
holders until it receives interest payments on the Bonds in a Trust. The
Trustee will recover its advancements without interest or other costs to
such Trust from interest received on the Bonds in the Trust. When these
advancements have been recovered, regular distributions of interest to
Unit holders will commence. See "Rights of Unit Holders-How are Interest
and Principal Distributed?" Interest account balances are established
with generally positive cash balances so that it will not be necessary
on a regular basis for the Trustee to advance its own funds in
connection with interest distributions.
For The First Trust Combined Series 198-208, in an effort to reduce the
amount of Purchased Interest which would otherwise have to be paid by
Unit holders, the Trustee may advance a portion of the accrued interest
to the Sponsor as the Unit holder of record as of the First Settlement
Date. Consequently, the amount of accrued interest to be added to the
Public Offering Price of Units will include only accrued interest from
the First Settlement Date to the date of settlement (other than the
Purchased Interest already included therein), less any distributions
Page 9
from the Interest Account subsequent to the First Settlement Date. See
"Rights of Unit Holders-How are Interest and Principal Distributed?"
For The First Trust Combined Series 209 and subsequent Series, in an
effort to reduce the amount of accrued interest which would otherwise
have to be paid in addition to the Public Offering Price in the sale of
Units to the public, the Trustee will advance the amount of accrued
interest as of the First Settlement Date and the same will be
distributed to the Sponsor as the Unit holder of record as of the First
Settlement Date. Consequently, the amount of accrued interest to be
added to the Public Offering Price of Units will include only accrued
interest from the First Settlement Date to the date of settlement, less
any distributions from the Interest Account subsequent to the First
Settlement Date. See "Rights of Unit Holders-How are Interest and
Principal Distributed?"
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by a Trust and distributed to Unit holders.
If a Unit holder sells or redeems all or a portion of his Units, he will
be entitled to receive his proportionate share of the Purchased Interest
(if any) and accrued interest from the purchaser of his Units. Since the
Trustee has the use of the funds (including Purchased Interest, if any)
held in the Interest Account for distributions to Unit holders and since
such Account is non-interest-bearing to Unit holders, the Trustee
benefits thereby.
Why and How are the Insured Trusts Insured?
THE FOLLOWING DISCUSSION IS APPLICABLE ONLY TO THE INSURED TRUSTS. THE
BONDS IN THE PORTFOLIO OF AN ADVANTAGE TRUST ARE NOT INSURED BY
INSURANCE OBTAINED BY THE FUND.
All Bonds in the portfolio of an Insured Trust are insured as to the
scheduled payment of interest and principal by policies obtained by each
Insured Trust from Financial Guaranty Insurance Company ("Financial
Guaranty" or "FGIC"), a New York stock insurance company, or Ambac
Assurance Corporation ("Ambac Assurance" or "Ambac"), a Wisconsin-
domiciled stock insurance company, or obtained by the Bond issuer, the
underwriters, the Sponsor or others prior to the Initial Date of Deposit
directly from Financial Guaranty, Ambac Assurance or other insurers (the
"Preinsured Bonds"). The insurance policy obtained by each Insured Trust
is noncancellable and will continue in force for such Trust so long as
such Trust is in existence and the Bonds described in the policy
continue to be held by such Trust (see "Portfolio" for each Insured
Trust). The terms governing outstanding and existing policies remain
effective regardless of whether the insurer changes its name or sells
its assets. Nonpayment of premiums on the policy obtained by each
Insured Trust will not result in the cancellation of insurance, but will
permit Financial Guaranty and/or Ambac Assurance to take action against
the Trustee to recover premium payments due it. Premium rates for each
issue of Bonds protected by the policy obtained by each Insured Trust
are fixed for the life of such Trust. The premium for any Preinsured
Bonds has been paid in advance by the Bond issuer, the underwriters, the
Sponsor or others and any such policy or policies are noncancellable and
will continue in force so long as the Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. If the
provider of an original issuance insurance policy is unable to meet its
obligations under such policy, or if the rating assigned to the claims-
paying ability of such insurer deteriorates, Financial Guaranty and/or
Ambac Assurance has no obligation to insure any issue adversely affected
by either of the above described events. A monthly premium is paid by
each Insured Trust for the insurance obtained by such Trust, which is
payable from the interest income received by such Trust. In the case of
Preinsured Bonds, no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of the
aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay to
Citibank, N.A., or its successor, as its agent (the "Fiscal Agent"),
that portion of the principal of and interest on the Bonds covered by
the policy which shall become due for payment but shall be unpaid by
reason of nonpayment by the issuer of the Bonds. The term "due for
payment" means, when referring to the principal of a Bond, its stated
maturity date or the date on which it shall have been called for
mandatory sinking fund redemption and does not refer to any earlier date
on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on a Bond, the stated
date for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation, "due
for payment" also means, when referring to the principal of such Bond,
the date on which such Bond has been called for mandatory redemption as
a result of such determination of taxability, and when referring to
interest on such Bond, the accrued interest at the rate provided in such
documentation to the date on which such Bond has been called for such
mandatory redemption, together with any applicable redemption premium.
The term "due for payment" will not include, when referring to either
Page 10
the principal of a Bond or the interest on a Bond, any acceleration of
payment unless such acceleration is at the sole option of Financial
Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent on the
date such principal or interest becomes due for payment or on the
business day next following the day on which Financial Guaranty shall
have received notice of nonpayment, whichever is later. The Fiscal Agent
will disburse to the Trustee the face amount of principal and interest
which is then due for payment but is unpaid by reason of nonpayment by
the issuer but only upon receipt by the Fiscal Agent of (i) evidence of
the Trustee's right to receive payment of the principal or interest due
for payment and (ii) evidence, including any appropriate instruments of
assignment, that all of the rights to payment of such principal or
interest due for payment shall thereupon vest in Financial Guaranty.
Upon such disbursement, Financial Guaranty shall become the owner of the
Bond, appurtenant coupon or right to payment of principal or interest on
such Bond and shall be fully subrogated to all of the Trustee's rights
thereunder, including the right to payment thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained by an
Insured Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds regardless of the
identity of the holder thereof) (the "Permanent Insurance") upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee
will exercise the right to obtain Permanent Insurance only if upon such
exercise the Insured Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium attributable to the Permanent
Insurance) from such sale in excess of the sale proceeds if such Bonds
were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance is determined based upon the
insurability of each Bond as of the Initial Date of Deposit and will not
be increased or decreased for any change in the creditworthiness of such
Bond.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a wholly-
owned subsidiary of General Electric Capital Corporation ("GECC").
Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is a monoline
financial guarantee insurer domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As
of March 31, 1999, the total capital and surplus of Financial Guaranty
was approximately $1,274,619,558. Copies of Financial Guaranty's
financial statements, prepared on the basis of statutory accounting
principles, and the Corporation's financial statements, prepared on the
basis of generally accepted accounting principles, may be obtained by
writing to Financial Guaranty at 115 Broadway, New York, New York 10006,
Attention: Communications Department (telephone number (212) 312-3000)
or to the New York State Insurance Department at 25 Beaver Street, New
York, New York 10004-2319, Attention: Financial Condition
Property/Casualty Bureau (telephone number (212) 480-5187).
In addition, Financial Guaranty is currently licensed to write insurance
in all fifty states and the District of Columbia.
The information relating to Financial Guaranty contained above has been
furnished by such corporation. The financial information contained
herein with respect to such corporation is unaudited but appears in
reports or other materials filed with state insurance regulatory
authorities and is subject to audit and review by such authorities. No
representation is made herein as to the accuracy or adequacy of such
information or as to the absence of material adverse changes in such
information subsequent to the date thereof.
Ambac Assurance Corporation ("Ambac Assurance"). Effective July 14,
1997, AMBAC Indemnity Corporation changed its name to Ambac Assurance
Corporation. The Insurance Policy of Ambac Assurance obtained by an
Insured Trust is noncancellable and will continue in force for so long
as the Bonds described in the Insurance Policy are held by an Insured
Trust. A monthly premium is paid by an Insured Trust for the Insurance
Policy obtained by it. The Trustee will pay, when due, successively, the
Page 11
full amount of each installment of the insurance premium. Pursuant to a
binding agreement with Ambac Assurance, in the event of a sale of a Bond
covered by the Ambac Assurance Insurance Policy, the Trustee has the
right to obtain permanent insurance for such Bond upon payment of a
single predetermined premium from the proceeds of the sale of such Bond.
Under the terms of the Insurance Policy, Ambac Assurance agrees to pay
to the Trustee that portion of the principal of and interest on the
Bonds insured by Ambac Assurance which shall become due for payment but
shall be unpaid by reason of nonpayment by the issuer of the Bonds. The
term "due for payment" means, when referring to the principal of a Bond
so insured, its stated maturity date or the date on which it shall have
been called for mandatory sinking fund redemption and does not refer to
any earlier date on which payment is due by reason of call for
redemption (other than by mandatory sinking fund redemption),
acceleration or other advancement of maturity and means, when referring
to interest on a Bond, the stated date for payment of interest.
Ambac Assurance will make payment to the Trustee not later than thirty
days after notice from the Trustee is received by Ambac Assurance that a
nonpayment of principal or of interest on a Bond has occurred, but not
earlier than the date on which the Bonds are due for payment. Ambac
Assurance will disburse to the Trustee the face amount of principal and
interest which is then due for payment but is unpaid by reason of
nonpayment by the issuer in exchange for delivery of Bonds, not less in
face amount than the amount of the payment in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where
Bonds are issuable only in a form whereby principal is payable to
registered holders or their assigns, Ambac Assurance shall pay principal
only upon presentation and surrender of the unpaid Bonds uncancelled and
free of any adverse claim, together with an instrument of assignment in
satisfactory form, so as to permit ownership of such Bonds to be
registered in the name of Ambac Assurance or its nominee. In cases where
Bonds are issuable only in a form whereby interest is payable to
registered holders or their assigns, Ambac Assurance shall pay interest
only upon presentation of proof that the claimant is the person entitled
to the payment of interest on the Bonds and delivery of an instrument of
assignment, in satisfactory form, transferring to Ambac Assurance all
right under such Bonds to receive the interest in respect of which the
insurance payment was made.
Ambac Assurance is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in fifty states, the District of
Columbia and the Commonwealth of Puerto Rico, with admitted assets of
approximately $3,462,875,000 (unaudited) and statutory capital of
approximately $1,970,343,000 (unaudited) as of March 31, 1999. Statutory
capital consists of Ambac Assurance's policyholders' surplus and
statutory contingency reserve. Ambac Assurance is a wholly owned
subsidiary of Ambac Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's have both assigned a
triple-A claims-paying ability rating to Ambac Assurance.
On December 18, 1997, all of the outstanding shares of Construction Loan
Insurance Corporation (which previously owned all of the outstanding
shares of Connie Lee Insurance Company) were merged into Connie Lee
Holdings, Inc. ("Connie Lee"). Connie Lee is a wholly-owned subsidiary
of Ambac Assurance Corporation, a Wisconsin-domiciled insurance company.
Copies of Ambac Assurance's financial statements prepared in accordance
with statutory accounting standards are available from Ambac Assurance.
The address of Ambac Assurance's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York, New
York 10004 and (212) 668-0340.
The information relating to Ambac Assurance contained above has been
furnished by Ambac Assurance. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any
adverse changes in such information, subsequent to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or Ambac
Assurance has applied its own standards which are not necessarily the
same as the criteria used in regard to the selection of bonds by the
Sponsor. This decision is made prior to the Initial Date of Deposit, as
bonds not covered by such insurance are not deposited in an Insured
Trust, unless such bonds are Preinsured Bonds. The insurance obtained by
an Insured Trust covers Bonds deposited in such Trust and physically
delivered to the Trustee in the case of bearer bonds or registered in
the name of the Trustee or its nominee or delivered along with an
assignment in the case of registered bonds or registered in the name of
the Trustee or its nominee in the case of Bonds held in book-entry form.
Page 12
Contracts to purchase Bonds are not covered by the insurance obtained by
an Insured Trust although Bonds underlying such contracts are covered by
insurance upon physical delivery to the Trustee.
Insurance obtained by each Insured Trust or by the Bond issuer, the
underwriters, the Sponsor or others does not guarantee the market value
of the Bonds or the value of the Units of such Trust. The insurance
obtained by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by the
Trustee, the insurance terminates as to such Bond on the date of sale.
In the event of a sale of a Bond insured by an Insured Trust, the
Trustee has the right to obtain Permanent Insurance upon the payment of
an insurance premium from the proceeds of the sale of such Bond. Except
as indicated below, insurance obtained by an Insured Trust has no effect
on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value to such insurance obtained by an
Insured Trust (including the right to obtain Permanent Insurance) for
the purpose of computing the price or redemption value of Units only if
the Bonds covered by such insurance are in default in payment of
principal or interest or, in the Sponsor's opinion, in significant risk
of such default. The value of the insurance will be equal to the
difference between (i) the market value of a Bond which is in default in
payment of principal or interest or in significant risk of such default
assuming the exercise of the right to obtain Permanent Insurance (less
the insurance premium attributable to the purchase of Permanent
Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering-How is the Public Offering
Price Determined?" herein for a more complete description of the
Evaluator's method of valuing defaulted Bonds and Bonds which have a
significant risk of default. Insurance on a Preinsured Bond is effective
as long as such Bond is outstanding. Therefore, any such insurance may
be considered to represent an element of market value in regard to the
Bonds thus insured, but the exact effect, if any, of this insurance on
such market value cannot be predicted.
A contract of insurance obtained by an Insured Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and/or Ambac Assurance and the Fund. Otherwise
neither Financial Guaranty nor its parent, FGIC Corporation, or any
affiliate thereof, nor Ambac Assurance nor its parent, Ambac, Inc., or
any affiliate thereof has any significant relationship, direct or
indirect, with the Fund or the Sponsor, except that the Sponsor has in
the past and may from time to time in the future, in the normal course
of its business, participate as sole underwriter or as manager or as a
member of underwriting syndicates in the distribution of new issues of
municipal bonds in which the investors or the affiliates of FGIC
Corporation and/or Ambac Inc. have or will be participants or for which
a policy of insurance guaranteeing the scheduled payment of interest and
principal has been obtained from Financial Guaranty and/or Ambac
Assurance. Neither the Fund nor the Units of a Trust nor the portfolio
of such Trust is insured directly or indirectly by FGIC Corporation
and/or Ambac Inc.
MBIA Insurance Corporation. MBIA Insurance Corporation ("MBIA
Corporation" or "MBIA") is the principal operating subsidiary of MBIA,
Inc., a New York Stock Exchange listed company. MBIA, Inc. is not
obligated to pay the debts of or claims against MBIA Corporation. MBIA
Corporation is domiciled in the State of New York and licensed to do
business in and subject to regulation under the laws of all fifty
states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the
United States and the Territory of Guam. MBIA has two European branches,
one in the Republic of France and the other in the Kingdom of Spain. New
York has laws prescribing minimum capital requirements, limiting classes
and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of
dividends by the insurer, changes in control and transactions among
affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for
certain periods of time.
As of December 31, 1998, MBIA had admitted assets of $6.5 billion
(audited), total liabilities of $4.2 billion (audited), and total
capital and surplus of $2.3 billion (audited) determined in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities. As of March 31, 1999, MBIA had admitted assets
of $6.7 billion (unaudited), total liabilities of $4.4 billion
(unaudited), and total capital and surplus of $2.3 billion (unaudited),
determined in accordance with statutory accounting practices prescribed
or permitted by insurance regulatory authorities. Copies of MBIA's
Page 13
financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504. The telephone number of MBIA is (914)
273-4545.
Effective February 17, 1998 MBIA acquired all of the outstanding stock
of Capital Markets Assurance Corporation ("CMAC"), a New York domiciled
financial guarantee insurance company, through a merger with its parent,
CapMAC Holdings, Inc. Pursuant to a reinsurance agreement, CMAC has
ceded all of its net insured risks (including any amounts due but unpaid
from third party reinsurers), as well as its unearned premiums and
contingency reserves, to MBIA. MBIA is not obligated to pay the debts of
or claims against CMAC.
Effective December 31, 1989, MBIA Inc. acquired Bond Investors Group,
Inc. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of Bond Investors Guaranty
Insurance Company (BIG), now known as MBIA Insurance Corp. of Illinois.
Through a reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves, to MBIA
and MBIA has reinsured BIG's net outstanding exposure.
Moody's Investors Service rates all bond issues insured by MBIA "Aaa"
and short-term loans "MIG 1," both designated to be of the highest
quality. Standard & Poor's rates all new issues insured by MBIA "AAA."
Capital Guaranty Insurance Company. On December 20, 1995, Capital
Guaranty Corporation ("CGC") merged with a subsidiary of Financial
Security Assurance Holdings Ltd. and Capital Guaranty Insurance Company,
CGC's principal operating subsidiary, changed its name to Financial
Security Assurance of Maryland Inc. ("FSA Maryland") and became a wholly-
owned subsidiary of Financial Security Assurance Inc. On September 30,
1997, Financial Security Assurance Inc. assumed all of the liabilities
of FSA Maryland and sold the FSA Maryland "shell company" to American
Capital Access, a wholly-owned subsidiary of American Capital Access
Holdings, Incorporated.
Financial Security Assurance. Financial Security Assurance Inc.
("Financial Security") is a monoline insurance company incorporated in
1984 under the laws of the State of New York. Financial Security is
licensed to engage in the financial guaranty insurance business in all
50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of
securities offered in domestic and foreign markets. In general,
financial guaranty insurance consists of the issuance of a guaranty of
scheduled payments of an issuer's securities, thereby enhancing the
credit rating of those securities, in consideration for payment of a
premium to the insurer. Financial Security and its subsidiaries
principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or
other assets having an ascertainable cash flow or market value.
Collateralized securities include public utility first mortgage bonds
and sale/leaseback obligation bonds. Municipal securities consist
largely of general obligation bonds, special revenue bonds and other
special obligations of state and local governments. Financial Security
insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy
Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed
company. Major shareholders of Holdings include Fund American
Enterprises Holdings, Inc., MediaOne Capital Corporation, XL Capital
Ltd. and The Tokio Marine and Fire Insurance Co. Ltd. No shareholder of
Financial Security is obligated to pay any debt of Financial Security or
its subsidiaries or any claim under any insurance policy issued by
Financial Security or its subsidiaries or to make any additional
contribution to the capital of Financial Security or its subsidiaries.
As of March 31, 1999, the total policyholders' surplus and contingency
reserves and the total unearned premium reserve, respectively, of
Financial Security and its consolidated subsidiaries were, in accordance
with statutory accounting principles, approximately $1,077,088,000
(unaudited) and $607,467,000 (unaudited), and the total shareholders'
equity and the unearned premium reserve, respectively, of Financial
Security and its consolidated subsidiaries were, in accordance with
generally accepted accounting principles, approximately $1,138,741,000
(unaudited), and $512,383,000 (unaudited). Copies of Financial
Security's financial statements may be obtained by writing to Financial
Security at 350 Park Avenue, New York, New York, 10022, Attention
Communications Department. Financial Security's telephone number is
(212) 826-0100.
Page 14
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security
or any of its operating insurance company subsidiaries are reinsured
among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject
to applicable statutory risk limitations. In addition, Financial
Security reinsures a portion of its liabilities under certain of its
financial guaranty insurance policies with other reinsurers under
various quota share treaties and on a transaction-by-transaction basis.
Such reinsurance is utilized as a risk management device and to comply
with certain statutory and rating agency requirements; it does not alter
or limit the obligations of Financial Security under any financial
guaranty insurance policy.
The claims-paying ability of Financial Security is rated "Aaa" by
Moody's Investors Service, Inc., and "AAA" by Standard & Poor's Rating
Services, Nippon Investors Service Inc. and Standard & Poor's
(Australia) Pty. Ltd. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by such
rating agencies.
Connie Lee Insurance Company. On December 18, 1997, all of the
outstanding shares of Construction Loan Insurance Corporation (which
previously owned all of the outstanding shares of Connie Lee Insurance
Company) were merged into Connie Lee Holdings, Inc. ("Connie Lee").
Connie Lee is a wholly-owned subsidiary of Ambac Assurance Corporation,
a Wisconsin-domiciled insurance company.
As of December 31, 1998, the total policyholders' surplus of Connie Lee
was $120,484,617 (unaudited) and total admitted assets were $234,425,505
(unaudited), as reported to the Commissioner of Insurance of the State
of Wisconsin in Connie Lee's financial statements prepared in accordance
with statutory accounting principles applicable to insurance companies.
Copies of these financial statements are available from Connie Lee upon
request.
Standard & Poor's has rated the claims-paying ability of Connie Lee "AAA".
Connie Lee makes no representation regarding the Bonds or the
advisability of investing in the Bonds. The above rating is not a
recommendation to buy, sell or hold the Connie Lee insured Bonds and
such rating is subject to the revision or withdrawal at any time by the
rating agency. Any downward revision or withdrawal of the rating may
have an adverse effect on the market price of the Connie Lee insured
Bonds.
The address of Connie Lee's administrative offices and its telephone
number are 1299 Pennsylvania Avenue, N.W., Washington, D.C. 20004 and
(800) 221-1854.
Because the Bonds in each Insured Trust are insured as to the scheduled
payment of principal and interest and on the basis of the financial
condition of the insurance companies referred to above, Standard &
Poor's has assigned to units of each Insured Trust its "AAA" investment
rating. This is the highest rating assigned to securities by Standard &
Poor's. See "Description of Bond Ratings." The obtaining of this rating
by each Insured Trust should not be construed as an approval of the
offering of the Units by Standard & Poor's or as a guarantee of the
market value of each Insured Trust or the Units of such Trust. Standard
& Poor's has indicated that this rating is not a recommendation to buy,
hold or sell Units nor does it take into account the extent to which
expenses of each Trust or sales by each Trust of Bonds for less than the
purchase price paid by such Trust will reduce payment to Unit holders of
the interest and principal required to be paid on such Bonds. Such
rating will be in effect for a period of thirteen months from the
Initial Date of Deposit of an Insured Trust and will, unless renewed,
terminate at the end of such period. There is no guarantee that the
"AAA" investment rating with respect to the Units of an Insured Trust
will be maintained.
An objective of portfolio insurance obtained by such Insured Trust is to
obtain a higher yield on the Bonds in the portfolio of such Trust than
would be available if all the Bonds in such portfolio had the Standard &
Poor's "AAA" and/or Moody's Investors Service, Inc. "Aaa" rating(s) and
at the same time to have the protection of insurance of scheduled
payment of interest and principal on the Bonds. There is, of course, no
certainty that this result will be achieved. Bonds in a Trust for which
insurance has been obtained by the Bond issuer, the underwriters, the
Sponsor or others (all of which were rated "AAA" by Standard & Poor's
and/or "Aaa" by Moody's Investors Service, Inc.) may or may not have a
higher yield than uninsured bonds rated "AAA" by Standard & Poor's or
"Aaa" by Moody's Investors Service, Inc. In selecting Bonds for the
portfolio of each Insured Trust, the Sponsor has applied the criteria
herein before described.
Page 15
What is the Federal Tax Status of Unit Holders?
See Part Three for each Trust.
FOR INFORMATION WITH RESPECT TO EXEMPTION FROM STATE OR OTHER LOCAL
TAXES, SEE PART THREE FOR EACH TRUST.
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to the Trusts, for which the Sponsor will be reimbursed in
amounts as set forth under "Special Trust Information" in each Part One
of this Prospectus, the Sponsor will not receive any fee in connection
with its activities relating to the Trusts. For Series 49 and all
subsequent Series, First Trust Advisors L.P., an affiliate of the
Sponsor, will receive an annual supervisory fee, which is not to exceed
the amount set forth in Part One for each Trust, for providing portfolio
supervisory services for the Trust. Such fee is based on the number of
Units outstanding in each Trust on January 1 of each year except for
Trusts which were established subsequent to the last January 1, in which
case the fee will be based on the number of Units outstanding in such
Trusts as of the respective Initial Dates of Deposit.
For each valuation of the Bonds in a Trust, the Evaluator will receive a
fee as indicated in Part One of this Prospectus. The Trustee pays
certain expenses of each Trust for which it is reimbursed by such Trust.
The Trustee will receive for its ordinary recurring services to a Trust
an annual fee computed as indicated in Part One of this Prospectus. For
a discussion of the services performed by the Trustee pursuant to its
obligations under the Indenture, reference is made to the material set
forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable monthly on or before each
Distribution Date from the Interest Account of each Trust to the extent
funds are available and then from the Principal Account of such Trust.
Since the Trustee has the use of the funds being held in the Principal
and Interest Accounts for future distributions, payment of expenses and
redemptions and since such Accounts are non-interest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Fund is expected to result from the
use of these funds. However, the Trustee may bear from its own resources
certain expenses relating to a Trust.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services and
supervisory services, such individual fees may exceed the actual costs
of providing such services for a Trust, but at no time will the total
amount received for such Services rendered to all unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year exceed
the actual cost to the Sponsor or its affiliate of supplying such
services in such year.
The annualized cost of the portfolio insurance obtained by the Fund for
each Insured Trust is indicated in Part One for each Trust in a Series
of the Fund. The portfolio insurance continues so long as such Trust
retains the Bonds thus insured. Premiums are payable monthly in advance
by the Trustee on behalf of such Trust. As Bonds in the portfolio are
redeemed by their respective issuers or are sold by the Trustee, the
amount of premium will be reduced in respect of those Bonds no longer
owned by and held in the Trust which were insured by insurance obtained
by such Trust. Preinsured Bonds for which insurance has been obtained
from Financial Guaranty and/or Ambac Assurance or, beginning with Series
25 and all subsequent Series, other insurers, are not insured by such
Trust. The premium payable for Permanent Insurance will be paid solely
from the proceeds of the sale of such Bond in the event the Trustee
exercises the right to obtain Permanent Insurance on a Bond. The
premiums for such Permanent Insurance with respect to each Bond will
decline over the life of the Bond. An Advantage Trust is not insured;
accordingly, there are no premiums for insurance payable by such Trust.
The following additional charges are or may be incurred by a Trust: all
expenses (including legal and annual auditing expenses) of the Trustee
incurred in connection with its responsibilities under the Indenture,
except in the event of negligence, bad faith or willful misconduct on
its part; the expenses and costs of any action undertaken by the Trustee
to protect the Trust and the rights and interests of the Unit holders;
Page 16
fees of the Trustee for any extraordinary services performed under the
Indenture; indemnification of the Trustee for any loss, liability or
expense incurred by it without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with its
acceptance or administration of the Trust; indemnification of the
Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; all taxes and other government charges imposed upon the Bonds
or any part of the Trust (no such taxes or charges are being levied or
made or, to the knowledge of the Sponsor, are contemplated); and
expenditures incurred in contacting Unit holders upon termination of the
Trust. The above expenses and the Trustee's annual fee, when paid or
owing to the Trustee, are secured by a lien on the Trust. In addition,
the Trustee is empowered to sell Bonds of a Trust in order to make funds
available to pay all these amounts if funds are not otherwise available
in the Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required, the
Indenture requires the accounts of each Trust to be audited on an annual
basis at the expense of the Trust by independent auditors selected by
the Sponsor. So long as the Sponsor is making a secondary market for
Units, the Sponsor shall bear the cost of such annual audits to the
extent such cost exceeds $.50 per Unit. Unit holders of a Trust covered
by an audit may obtain a copy of the audited financial statements from
the Trustee upon request.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although it is not obligated to do so, the Sponsor intends to maintain a
market for the Units and continuously to offer to purchase Units at
prices, subject to change at any time, based upon the aggregate bid
price of the Bonds in the portfolio of each Trust plus the amount of
Purchased Interest of a Trust (if any) and interest accrued to the date
of settlement. All expenses incurred in maintaining a market, other than
the fees of the Evaluator and the costs of the Trustee in transferring
and recording the ownership of Units, will be borne by the Sponsor. If
the supply of Units exceeds demand, or for some other business reason,
the Sponsor may discontinue purchases of Units at such prices. IF A UNIT
HOLDER WISHES TO DISPOSE OF HIS UNITS, HE SHOULD INQUIRE OF THE SPONSOR
AS TO CURRENT MARKET PRICES PRIOR TO MAKING A TENDER FOR REDEMPTION TO
THE TRUSTEE. Prospectuses relating to certain other bond funds indicate
an intention, subject to change, on the part of the respective sponsors
of such funds to repurchase units of those funds on the basis of a price
higher than the bid prices of the securities in the funds. Consequently,
depending upon the prices actually paid, the repurchase price of other
sponsors for units of their funds may be computed on a somewhat more
favorable basis than the repurchase price offered by the Sponsor for
Units of a Trust in secondary market transactions. As in the First Trust
Combined Series, the purchase price per unit of such bond funds will
depend primarily on the value of the securities in the Portfolio of the
applicable Trust.
The Public Offering Price of Units of a Trust will be determined by
adding to the Evaluator's determination of the aggregate bid price of
the Bonds in a Trust plus the amount of Purchased Interest of a Trust
(if any) and the appropriate sales charge determined in accordance with
the schedule set forth below, based upon the number of years remaining
to the maturity of each Bond in the portfolio of the Trust, adjusting
the total to reflect the amount of any cash held in or advanced to the
principal account of the Trust and dividing the result by the number of
Units of such trust then outstanding. The minimum sales charge on Units
will be 3% of the Public Offering Price (equivalent to 3.093% of the net
amount invested). For purposes of computation, Bonds will be deemed to
mature on their expressed maturity dates unless: (a) the Bonds have been
called for redemption or funds or securities have been placed in escrow
to redeem them on an earlier call date, in which case such call date
will be deemed to be the date upon which they mature; or (b) such Bonds
are subject to a "mandatory tender," in which case such mandatory tender
will be deemed to be the date upon which they mature. The offering price
of Bonds in the Trust may be expected to be greater than the bid price
of such Bonds by approximately 1-2% of the aggregate principal amount of
such Bonds.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each of the various
Bonds in the Trusts based upon the maturities of such bonds, in
accordance with the following schedule:
Page 17
<TABLE>
<CAPTION>
Secondary Offering Period Sales Charge
______________________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ ___________ ___________
<S> <C> <C>
0 Months to 1 Year 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 but less than 9 5.00 5.263
9 but less than 10 5.50 5.820
10 or more 5.80 6.157
</TABLE>
There will be no reduction of the sales charges for volume purchases. A
dealer will receive from the Sponsor a dealer concession of 70% of the
total sales charges for Units sold by such dealer and dealers will not
be eligible for additional concessions for Units sold pursuant to the
above schedule.
An investor may aggregate purchases of Units of two or more consecutive
series of a particular State, National, Discount, Intermediate, Long
Intermediate or Short Intermediate Trust for purposes of calculating the
discount for volume purchases listed above. Additionally, with respect
to the employees, officers and directors (including their immediate
family members, defined as spouses, children, grandchildren, parents,
grandparents, mothers-in-law, fathers-in-law, sons-in-law and daughters-
in-law, and trustees, custodians or fiduciaries for the benefit of such
person) of the Sponsor and broker/dealers and their subsidiaries and
vendors providing services to the Sponsor, may purchase Units of the
Trusts during the secondary market at the Public Offering Price less the
concession the Sponsor typically allows broker/dealers.
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer. The reduced sales charge structure will apply on all
purchases of Units in a Trust by the same person on any one day from the
Sponsor or any one broker/dealer and, for purposes of calculating the
applicable sales charge, purchases of Units in the Fund will be
aggregated with concurrent purchases by the same person from the Sponsor
or such broker/dealer of Units in any series of tax-exempt unit
investment trusts sponsored by Nike Securities L.P. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser will be deemed, for the purpose of calculating
the applicable sales charge, to be additional purchases by the
purchaser. The reduced sales charges will also be applicable to a
trustee or other fiduciary purchasing securities for a single trust
estate or single fiduciary account.
From time to time the Sponsor may implement programs under which
broker/dealers and other selling agents of the Fund may receive nominal
awards from the Sponsor for each of their registered representatives who
have sold a minimum number of UIT Units during a specified time period.
In addition, at various times the Sponsor may implement other programs
under which the sales force of broker/dealers and other selling agents
may be eligible to win other nominal awards for certain sales efforts,
or under which the Sponsor will reallow to any such broker/dealer or
other selling agent that sponsors sales contests or recognition programs
conforming to criteria established by the Sponsor, or participates in
sales programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such person at
the public offering price during such programs. Also, the Sponsor in its
discretion may from time to time pursuant to objective criteria
established by the Sponsor pay fees to qualifying broker/dealers and
other selling agents for certain services or activities which are
primarily intended to result in sales of Units of the Trusts. Such
payments are made by the Sponsor out of its own assets, and not out of
the assets of the Trusts. These programs will not change the price Unit
holders pay for their Units or the amount that the Trusts will receive
from the Units sold.
A comparison of tax-free and equivalent taxable estimated current
returns and estimated long-term returns with the returns on various
taxable investments is one element to consider in making an investment
decision. The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on the Trust and
returns over specified periods on other similar Trusts sponsored by Nike
Page 18
Securities L.P. with returns on taxable investments such as corporate or
U.S. Government bonds, bank CDs and money market accounts or money
market funds, each of which has investment characteristics that may
differ from those of the Trust. U.S. Government bonds, for example, are
backed by the full faith and credit of the U.S. Government and bank CDs
and money market accounts are insured by an agency of the federal
government. Money market accounts and money market funds provide
stability of principal, but pay interest at rates that vary with the
condition of the short-term debt market. The investment characteristics
of the Trust are described more fully elsewhere in this Prospectus.
The aggregate price of the Bonds in each Trust is determined by the
evaluator (the "Evaluator"), on the basis of bid prices (1) on the basis
of current market prices for the Bonds obtained from dealers or brokers
who customarily deal in bonds comparable to those held by the Trust; (2)
if such prices are not available for any of the Bonds, on the basis of
current market prices for comparable bonds; (3) by determining the value
of the Bonds by appraisal; or (4) by any combination of the above.
Unless Bonds are in default in payment of principal or interest or, in
the Sponsor's opinion, in significant risk of such default, the
Evaluator will not attribute any value to the insurance obtained by an
Insured Trust. On the other hand, the value of insurance obtained by the
issuer of Bonds in a Trust is reflected and included in the market value
of such Bonds.
The Evaluator will consider in its evaluation of Bonds which are in
default in payment of principal or interest or, in the Sponsor's
opinion, in significant risk of such default (the "Defaulted Bonds") and
which are covered by insurance obtained by an Insured Trust, the value
of the insurance guaranteeing interest and principal payments. The value
of the insurance will be equal to the difference between (i) the market
value of Defaulted Bonds assuming the exercise of the right to obtain
Permanent Insurance (less the insurance premium attributable to the
purchase of Permanent Insurance) and (ii) the market value of such
Defaulted Bonds not covered by Permanent Insurance. In addition, the
Evaluator will consider the ability of Financial Guaranty and/or Ambac
Assurance to meet its commitments under an Insured Trust's insurance
policy, including the commitments to issue Permanent Insurance. It is
the position of the Sponsor that this is a fair method of valuing the
Bonds and the insurance obtained by an Insured Trust and reflects a
proper valuation method in accordance with the provisions of the
Investment Company Act of 1940.
The Evaluator will be requested to make a determination of the aggregate
price of the Bonds in each Trust, on a bid price basis, as of the close
of trading on the New York Stock Exchange on each day on which it is
open, effective for all sales, purchases or redemptions made subsequent
to the last preceding determination.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. A person will
become owner of the Units on the date of settlement provided payment has
been received. Cash, if any, made available to the Sponsor prior to the
date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934.
Delivery of Certificates representing Units so ordered will be made
three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units Be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
Units repurchased in the secondary market (see "Public Offering-Will
There be a Secondary Market?") may be offered by this Prospectus at the
secondary market public offering price determined in the manner
described above.
It is the intention of the Sponsor to qualify Units of the Fund for sale
in a number of states. Sales will be made to dealers and others at
prices which represent a concession or agency commission of 4.0% of the
Public Offering Price per Unit for each State, Discount or National
Trust, 3.0% of the Public Offering Price for an Intermediate or Long
Intermediate Trust, and 2.5% of the Public Offering Price per Unit for a
Short Intermediate Trust. Notwithstanding the foregoing, broker/dealers
or other selling agents who purchase, in the aggregate, $250,000 of the
Trusts on any day will receive a volume concession or agency commission
of $40.00 per Unit. However, resales of Units of a Trust by such
broker/dealers and other selling agents to the public will be made at
the Public Offering Price described in this Prospectus. The Sponsor
Page 19
reserves the right to change the amount of the concession or agency
commission from time to time. Certain commercial banks are making Units
of the Fund available to their customers on an agency basis. A portion
of the sales charge paid by these customers is retained by or remitted
to the banks in the amounts indicated in the amounts indicated above.
Under the Glass-Steagall Act, banks are prohibited from underwriting
Units; however, the Glass-Steagall Act does permit certain agency
transactions and the banking regulators have not indicated that these
particular agency transactions are not permitted under such Act. In
Texas and in certain other states, any banks making Units available must
be registered as broker/dealers under state law.
What are the Sponsor's Profits?
The Sponsor and participating dealers will receive a maximum gross sales
commission equal to 5.8% of the Public Offering Price of the Units of
each State Trust (equivalent to 6.157% of the net amount invested), 5.8%
of the Public Offering Price of the Units of a National or Discount
Trust (equivalent to 6.157% of the net amount invested), 4.7% of the
Public Offering Price of the Units of an Intermediate or Long
Intermediate Trust (equivalent to 4.932% of the net amount invested),
and 3.7% of the Public Offering Price of the Units of a Short
Intermediate Trust (equivalent to 3.842% of the net amount invested)
less any reduced sales charge for quantity purchases as described under
"Public Offering-How is the Public Offering Price Determined?"
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased (based on the bid prices of the Bonds
in each Trust) and the price at which Units are resold (which price is
also based on the bid prices of the Bonds in each Trust and includes a
maximum sales charge of 5.8% for a State Trust, 5.8% for a National or
Discount Trust, 4.7% for an Intermediate or Long Intermediate Trust and
3.7% for a Short Intermediate Trust) or redeemed. The secondary market
public offering price of Units may be greater or less than the cost of
such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How are Certificates Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units is evidenced by registered certificates executed by
the Trustee and the Sponsor. Delivery of certificates representing Units
ordered for purchase is normally made three business days following such
order or shortly thereafter. Certificates are transferable by
presentation and surrender to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer.
Certificates to be redeemed must be properly endorsed or accompanied by
a written instrument or instruments of transfer. A Unit holder must sign
exactly as his name appears on the face of the certificate with the
signature guaranteed by a participant in the Securities Transfer Agents
Medallion Program ("STAMP") or such other signature guaranty program in
addition to, or in substitution for, STAMP, as may be accepted by the
Trustee. In certain instances the Trustee may require additional
documents such as, but not limited to, trust instruments, certificates
of death, appointments as executor or administrator or certificates of
corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification. Certificates
for Units will bear an appropriate notation on their face indicating
which plan of distribution has been selected in respect thereof. When a
change is made, the existing certificate must be surrendered to the
Trustee and a new certificate issued to reflect the then currently
effective plan of distribution. There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued to
replace destroyed, stolen or lost certificates, the Unit holder may be
required to furnish indemnity satisfactory to the Trustee and pay such
expenses as the Trustee may incur. Mutilated certificates must be
surrendered to the Trustee for replacement.
Page 20
How are Interest and Principal Distributed?
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with the
Distribution Dates being the last day of the month in which the related
Record Date occurs. It is anticipated that an amount equal to
approximately one-half of the amount of net annual interest income per
Unit will be distributed on or shortly after each Distribution Date to
Unit holders of record on the preceding Record Date. Record Dates for
monthly distributions of interest are the fifteenth day of each month.
The Distribution Dates for distributions of interest under the monthly
plan is the last day of each month in which the related Record Date
occurs. See "Special Trust Information" appearing in each Part I of this
Prospectus.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the Trustee will furnish each Unit holder a card to be returned to
the Trustee not more than thirty nor less than ten days before the end
of such month. Unit holders desiring to change the plan of distribution
in which they are participating may so indicate on the card and return
same, together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate are
not returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve months.
The pro rata share of cash in the Principal Account of each Trust will
be computed as of the fifteenth day of each month, and distributions to
the Unit holders of such Trust as of such Record Date will be made on
the dates specified in Part One. Proceeds from the disposition of any of
the Bonds of such Trust (less any premiums due with respect to Bonds for
which the Trustee has exercised the right to obtain Permanent Insurance)
received after such Record Date and prior to the following Distribution
Date will be held in the Principal Account of such Trust and not
distributed until the next Distribution Date. The Trustee is not
required to make a distribution from the Principal Account of a Trust
unless the amount available for distribution shall equal at least $1.00
per Unit.
The Trustee will credit to the Interest Account of each Trust all
interest received by such Trust, including that part of the proceeds
(including insurance proceeds if any, paid to an Insured Trust) of any
disposition of Bonds which represents accrued interest. Other receipts
will be credited to the Principal Account of such Trust. The
distribution to the Unit holders of a Trust as of each Record Date will
be made on the following Distribution Date or shortly thereafter and
shall consist of an amount substantially equal to such portion of the
holder's pro rata share of the estimated annual income of such Trust
after deducting estimated expenses. Except through an advancement of its
own Funds, the Trustee has no cash for distribution to Unit holders
until it receives interest payments on the Bonds in a Trust. The Trustee
shall be reimbursed, without interest, for any such advances from funds
in the Interest Account of such Trust on the ensuing Record Date.
Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution Date
after the purchase, under the applicable plan of distribution. The
Trustee is not required to pay interest on funds held in the Principal
or Interest Account of a Trust (but may itself earn interest thereon and
therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of each Trust and, to the extent funds are not
sufficient therein, from the Principal Account of each Trust, amounts
necessary to pay the expenses of such Trust. The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the
Trustee may withdraw from the Interest Account and the Principal Account
of a Trust such amounts as may be necessary to cover redemption of Units
of such Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an existing account. For
example, at a Unit holder's direction, the Trustee would distribute
Page 21
automatically on the applicable distribution date interest income or
principal on the participant's Units to, among other investment
vehicles, a Unit holder's checking, bank savings, money market,
insurance, reinvestment or any other account. All such distributions, of
course, are subject to the minimum investment and sales charges, if any,
of the particular investment vehicle to which distributions are
directed. The Trustee will notify the participant of each distribution
pursuant to the Universal Distribution Option. The Trustee will
distribute directly to the Unit holder any distributions which are not
accepted by the specified investment vehicle. A participant may at any
time, by so notifying the Trustee in writing, elect to terminate his
participation in the Universal Distribution Option and receive directly
future distributions on his Units.
Distribution Reinvestment Option. The Sponsor has entered into an
arrangement with Oppenheimer Management Corporation, which permits any
Unit holder of a Trust to elect to have each distribution of interest
income or principal on his Units automatically reinvested in shares of
either the Oppenheimer Intermediate Tax-Exempt Bond Fund (the
"Intermediate Series") or the Oppenheimer Insured Tax-Exempt Bond Fund
(the "Insured Series"). Oppenheimer Management Corporation is the
investment adviser of each Series which are open-end, diversified
management investment companies. The investment objective of the
Intermediate Series is to provide a high level of current interest
income exempt from Federal income tax through the purchase of investment
grade securities. The investment objective of the Insured Series is to
provide as high a level of current interest income exempt from Federal
income tax as is consistent with the assurance of the scheduled receipt
of interest and principal through insurance and the preservation of
capital (the income of either Series may constitute an item of
preference for determining the Federal alternative minimum tax). The
objectives and policies of each Series are presented in more detail in
the prospectus for each Series.
Each person who purchases Units of a Trust may contact the Trustee to
request a prospectus describing each Series and a form by which such
person may elect to become a participant in a Distribution Reinvestment
Option with respect to a Series. Each distribution of interest income or
principal on the participant's Units will automatically be applied by
the Trustee to purchase shares (or fractions thereof) of a Series
without a sales charge and with no minimum investment requirements.
The shareholder service agent for each Series will mail to each
participant in the Distribution Reinvestment Option confirmations of all
transactions undertaken for such participant in connection with the
receipt of distributions from The First Trust Combined Series and the
purchase of shares (or fractions thereof) of a Series.
A participant may at any time, by so notifying the Trustee in writing,
elect to terminate his participation in the Distribution Reinvestment
Option and receive future distributions on his Units in cash. There will
be no charge or other penalty for such termination. The Sponsor and
Oppenheimer Management Corporation each have the right to terminate the
Distribution Reinvestment Option, in whole or in part.
It should be remembered that even if distributions are reinvested
through the Universal Distribution Option or the Distribution
Reinvestment Option they are still treated as distributions for income
tax purposes.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after
the last business day of each calendar year, the Trustee will furnish to
each person who at any time during the calendar year was a Unit holder
of a Trust of record, a statement as to (1) the Interest Account:
interest received by such Trust (including amounts representing interest
received upon any disposition of Bonds of such Trust), the amount of
such interest representing insurance proceeds (if applicable),
Page 22
deductions for payment of applicable taxes and for fees and expenses of
the Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount
and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (2) the
Principal Account: the dates of disposition of any Bonds of such Trust
and the net proceeds received therefrom (excluding any portion
representing interest and the premium attributable to the exercise of
the right, if applicable, to obtain Permanent Insurance), deduction for
payment of applicable taxes and for fees and expenses of the Trust,
redemptions of Units, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) the Bonds held and the
number of Units of such Trust outstanding on the last business day of
such calendar year; (4) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (5) the
amounts actually distributed during such calendar year from the Interest
Account and from the Principal Account of such Trust, separately stated,
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Date for such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
Each distribution statement will reflect pertinent information in
respect of each plan of distribution so that Unit holders may be
informed regarding the results of the other plan or plans of distribution.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
Trustee at its unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, duly endorsed or
accompanied by proper instruments of transfer with signature guaranteed
as explained above (or by providing satisfactory indemnity, as in
connection with lost, stolen or destroyed certificates), and payment of
applicable governmental charges, if any. No redemption fee will be
charged. On the third day following such tender, the Unit holder will be
entitled to receive in cash an amount for each Unit equal to the
Redemption Price per Unit next computed after receipt by the Trustee of
such tender of Units. The "date of tender" is deemed to be the date on
which Units are received by the Trustee (if such day is a day on which
the New York Stock Exchange is open for trading), except that as regards
Units received after the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time or as of any earlier closing time on a
day on which the New York Stock Exchange is scheduled in advance to
close at such earlier time), the date of tender is the next day on which
such Exchange is open for trading and such Units will be deemed to have
been tendered to the Trustee on such day for redemption at the
redemption price computed on that day. Units so redeemed shall be
cancelled.
Purchased Interest (if any) and other accrued interest to the settlement
date paid on redemption shall be withdrawn from the Interest Account of
a Trust or, if the balance therein is insufficient, from the Principal
Account of such Trust. All other amounts paid on redemption shall be
withdrawn from the Principal Account of the Trust.
The Redemption Price per Unit will be determined on the basis of the bid
price of the Bonds in a Trust and the amount of Purchased Interest of
the Trust (if any), as of the close of trading on the New York Stock
Exchange on the date any such determination is made. The Redemption
Price per Unit is the pro rata share of each Unit determined by the
Trustee on the basis of (1) the cash on hand in the Trust or moneys in
the process of being collected, (2) the value of the Bonds in such Trust
based on the bid prices of the Bonds, except for those cases in which
the value of the insurance, if applicable, has been added, and (3)
Purchased Interest (if any) and any other interest accrued thereon, less
(a) amounts representing taxes or other governmental charges payable out
of such Trust, (b) the accrued expenses of such Trust, and (c) cash held
for distribution to Unit holders of record as of a date prior to the
evaluation then being made. The Evaluator may determine the value of the
Bonds in a Trust (1) on the basis of current bid prices of the Bonds
obtained from dealers or brokers who customarily deal in bonds
comparable to those held by such Trust, (2) on the basis of bid prices
for bonds comparable to any Bonds for which bid prices are not
available, (3) by determining the value of the Bonds by appraisal, or
(4) by any combination of the above. In determining the Redemption Price
per Unit for an Insured Trust, no value will be attributed to the
portfolio insurance covering the Bonds in such Trust unless such Bonds
are in default in payment of principal or interest or in significant
risk of such default. On the other hand, Bonds insured under a policy
obtained by the Bond issuer, the underwriters, the Sponsor or others are
entitled to the benefits of such insurance at all times and such
benefits are reflected and included in the market value of such Bonds.
See "Why and How are the Insured Trusts Insured?" For a description of
Page 23
the situations in which the evaluator may value the insurance obtained
by an Insured Trust, see "Public Offering-How is the Public Offering
Price Determined?"
The difference between the bid and offering prices of such Bonds may be
expected to average 1-2% of the principal amount. In the case of
actively traded bonds, the difference may be as little as 1/2 of 1% and,
in the case of inactively traded bonds, such difference usually will not
exceed 3%. Therefore, the price at which Units may be redeemed could be
less than the price paid by the Unit holder and may be less than the par
value of the Securities represented by the Units so redeemed.
The Trustee is empowered to sell underlying Bonds in a Trust in order to
make funds available for redemption. To the extent that Bonds are sold,
the size and diversity of such Trust will be reduced. Such sales may be
required at a time when Bonds would not otherwise be sold and might
result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or an emergency exists, as a result of which
disposal or evaluation of the Bonds is not reasonably practicable, or
for such other periods as the Securities and Exchange Commission may by
order permit. Under certain extreme circumstances, the Sponsor may apply
to the Securities and Exchange Commission for an order permitting a full
or partial suspension of the right of Unit holders to redeem their Units.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, which for certain
Trusts includes Purchased Interest, it may purchase such Units by
notifying the Trustee before 1:00 p.m. Eastern time on the next
succeeding business day and by making payment therefor to the Unit
holder not later than the day on which the Units would otherwise have
been redeemed by the Trustee. Units held by the Sponsor may be tendered
to the Trustee for redemption as any other Units. Any profit or loss
resulting from the resale or redemption of such Units will belong to the
Sponsor.
How May Bonds be Removed from the Fund?
The Trustee is empowered to sell such of the Bonds in each Trust on a
list furnished by the Sponsor as the Trustee in its sole discretion may
deem necessary to meet redemption requests or pay expenses to the extent
funds are unavailable. As described in the following paragraph and in
certain other unusual circumstances for which it is determined by the
Depositor to be in the best interests of the Unit holders or if there is
no alternative, the Trustee is empowered to sell Bonds in a Trust which
are in default in payment of principal or interest or in significant
risk of such default and for which value has been attributed to the
insurance, if any, obtained by the Trust. See "Rights of Unit Holders-
How May Units be Redeemed?" The Sponsor is empowered, but not obligated,
to direct the Trustee to dispose of Bonds in a Trust in the event of
advanced refunding. The Sponsor may from time to time act as agent for a
Trust with respect to selling Bonds out of a Trust. From time to time,
the Trustee may retain and pay compensation to the Sponsor subject to
the restrictions under the Investment Company Act of 1940, as amended.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor, either pursuant to
the portfolio insurance, if any, or otherwise, within thirty days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails
to instruct the Trustee to sell or to hold such Bond within thirty days
after notification by the Trustee to the Sponsor of such default, the
Trustee may, in its discretion, sell the defaulted Bond and not be
liable for any depreciation or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made by an
issuer of any of the Bonds to issue new obligations in exchange and
substitution for any Bonds pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept such an offer
or to take any other action with respect thereto as the Sponsor may deem
proper if the issuer is in default with respect to such Bonds or in the
written opinion of the Sponsor the issuer will probably default in
respect to such Bonds in the foreseeable future. Any obligations so
received in exchange or substitution will be held by the Trustee subject
to the terms and conditions in the Indenture to the same extent as Bonds
Page 24
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under "What
is the First Trust Combined Series?" for Failed Bonds, the acquisition
by a Trust of any securities other than the Bonds initially deposited is
prohibited.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, the 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, Templeton Growth
and Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities
Trust and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974 and to
date more than $25 billion in First Trust unit investment trusts have
been deposited. The Sponsor's employees include a team of professionals
with many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1998, the total
partners' capital of Nike Securities L.P. was $18,506,548 (audited).
This paragraph relates only to the Sponsor and not to the Trust or to
any series thereof or to any other Underwriter. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Bonds. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the Fund which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
Page 25
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trusts as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East Roosevelt
Road, Suite 200, Wheaton, Illinois 60187. The Evaluator may resign or
may be removed by the Sponsor and the Trustee, in which event the
Sponsor and the Trustee are to use their best efforts to appoint a
satisfactory successor. Such resignation or removal shall become
effective upon the acceptance of appointment by the successor Evaluator.
If upon resignation of the Evaluator no successor has accepted
appointment within thirty days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee), provided that
the Indenture is not amended to increase the number of Units of any
Trust issuable thereunder or to permit the deposit or acquisition of
securities either in addition to or in substitution for any of the Bonds
of any Trust initially deposited in a Trust, except for the substitution
of certain refunding securities for Bonds or New Bonds for Failed Bonds.
In the event of any amendment, the Trustee is obligated to notify
promptly all Unit holders of the substance of such amendment.
Each Trust may be liquidated at any time by consent of 100% of the Unit
holders of such Trust or by the Trustee when the value of such Trust, as
shown by any evaluation, is less than 20% of the aggregate principal
amount of the Bonds initially deposited in the Trust or by the Trustee
in the event that Units of a Trust not yet sold aggregating more than
60% of the Units of such Trust are tendered for redemption by the
Underwriters, including the Sponsor. If a Trust is liquidated because of
the redemption of unsold Units of the Trust by the Underwriters, the
Sponsor will refund to each purchaser of Units of such Trust the entire
sales charge paid by such purchaser. The Indenture will terminate upon
the redemption, sale or other disposition of the last Bond held
thereunder, but in no event shall it continue beyond the Mandatory
Termination Date as indicated in Part One for each Trust. In the event
of termination, written notice thereof will be sent by the Trustee to
all Unit holders of such Trust. Within a reasonable period after
termination, the Trustee will sell any Bonds remaining in the Trust,
and, after paying all expenses and charges incurred by such Trust, will
distribute to each Unit holder of such Trust (including the Sponsor if
it then holds any Units), upon surrender for cancellation of his
Certificate for Units, his pro rata share of the balances remaining in
the Interest and Principal Accounts of such Trust, all as provided in
the Indenture.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Booth & Baron, 122 East 42nd Street, Suite 1507, New York, New York
10168, acts as special counsel for the Fund for New York tax matters for
Series 1, 2 and 3 of the Fund. Winston & Strawn (previously named Cole &
Page 26
Deitz), 175 Water Street, New York, New York 10038 acts as counsel for
the Trustee and as special counsel for the Fund for New York Tax matters
for Series 4-125 of the Fund. Carter, Ledyard & Milburn, 2 Wall Street,
New York, New York 10005, acts as counsel for the Trustee and as special
counsel for the Fund for New York tax matters for Series 126 and
subsequent Series of the Fund. For information with respect to state and
local tax matters, including the State Trust special counsel for such
matters, see Part Three for each Trust.
Experts
The statements of net assets, including the portfolios, of each Trust
contained in Part One of the Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere therein and in the
Registration Statement, and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and
auditing.
Page 27
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follow:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
l. 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;
ll. Nature of and provisions of the obligation;
lll. 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.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
_____________
*As published by the rating companies.
**Bonds insured by Financial Guaranty Insurance Company, Ambac Assurance
Corporation, Municipal Bond Investors Assurance Corporation, Connie Lee
Insurance Company, Financial Security Assurance and Capital Guaranty
Insurance Company are automatically rated "AAA" by Standard & Poor's.
Page 28
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. rating symbols and their meanings follow:
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat large than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1-Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
Baa-Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at
the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Con.(---)-Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally.
These are bonds secured by (a) earnings of projects under construction,
(b) earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis
of condition.
Fitch Investors Service, Inc. A brief description of the applicable
Fitch Investors Service, Inc. rating symbols and their meanings follow:
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments.
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
Page 29
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to
show relative standing within these major rating categories.
Page 30
CONTENTS:
The First Trust Combined Series:
What is The First Trust Combined Series? 3
What are Estimated Long-Term Return and
Estimated Current Return? 8
How are Purchased Interest and Accrued
Interest Treated? 9
Why and How are the Insured Trusts Insured? 10
What is the Federal Tax Status of Unit Holders? 16
What are the Expenses and Charges? 16
Public Offering:
How is the Public Offering Price Determined? 17
How are Units Distributed? 19
What are the Sponsor's Profits? 20
Rights of Unit Holders:
How are Certificates Issued and Transferred? 20
How are Interest and Principal Distributed? 21
How can Distributions to Unit Holders be
Reinvested? 21
What Reports will Unit Holders Receive? 22
How May Units be Redeemed? 23
How May Units be Purchased by the Sponsor? 24
How May Bonds be Removed from the Fund? 24
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 25
Who is the Trustee? 25
Limitations on Liabilities of Sponsor and Trustee 25
Who is the Evaluator? 26
Other Information:
How May the Indenture be Amended or
Terminated? 26
Legal Opinions 26
Experts 27
Description of Bond Ratings 28
__________
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 INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST(REGISTERED TRADEMARK)
THE FIRST TRUST
COMBINED SERIES
Prospectus
Part Two
May 28, 1999
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE
AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 31
COLORADO TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated December 31, 1998 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 Units. If the Unit holder disposes of a Unit, he is deemed thereby
to have disposed of his entire pro rata interest in all assets of the
Trust involved including his 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 advisers 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 Units are
sold or redeemed for an amount equal to or less than his 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 Unit, and the price the Unit holder pays for his
Unit. Unit holders should consult their tax advisers 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
amount (if any) by which the stated redemption price at maturity exceeds
Page 2
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 advisers regarding
these rules and their application.
Counsel for the Sponsor has also advised that under Section 265 of the
Code, interest on indebtedness incurred or continued to purchase or
carry Units of a Trust is not deductible for Federal income tax
purposes. The Internal Revenue Service has taken the position that such
indebtedness need not be directly traceable to the purchase or carrying
of Units (however, these rules generally do not apply to interest paid
on indebtedness incurred to purchase or improve a personal residence).
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 advisers.
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 tax adviser.
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 Social Security benefits in gross income whether or not he receives
any tax-exempt interest. A taxpayer whose modified adjusted gross income
(after inclusion of tax-exempt interest) does not exceed the base amount
need not include any Social Security benefits in gross income.
Page 3
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 advisers 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 advisers with
respect to the particular tax consequences to them, including the
corporate alternative minimum tax, the Superfund Tax and the branch
profits tax imposed by Section 884 of the Code.
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 advisers 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
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
Page 4
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.
Colorado Tax Status of Unit Holders
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited and held in each Trust. However, although Chapman
and Cutler expresses no opinion with respect to the issuance of the
Bonds, in rendering its opinion expressed herein, 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 (the "State Income Tax"). This opinion does
not address the taxation of persons other than full time residents of
Colorado.
At the time of the closing for each Colorado Trust, Chapman and Cutler,
Special Counsel to the Fund for Colorado tax matters, rendered an
opinion under then existing Colorado income tax law applicable to
taxpayers whose income is subject to Colorado income taxation
substantially to the effect that:
Because Colorado income tax law is based upon the Federal law, each
Colorado 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 computation described above:
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 in the hands of the Trustee;
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;
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;
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);
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
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.
Page 5
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.
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Colorado law. 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.
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. Based on data published by the Colorado Department of
Labor and Employment, total wage and salary employment in 1997 was
1,977,000 (seasonally adjusted). This was an increase of 76,600 from
1996. Services and trade were the number one and two largest growing
industries in Colorado in 1997, followed by the finance, insurance, and
real estate sector. Construction was the fourth largest source of
employment growth in 1997.
The annual average unemployment rate in Colorado from 1994 to 1996
remained stable at 4.2%. In 1997, the unemployment rate in Colorado
dropped to 3.3% while the nation's unemployment rate was 5.0%.
Colorado's job growth rate increased 4.0% in 1997, an increase from the
3.6% growth rate in 1996. In comparison, the job growth rate for the
United States in 1996 and 1997 was 2.0% and 2.3%, respectively. Total
nonagricultural employment in Colorado is expected to increase 3.9% in
1998.
Personal income rose 7.2% in Colorado during 1997 as compared with 5.8%
for the nation as a whole. In 1998, Colorado's personal income is
expected to increase 6.7%, outpacing the nation's 1998 estimated rate of
5.4%.
The year 1998 will look much like 1997. There will be some slowing of
population, housing starts and employment, but the outlook is still
strong.
Restrictions on Appropriations and Revenues. 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"). The Unappropriated Reserve requirement for
fiscal year 1991, 1992 and 1993 was set at 3% of total appropriations
from the General Fund. 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 2% for 1994 and 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.
The 1997 fiscal year ending General Fund balance was $375.1 million
prior to legislative change HB 98-1414. The restated 1997 ending fund
balance is $514.1 million or $347.4 million over the combined
Unappropriated Reserve and Emergency Reserve requirement. As required by
the new law, the revised ending fund balance does not net out the
state's first TABOR rebate. The new measure directs the state
controller's office to show TABOR refunds in the year they are to be
refunded, rather than the year they were incurred. Based on June 12,
1998 estimates, the 1998 fiscal year ending General Fund balance is
expected to be $823.6 million, or $646.6 million over the required
Unappropriated Reserve and Emergency Reserve.
Page 6
On November 3, 1992, voters in Colorado approved a constitutional
amendment (the "Amendment") which, in general, became effective December
31, 1992, and which could restrict 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 Amendment
limits increases in expenditures from the State General Fund and program
revenues (cash funds) to the growth in inflation plus the percentage
change in state population in the prior calendar year. 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.
Litigation concerning several issues relating to the Amendment was filed
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.
According to the Colorado Economic Perspective, Fourth Quarter, FY 1997-
98, June 12, 1998 (the "Economic Report"), inflation for 1996 was 3.5%
and population grew at the rate of 2.0% in Colorado. Accordingly, under
the Amendment, increases in State expenditures during the 1998 fiscal
year are limited to 5.5% over expenditures during the 1997 fiscal year.
The 1997 fiscal year is the base year for calculating the limitation for
the 1998 fiscal year. The limitation for the 1999 fiscal year is 5.3%,
based on inflation of 3.3% and population growth of 2.0% during 1997.
For the 1997 fiscal year, General Fund revenues totaled $4,639.9 million
and program revenues (cash funds) totaled $2,007.7 million, resulting in
total base revenues of $6,647.6 million. Expenditures for the 1998
fiscal year, therefore, cannot exceed $6,866.6 million. The 1998 fiscal
year General Fund and program revenues (cash funds) are expected to
total $7,395.4 million, or $528.8 million more than expenditures allowed
under the spending limitation. This will be the second time the state
has breached the limit since its implementation in 1992. The first
breach was in 1997 and the excess revenue of $139.0 million was refunded
to Colorado taxpayers during the 1998 tax filing season. A measure was
placed on the November 1998 ballot to deal with the excess revenue in
fiscal year 1998. The measure proposed spending the excess revenue
either $200 million per year or $1 billion for five years for highway
construction and repair, K-12, safety needs, and higher education
building. The Economic Report estimates that the limit will be breached
by $494.1 million in fiscal year 1998-99.
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.
Page 7
State Finances. As the State experienced revenue shortfalls in the mid-
1980s, it adopted various measures, including impoundment of funds by
the Governor, reduction of appropriations by the General Assembly, a
temporary increase in the sales tax, deferral of certain tax reductions
and inter-fund borrowings. On a GAAP basis, the State had General Fund
balances (before reserves) at June 30 of approximately $405.1 million in
fiscal year 1994, $486.7 million in fiscal year 1995, $368.5 million in
fiscal year 1996 and $514.1 million in fiscal year 1997. The fiscal year
1998 ending General Fund balance (before reserves) is projected at
$823.6 million.
Revenues for the fiscal year ending June 30, 1997, showed Colorado's
general fund increasing after a slowdown in 1996. Revenues grew by
$410.7 million to $4,679.4 million, a 9.6% increase from 1996. This
figure was higher than the fiscal year 1996 pace of 6.8%. General Fund
revenues exceeded expenditures by $145.0 million. The turnaround in
fiscal year 1997 came as a result of surging corporate, use and
individual income taxes, which rose 15.3%, 11.0% and 12.6%, respectively.
For fiscal year 1997, the following tax categories generated the
following respective revenue percentages of the State's $4,679.4 million
total gross receipts: individual income taxes represented 55% of gross
fiscal year 1997 receipts; sales, use and excise taxes represented 30.5%
of gross fiscal year 1997 receipts; and corporate income taxes
represented 5.1% of gross fiscal year 1997 receipts. The percentages of
General Fund revenue generated by type of tax for fiscal year 1998 are
not expected to be significantly different from fiscal year 1997
percentages.
For fiscal year 1998, General Fund revenues are projected at $5,339.7
million. Revenue growth is expected to increase 14.1% over FY 1997
actual revenues. General fund expenditures are estimated at $4,733.7
million. The ending General Fund balance for fiscal year 1998, after
reserve set-asides, is $646.6 million.
State Debt. 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.
Economic conditions in the State may have continuing effects on other
governmental units within the State (including issuers of the Bonds in
the Colorado Trust), which, to varying degrees, have also experienced
reduced revenues as a result of recessionary conditions and other factors.
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 Colorado 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 Colorado Trusts to pay interest on or
principal of the Bonds.
Page 8
COLORADO TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
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 9
MISSOURI 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
she receives any tax-exempt interest. A taxpayer whose modified adjusted
Page 3
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.
Missouri 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 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.
The assets of each Trust will consist of interest-bearing obligations
issued by or on behalf of the State of Missouri (the "State") or
counties, municipalities, authorities or political subdivisions thereof
(the "Missouri Bonds") or by the Commonwealth of Puerto Rico, Guam and
the United States Virgin Islands (the "Possession Bonds") (collectively,
the "Bonds").
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited in and held in each Trust. However, although no
opinion is expressed herein regarding such matters, it is assumed that:
(i) the Bonds were validly issued, (ii) the interest thereon is
excludable from gross income for Federal income tax purposes and (iii)
interest on the Bonds, if received directly by a Unit holder, would be
exempt from the Missouri income tax applicable to individuals and
corporations ("Missouri State Income Tax"). It is assumed that, at the
respective times of issuance of the Bonds, opinions that the Bonds were
validly issued and that interest on the Bonds is excluded from gross
Federal income tax purposes were rendered by bond counsel to the
respective issuing authorities. In addition, with respect to the
Missouri Bonds, bond counsel to the issuing authorities rendered
opinions that the interest on the Missouri Bonds is exempt from the
Missouri state income tax and, with respect to the Possession Bonds,
bond counsel to the issuing authorities rendered opinions that the
Possession Bonds and the interest thereon is exempt from all state and
local income taxation.
Neither the Sponsor nor its counsel has made any review for the Trusts
of the proceedings relating to the issuance of the Bonds or of the bases
for the opinions rendered in connection therewith. The opinion set forth
below does not address the taxation of persons other than full-time
residents of Missouri.
In the opinion of Chapman and Cutler, Special Counsel to the Fund for
Missouri tax matters, under existing law:
Each Trust is not an association taxable as a corporation for Missouri
income tax purposes, and each Unit holder of a Trust will be treated as
the owner of a pro rata portion of the Trust and the income of such
portion of the Trust will be treated as the income of the Unit holder
for Missouri State Income Tax purposes.
Interest paid and original issue discount, if any, on the Bonds which
would be exempt from the Missouri State Income Tax if received directly
by a Unit holder will be exempt from the Missouri State Income Tax when
received by a Trust and distributed to such Unit holder; however, no
opinion is expressed herein regarding taxation of interest paid and
original issue discount, if any, on the Bonds received by a Trust and
distributed to Unit holders under any other tax imposed pursuant to
Missouri law, including but not limited to the franchise tax imposed on
financial institutions pursuant to Chapter 148 of the Missouri Statutes.
Each Unit holder of a Trust will recognize gain or loss for Missouri
State Income Tax purposes if the Trustee disposes of a bond (whether by
redemption, sale, or otherwise) or if the Unit holder redeems or sells
Units of a Trust to the extent that such a transaction results in a
recognized gain or loss to such Unit holder for Federal income tax
purposes. Due to the amortization of bond premium and other basis
adjustments required by the Internal Revenue Code, a Unit holder, under
some circumstances, may realize taxable gain when his or her Units are
Page 5
sold or redeemed for an amount less than or equal to their original cost.
Any insurance proceeds paid under policies which represent maturing
interest on defaulted obligations which are excludable from gross income
for Federal income tax purposes will be excludable from the Missouri
State Income Tax to the same extent as such interest would have been so
excludable if paid by the issuer of such Bonds held by a Trust; however,
no opinion is expressed herein regarding taxation of interest paid and
original issue discount, if any, on the Bonds received by a Trust and
distributed to Unit holders under any other tax imposed pursuant to
Missouri law, including but not limited to the franchise tax imposed on
financial institutions pursuant to Chapter 148 of the Missouri Statutes.
The Missouri State Income Tax does not permit a deduction of interest
paid or incurred on indebtedness incurred or continued to purchase or
carry Units in a Trust, the interest on which is exempt from such Tax.
The Trust will not be subject to the Kansas City, Missouri Earnings and
Profits Tax and each Unit holder's share of income of the Bonds held by
a Trust will not generally be subject to the Kansas City, Missouri
Earnings and Profits Tax or the City of St. Louis Earnings Tax (except
that no opinion is expressed in the case of certain Unit holders,
including corporations, otherwise subject to the St. Louis City Earnings
Tax).
Chapman and Cutler has expressed no opinion with respect to taxation
under any other provision of Missouri law. Ownership of the Units may
result in collateral Missouri tax consequence to certain taxpayers.
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
The following discussion regarding constitutional limitations and the
economy of the State of Missouri is included for the purpose of
providing general information that may or may not affect issuers of the
Bonds in Missouri.
Economic Outlook. As a major manufacturing, financial, and agricultural
state, Missouri's economic health is tied closely to that of the nation.
The state's residents have enjoyed a vibrant and growing economy over
the last five years demonstrated by low unemployment, large job gains
and significant income growth. Among the factors that contributed to the
strength of the state economy is the competitiveness of Missouri
businesses. During 1997, more than $7.6 billion in products and services
were exported from the state to 181 countries, directly supporting more
than 150,000 jobs, while business expansions nearly doubled during 1998.
Total employment in Missouri at the end of 1998 reached 2.74 million,
down 1.1% from the previous year. By March 1999, however, employment had
grown enough to surpass the 1996 peak of 2.78 million. Most annual job
growth stems from the expansion of the services sector, with the largest
portion of its 2.9% increase in business services, health services and
social services. The finance, insurance and real estate sector and the
retail trade sector also enjoyed significant gains.
Although manufacturing jobs-generally among the highest paying in the
economy-have been disappearing around the country, Missouri's
manufacturing employment remained stable in 1998. Losses in
transportation equipment, textiles and leather products manufacturing
were offset by gains primarily in electronic and electrical equipment as
well as chemical and allied products manufacturing. And despite
unusually harsh weather conditions during 1998, the construction
industry added jobs and recorded an 8.7% annual increase in employment.
Missouri's annual average unemployment rate for both 1997 and 1998 was
4.2%, comparing favorably to national averages of 4.9% and 4.5% for
those years. Despite the fact that unemployment generally peaks for the
year during the first three months, the state's unemployment rate
dropped substantially at the beginning of 1999 and has averaged 3.1% for
the first three months.
Per capita personal income in Missouri grew to $24,247 in 1998, a 3.4%
yearly gain compared to 4.4% national growth. This figure equals about
92% of the U.S. per capita personal income ($26,412), ranking Missouri
28th among all the states.
Page 6
The economic outlook is for continued improvement in 1999 with steady
growth coupled with strong employment gains. The Asian and Latin
American financial crises, however, may negatively impact exports and,
in turn, the continued growth of the Missouri economy.
Revenues and Expenditures. The State of Missouri finished Fiscal Year
1998 in sound financial condition due to strong revenue collections and
efficient management of state programs. Net general revenue collections
increased slightly over Fiscal 1997 due to the strength of the national
and state economies, and expenditures were lower than anticipated. Due
to these positive results, Missouri enjoyed a modest fund balance which
will be employed for one-time uses.
Total revenues available for all government fund types during Fiscal
Year 1998 totaled $18.47 billion, reflecting a 5.0% gain from the
previous year. This increase was caused by continued growth in
Missouri's core revenue sources, with the individual income tax rising
10.4% and the inheritance tax jumping 21.8%. The state's corporate
income tax revenues, however, dropped by 4.9%, while sales and tax
income remained level compared with Fiscal 1997.
The state General Fund accounted for $6.88 billion of these collections
(up 5.6%), offset by $6.31 billion in General Fund spending. During
Fiscal 1998, every category of appropriations increased over the
previous year except capital improvements, which dropped by about one-
fourth. Desegregation payments represented the largest single increase
in spending during Fiscal 1998. Among the issues which affected Fiscal
1998 revenues were the elimination of the 3% grocery tax (effective
October 1, 1997) and the tripling of the dependent deduction for income
taxes. The General Fund balance as of June 30, 1998 was $197.5 million,
compared to $24.8 million at the end of Fiscal 1997. Overall
governmental expenditures totaled $17.1 billion, leaving a $484.2
million surplus.
The Fiscal Year 1999 budget increases include nearly $798 million in
desegregation costs and one-time tax refunds. Article X of the Missouri
Constitution requires that excess state revenues be refunded to state
income taxpayers, amounting to $548 million in payments to be returned
to its citizens during Fiscal 1999. In addition, tax cuts enacted in
1997 lowered revenues by $120 million. After these expenses, total
General Fund income for Fiscal 1999 is estimated to reach $6.67 billion,
with overall government resources amounting to $15.4 billion after these
costs.
Proposed tax cuts which may be enacted during Fiscal 1999 include an
increase in the personal exemption on the individual income tax (the
first since 1946), a new deduction on health insurance premiums for the
self-employed, and a reduction in the corporate income tax for small
businesses. If passed, these proposals would have $191 million impact on
revenues for the first year after enactment.
As of April 30, 1999, year-to-date Fiscal 1999 revenues have reached
$5.53 billion, showing a 3.1% gain over Fiscal 1998 collections through
that date. Appropriations during this period total $6.23 billion, 12.2%
higher than the previous year's spending to date.
Desegregation Costs. Fiscal Year 2000 may mark the end of the
desegregation spending in Missouri. The Kansas City desegregation
lawsuit was settled on March 25, 1997, after which the 1998 legislature
passed SB 781 to establish a framework for settling the St. Louis
desegregation case. A settlement agreement was reached in the latter
suit in January 1999 to end court-ordered supervision in St. Louis. This
settlement is contingent upon voter approval of local matching funds for
the SB 781 formula revenues and approval by a federal judge.
Federal court-ordered payments for the St. Louis and Kansas City
desegregation plans were $279.8 million in Fiscal 1998, amounting to
about 4% of state General Fund revenues. Total estimated payments during
Fiscal 1999 are $250.6 million, including a final payment for Kansas
City. If approved, the final settlement payment for St. Louis will total
$157 million during Fiscal 2000.
As of December 31, 1998, Missouri has spent $3.3 billion on the
desegregation cases in St. Louis and Kansas City. By the end of Fiscal
1999, that total will have reached an estimated $3.4 billion. With the
suits having been settled, the state stands to experience substantial
savings which must, by law, be used to boost aid to all Missouri
schools. For Fiscal 2000, ongoing savings totaling $187.4 million and
cumulative one-time savings of $81.5 million have been redirected to
school districts.
Debt Management. Missouri voters have approved constitutional amendments
providing for the issuance of general obligation bonds used for a number
of purposes. The amount of general obligation debt that can be issued by
the state is limited to the amount approved by popular vote plus $1
million.
Page 7
Total general obligation bonds issued as of June 30, 1998 reached $1.23
billion, of which $1.06 billion was outstanding. These funds are used
for environmental protection from water pollution and for improvements
of state buildings and property. As of the same date, revenue bonds
issued for special building projects totaled $148.5 million, of which
$108.3 million was outstanding. Overall state indebtedness as of June
30, 1998 was $1.71 billion, with $1.37 billion outstanding.
Ratings. State of Missouri general obligation bond issues are currently
rated as follows: Standard & Poor's Rating Services, AAA; Moody's
Investors Service, Inc., Aaa; and Fitch IBCA, Inc., AAA. Missouri is one
of only eight states that have this highest rating from all three
organizations. Although these ratings indicate that the State of
Missouri is in relatively good economic health, there can be no
assurance that this will continue or that particular bond issues may not
be adversely affected by changes in the state or local economic or
political conditions.
The foregoing information constitutes only a brief summary of some of
the general factors which may impact certain issuers of Bonds and does
not purport to be a complete or exhaustive description of all adverse
conditions to which the issuers of Bonds held by the Missouri 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 Missouri Trusts to pay interest on or
principal of the Bonds.
Page 8
Missouri 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 9
MINNESOTA TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated March 31, 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.
Minnesota Tax Status of Unit Holders
At the time of the closing for each Minnesota Trust, Special Counsel to
the Fund for Minnesota tax matters rendered an opinion under then
existing Minnesota income tax law applicable to taxpayers whose income
is subject to Minnesota income taxation substantially to the effect that:
Each Minnesota Trust will have no income other than (i) interest income
on bonds issued by the State of Minnesota and its political and
governmental subdivisions, municipalities and governmental agencies and
instrumentalities and on bonds issued by possessions of the United
States which would be exempt from Federal and Minnesota income taxation
when paid directly to an individual, trust or estate (the "Bonds"), (ii)
gain on the disposition of such Bonds, and (iii) proceeds paid under
certain insurance policies issued to the Trustee or to the issuers of
the Bonds which represent maturing interest or principal payments on
defaulted Bonds held by the Trustee.
Neither the Sponsor nor its counsel has independently examined the Bonds
to be deposited in and held in the Trust. However, although no opinion
is expressed herein regarding such matters, it is assumed that: (i) the
Bonds were validly issued, (ii) the interest thereon is excludible from
gross income for Federal income tax purposes and (iii) the interest
thereon is exempt from income tax imposed by Minnesota that is
applicable to individuals, trusts and estates (the "Minnesota Income
Tax"). It should be noted that interest on the Bonds is subject to tax
in the case of corporations subject to the Minnesota Corporate Franchise
Tax or the Corporate alternative Minimum Tax and is a factor in the
computation of the Minimum Fee applicable to financial institutions. The
opinion set forth below does not address the taxation of persons other
than full-time residents of Minnesota.
In the opinion of Chapman and Cutler, counsel to the Sponsor, under
existing Minnesota income tax laws as of the date of this prospectus and
based upon the assumptions above:
1. Each Minnesota Trust is not an association taxable as a corporation
and each Unit holder of a Minnesota Trust will be treated as the owner
of a pro rata portion of the Minnesota Trust, and the income of such
portion of the Minnesota Trust will therefore be treated as the income
of the Unit holder for Minnesota Income Tax purposes;
2. Income on the Bonds which is exempt from the Minnesota Income Tax
when received by a Unit holder of a Minnesota Trust and which would be
exempt from the Minnesota Income Tax if received directly by a Unit
holder will retain its status as exempt from such tax when received by
the Minnesota Trust and distributed to such Unit holder;
3. To the extent that interest on the Bonds, if any, which is
includible in the computation of "alternative minimum taxable income"
for federal income tax purposes, such interest will also be includible
in the computation of "alternative minimum taxable income" for purposes
of the Minnesota Alternative Minimum Tax imposed on individuals, estates
and trusts and on corporations;
4. Each Unit holder of a Minnesota Trust will recognize gain or loss
for Minnesota Income Tax purposes if the Trustee disposes of a Bond
(whether by redemption, sale or otherwise) or if the Unit holder redeems
or sells Units of the Minnesota Trust to the extent that such
transaction results in a recognized gain or loss to such Unit holder for
Federal income tax purposes;
5. Tax cost reduction requirements relating to amortization of bond
premium may, under some circumstances, result in Unit holders realizing
taxable gain for Minnesota Income Tax purposes when their Units are sold
or redeemed for an amount equal to or less than their original cost;
6. Proceeds, if any, paid under individual insurance policies obtained
by issuers of Bonds which represent maturing interest on defaulted
obligations held by the Trustee will be excludible from Minnesota net
income if, and to the same extent as, such interest would have been so
Page 5
excludible if paid in the normal course by the issuer of the defaulted
obligation 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, and;
7. To the extent that interest derived from a Minnesota Trust by a
Unit holder with respect to any possession obligations is excludible
from gross income for Federal income tax purposes pursuant to 48 U.S.C.
Section 745, 48 U.S.C. Section 1423a and 48 U.S.C. Section 1403, such
interest will not be subject to either the Minnesota Income Tax or the
Minnesota alternative minimum tax imposed on individuals, estates and
trusts. It should be noted that interest relating to possession bonds is
subject to tax in the case of corporations, subject to the Minnesota
Corporate Franchise Tax or the Corporate Alternative Minimum Tax.
Chapman and Cutler has not examined any of the Bonds to be deposited and
held in the Minnesota Trust or the proceedings for the issuance thereof
or the opinions of bond counsel with respect thereto, and therefore
express no opinions to the exemption from State income taxes of interest
on the Bonds if received directly by a Unit holder.
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. The State of Minnesota economy is one of the strongest
and most diverse in the nation, exhibiting a balance of industries and
solid expansion. In fact, the state's job growth in nonfarm employment
outpaced the nation's by about 60% between 1989 and 1998. Rapidly
growing industries including business services, motion pictures and air
transportation, as well as continued expansion in the state's more
traditional industries, have contributed to this performance.
Minnesota's economy continued to outperform national averages during
1998. Overall payroll employment increased 2.9% in 1998, up from 1997's
1.6% growth, to total over 2.6 million jobs. High technology industries,
including printing and publishing, health and medical devices, and
computer components and software are flourishing. Manufacturing,
transportation, trade and services experienced moderate growth, in the
2% to 3.5% range, as Minnesota's manufactured exports increased rapidly.
During 1997 the state's top three export industries-industrial
machinery, scientific instrument and electronic equipment-accounted for
about 60% ($5.8 billion) of Minnesota's total manufactured exports. The
fastest growing sectors in terms of employment, however, were
construction with 8.6% growth and the finance, insurance and real estate
(FIRE) sector, which enjoyed employment gains of 6.0% during 1998.
During the 1990s, Minnesota's FIRE sector has grown approximately six
times faster than the national average.
Agriculture is another important factor of the Minnesota economy. During
1997, the state exported over $2.6 billion worth of agricultural
products. Among the state's most important products are sugar beets,
soybeans, corn, wheat, oats, peas, turkeys and cheese. During 1998,
reduced Asian demand and good harvests sent farm prices below the break-
even point for many crop and livestock farmers, causing farm income for
Minnesota grain producers to hit the lowest levels since the mid-1980s.
The state's farmers are expected to face another difficult year in 1999.
Problems in Brazil will allow Minnesota to take a larger share of the
world soybean market, but soybean prices are likely to remain at or near
their 20-year lows. Livestock and poultry farmers will benefit from
lower grain prices, but current market prices for hogs and turkeys will
continue to be depressed.
The annual unemployment rate in Minnesota has been below the national
rate every year since 1985. During 1998, the state's average
unemployment rate dropped to 2.5% from 3.3% a year earlier, resting two
full percentage points below the U.S. rate. Nationally, the average
unemployment rate during 1998 was 4.5%. In conjunction with its low
unemployment rate, Minnesota boasts the highest labor participation rate
(75%) in the nation. Accordingly, investors should note that future
economic growth may be hampered by shortages in skilled workers.
Minnesota's per capita income growth has also outpaced the nation's
during the 1990s. While population has been stable in 1998 with less
than 1% growth (4.7 million), personal income has risen rapidly. The
state averaged 4.1% gains in per capita personal income during 1998,
following 6.3% growth in 1997. Minnesota's per capita personal income
Page 6
level is now $26,295, almost 104% of the U.S. rate ($25,298).
Personal income in Minnesota is forecast to grow by 4.7% during 1999,
slightly above the average rate forecast for the nation. Wage and salary
income growth, however, is projected to lag behind the national average
rate as states outside the Midwest also begin to feel labor market
pressures and part-time workers elsewhere increase their hours to, or
beyond, the levels they desire. Forecasts for 1999 show Minnesota
experiencing continued growth, particularly in high-tech industries and
business services. Despite a projected national slump in manufacturing,
the state's manufacturing sector is expected to rise much as it has in
the past when national manufacturing employment shrinks. Overall nonfarm
employment is projected to rise 2.1% during 1999.
Revenues and Expenditures. Minnesota operates on a two-year budget cycle
(a biennium). The 1998-99 biennium began on July 1, 1997. Net general
fund revenues for the current biennium are expected to total $22.5
billion, 1.3% more than the amount forecast shortly after the mid-point
of the biennium. Of this amount, $10.7 billion in receipts were
collected during Fiscal Year 1998. The individual income tax represents
the largest portion of these collections (44%), while the state sales
tax generates another 30%.
During Fiscal Year 1999, income tax revenues are expected to grow 8.2%
and sales tax revenues are projected to increase by 5.0%, bringing total
projected revenues to $11.9 billion. The larger than expected increase
in income tax revenues are due to strong wage gains, as well as rapidly
increasing capital gains payments. The $22.5 billion in estimated
revenues for the 1998-99 biennium represents 14.9% growth over the
previous biennium's revenues.
The February 1999 expenditure forecast for the 1998-99 biennium totals
$21.7 billion. Minor decreases in K-12 education, healthcare, family
support and other major local assistance estimates, combined with
slightly higher costs for property tax aid and state agency spending,
account for the increases in spending over originally budgeted amounts.
The largest area for appropriations continues to be education,
representing 31.9% of overall spending (or 43% when post-secondary
education is included). Another 14.4% is spent on healthcare, while
11.9% is used for property tax credits.
The ending balance for the 1998-99 biennium is projected to be $910
million. As of the end of FY 1998, Minnesota had nearly $1 billion in
general fund reserves, including a $350 million Cash Flow Account and a
Budget Reserve Fund of $613 million. Minnesota's Budget Reserve is the
6th largest in the nation, while the reserve as a percentage of
expenditures ranks 10th largest. At the end of the current biennium, the
Budget Reserve Fund is projected to reach $963 million or 5.4% of
appropriations.
On May 8, 1998, Minnesota settled its lawsuit with the tobacco industry,
resulting in estimated revenues to the state of $6.1 billion over the
next 25 years. A small portion ($202 million) of the settlement has been
set aside by the courts for specific purposes, but the balance is to be
deposited into the state's general fund as non-dedicated revenues. The
payments have the following components: (1) Annual payments to the
state's general reserve fund start with a $114.8 million deposit in FY
2000. This amount increases annually, will reach $204 million during FY
2004, and will continue in perpetuity; and (2) One-time settlement
payments begin in FY 1999 and will end in FY 2003. Those payments,
totaling $1.3 billion, will be $461 million during FY 1999, $242 million
during FY 2001-02, and $121 million in FY 2003.
Total current resources for the 2000-01 biennium are forecast to reach
$25.4 billion, 11.1% higher than the current biennium. Of this amount,
the income tax is expected to generate $5.8 million (up 13%) and $6.1
million (up 5.7%) during FY 2000 and FY 2001, respectively. The
unusually high growth rate in the income tax during the first part of
the biennium is attributable to the impact of the property tax rebate
program on net income tax receipts during the 1998-99 biennium. Those
rebates have reduced that biennium's income tax by a total of $886
million. Without the rebates, the total increase in 2000-01 biennium
receipts would be only 10.9%. Total expenditures for the biennium are
projected at $22.5 million, a 4.1% increase over the 1998-99 biennium.
Debt Management. Minnesota Statutes, Section 16A.641 provides for an
annual appropriation for transfer to the Debt Service Fund. The amount
of the appropriation is to be such that, when combined with the balance
on hand in the Debt Service Fund on December 1 of each year for state
bonds, it will be sufficient to pay all general obligation bond
principal and interest due and to become due through July 1 in the
second ensuing year. If the amount appropriated is insufficient when
combined with the balance on hand in the Debt Service Fund, the state
constitution requires the state auditor to levy a statewide property tax
Page 7
to cover the deficiency. No such property tax has been levied since 1969
when the law was enacted requiring the appropriation.
For the 1998-99 biennium, operating transfers to the Debt Service Fund
total $545 million. The state issued $531 million of new general
obligation bonds during FY 1998, and $184.8 million of general
obligation bonds were redeemed, leaving an outstanding balance of $2.51
billion in general obligation debt as of June 30, 1998. General
obligation bonds authorized but unissued as of June 30, 1998 were $940.2
million.
Ratings. Fitch IBCA, Inc. (formerly known as Fitch Investors Service,
L.P.) rates State of Minnesota general obligation bonds as AAA. In May
1996, Moody's Investor Services upgraded Minnesota's general obligation
bond rating to Aaa. In August 1997, Standard & Poor's raised the state's
general obligation bond rating from AA+ to AAA.
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 Minnesota 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 Minnesota Trusts to pay interest on or
principal of the Bonds.
Page 8
MINNESOTA TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
The First Trust Advantage
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 9
NEBRASKA TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust Advantage
PROSPECTUS NOTE: THIS PART THREE PROSPECTUS
Part Three MAY ONLY BE USED WITH
Dated March 31, 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
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.
Page 3
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
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
Page 4
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.
Nebraska Tax Status of Unit Holders
The assets of a Nebraska Trust will consist of interest-bearing
obligations issued by or on behalf of the State of Nebraska (the
"State") or counties, municipalities, authorities or political
subdivisions thereof (the "Nebraska Bonds") or by the Commonwealth of
Puerto Rico, Guam and the United States Virgin Islands (the "Possession
Bonds") (collectively, the "Bonds").
Neither the Sponsor nor its counsel have independently examined the
Bonds to be deposited in and held in a Nebraska Trust. With respect to
certain Nebraska bonds which may be held by a Nebraska Trust, the
opinions of bond counsel to the issuing authorities for such bonds have
indicated that the interest on such bonds is included in computing the
Nebraska Alternative Minimum Tax imposed by Section 77-2715 (2) of the
Revised Nebraska Statutes (the "Nebraska Minimum Tax") (the "Nebraska
AMT Bonds"). However, although no opinion is expressed herein regarding
such matters, it is assumed that: (i) the Bonds were validly issued,
(ii) the interest thereon is excludible from gross income for Federal
income tax purposes, (iii) none of the Bonds (other than the Nebraska
AMT Bonds, if any) are "specified private activity bonds" the interest
on which is included as an item of tax preference in the computation of
the Alternative Minimum Tax for federal income tax purposes, (iv)
interest on the Nebraska Bonds (other than the Nebraska AMT Bonds, if
any), if received directly by a Unit holder, would be exempt from both
the Nebraska income tax, imposed by Section 77-2714 et. seq. of the
Revised Nebraska Statutes (other than the Nebraska Minimum Tax) (the
"Nebraska State Income Tax") and the Nebraska Minimum Tax imposed by
Section 77-2715 (2) of the Revised Nebraska Statutes (the "Nebraska
Minimum Tax") and (v) interest on the Nebraska AMT Bonds, if any, if
received directly by a Unit holder, would be exempt from the Nebraska
State Income Tax. The opinion set forth below does not address the
taxation of persons other than full time residents of Nebraska.
At the time of the closing for each Nebraska Trust, Chapman and Cutler,
Special Counsel to the Fund for Nebraska tax matters, rendered an
opinion under existing Nebraska law based upon the assumptions set forth
above:
Each Nebraska Trust is not an association taxable as a corporation, each
Unit holder of a Nebraska Trust will be treated as the owner of a pro
rata portion of a Nebraska Trust, and the income of such portion of a
Nebraska Trust will therefore be treated as the income of the Unit
holder for both Nebraska State Income Tax and the Nebraska Minimum Tax
purposes;
Interest on the Bonds which is exempt from both the Nebraska State
Income Tax and the Nebraska Minimum Tax when received by a Nebraska
Trust, and which would be exempt from both the Nebraska State Income Tax
and the Nebraska Minimum Tax if received directly by a Unit holder, will
retain its status as exempt from such taxes when received by a Nebraska
Trust and distributed to a Unit holder.
Interest on the Nebraska AMT Bonds, if any, which is exempt from the
Nebraska State Income Tax but is included in the computation of the
Nebraska Minimum Tax when received by a Nebraska Trust, and which would
be exempt from the Nebraska State Income Tax but would be included in
the computation of the Nebraska Minimum Tax if received directly by a
Unit holder, will retain its status as exempt from the Nebraska State
Income Tax but included in the computation of the Nebraska Minimum Tax
when received by such Nebraska Trust and distributed to a Unit holder;
To the extent that interest derived from a Nebraska Trust by a Unit
holder with respect to the Possession Bonds is excludable from gross
income for Federal income tax purposes pursuant to 48 U.S.C. Section
745, 48 U.S.C. Section 1423a and 48 U.S.C. Section 1403, such interest
will not be subject to either the Nebraska State Income Tax or the
Nebraska Minimum Tax;
Each Unit holder of a Nebraska Trust will recognize gain or loss for
both Nebraska State Income Tax and Nebraska Minimum Tax purposes if the
Trustee disposes of a Bond (whether by redemption, sale, or otherwise)
or if the Unit holder redeems or sells Units of a Nebraska Trust to the
extent that such a transaction results in a recognized gain or loss to
such Unit holder for Federal income tax purposes;
The Nebraska State Income Tax does not permit a deduction for interest
paid or incurred on indebtedness incurred or continued to purchase or
Page 5
carry Units in a Nebraska Trust, the interest on which is exempt from
such Tax; and
In the case of a Unit holder subject to the State financial institutions
franchise tax, the income derived by such Unit holder from his or her
pro rata portion of the Bonds held by a Nebraska Trust may affect the
determination of such Unit holder's maximum franchise tax.
Special Counsel has not examined any of the Bonds to be deposited and
held in a Nebraska Trust or the proceedings for the issuance thereof or
the opinions of bond counsel with respect thereto, and therefore
expresses no opinion as to the exemption from either the Nebraska State
Income Tax or the Nebraska Minimum Tax of interest on the Nebraska Bonds
if received directly by a Unit holder.
Special Counsel has expressed no opinion with respect to taxation under
any other provision of Nebraska law. Ownership of the Units may result
in collateral Nebraska tax consequences to certain taxpayers.
Prospective investors should consult their own tax advisors as to the
applicability of any such collateral consequences.
Certain Considerations
Economic Outlook. The State of Nebraska, located at the heart of the
Great Plains, has a population of about 1,662,700. During the 1970s and
1980s, the state suffered increasingly rapid outward migration, but this
trend has reversed over the past decade. Along with positive population
growth, the state has enjoyed regular economic growth during the past
few years. Historically, the state's economy is less cyclical than the
national economy; that is, it typically does not grow as quickly as the
national economy during periods of expansion but also does not contract
as much during periods of recession. Nebraska's economy expanded during
1997 and 1998 with steady growth in labor force, employment, retail
sales, income and tourism.
With more than 44 million of the state's 49 million acres used for
farming and ranching, agriculture is a leading component of the Nebraska
economy. During 1997, the state ranked third in the nation in livestock
and livestock products with $5.5 billion in cash receipts and sixth in
crop production at $4.6 billion. Nebraska is a leader in the production
of corn, sorghum, hay, soybeans and other dry edible beans, as well as
cattle production, in which it ranks second only to Texas. During 1997,
agricultural and food exports totaled about $3.3 billion or about 52% of
the state's total exports, with Japan, Canada, Mexico and South Korea as
the state's leading trade partners. Although the value of the state's
farm land and buildings has increased, average crop and livestock prices
have dropped for two years in a row. Any changes in agriculture and in
the agricultural economy will continue to have significant consequences
for the overall Nebraska economy.
In terms of revenue and earnings, manufacturing is the other leading
component of Nebraska's economy. Job growth in manufacturing averaged
just over 2% during 1997 and 1998, while the nation as a whole has
experienced declining employment in this sector. Total nonfarm
employment increased by 15,400 jobs (1.8%) during 1998, with the largest
percentage gains in construction, the finance, insurance and real estate
sector, transportation/utilities, and the services sector, the state's
largest employer. And although it employs only about 37,000 workers, the
tourism sector has become increasingly important to Nebraska's economy,
following only agriculture and manufacturing in total revenue.
The Nebraska unemployment rate has been among the lowest in the nation
throughout the 1990s. The state's average unemployment rate was 2.1%
during 1998, although it dropped as low as 1.6% during the course of the
year. The nation as a whole recorded 4.5% unemployment during 1998.
Since 1993, Nebraska's unemployment rate has been near or less than half
of the average national rate and is often the lowest in the nation.
Nebraska's per capita personal income has historically been below the
national average, although the gap has been closing. In 1991, the
state's per capita income was 92% of the U.S. average; in 1997, it was
94%. Per capita personal income grew 3.3% to $23,656 during 1997 (the
national average was $25,298), compared to the state's phenomenal 8.8%
growth in 1996. Nationally, per capita personal income growth has
averaged 4.7% over the past decade, while Nebraska's growth rate has
been somewhat higher at 4.9%.
According to the January 1999 Business in Nebraska newsletter from the
Bureau of Business Research at the University of Nebraska-Lincoln,
overall the state's economy remained strong through the third quarter of
Page 6
1998 and will continue to do so through 1999. Signs of weakness,
however, have appeared in a few sectors and in non-metropolitan
counties. With the exception of mining, the businesses that have
indicated weakness are directly tied to the agriculture sector. The
plunge in agriculture prices to levels not seen in ten or more years has
impacted at least two non-metropolitan industries-agricultural services
and wholesale trade, including farm implement dealers and handlers of
farm raw products. The full impact of the depressed agriculture sector
probably will not be realized until mid-1999. In addition, the state's
small crude oil industry has been "hammered" by the recent slide in
crude oil prices. Nevertheless, little of the current weakness is
expected to impact business in Nebraska's metropolitan areas. Further
prosperity for these businesses and the depression of the agricultural
economy could increase migration from Nebraska's rural areas to its
cities.
The Bureau of Business Research projects that nonfarm employment in
Nebraska will grow 2.4% in 1999 and 2.2% in 2000; nonfarm personal
income will increase by 6.0% in 1999 and 6.1% in 2000; and retail sales
will gain 5.7% in 1999 and 6.2% in 2000.
Revenues and Expenditures. Nebraska's Fiscal Year 1998 net general fund
receipts reached $2.11 billion, 5.6% over the projected level of
revenue. Of this total, the individual income tax represents the largest
amount, with $981.6 million in receipts. The sales and use tax created
$803.8 million in revenue for the state, and the corporate income tax
generated $142.2 million. FY 1998 appropriations totaled $1.93 billion,
up 3.3% over FY 1997 appropriations.
Revenues for Fiscal Year 1999 will be impacted by a temporary tax
reduction enacted by the 1998 Legislature. The state sales and use tax
rate was 5.0% from July 1990 through June 1998. For one year beginning
on July 1, 1998, the Nebraska sales and use tax rate is reduced to 4.5%
(LB1104). Moreover, the income tax cut enacted in 1997 was made
permanent during 1998 (LB1028). The initiative established a permanent
reduction in tax rates, an on-going deduction for health insurance
premiums for the self-employed and a permanent increase in personal
exemption credits. In addition, the 1998 Legislature further increased
the personal exemption credit (LB1028) for years beyond the 1998 tax
year. These legislative changes are expected to result in a $24 million
revenue reduction during Fiscal Year 1999 and a $70 million reduction
annually thereafter.
For the first seven months of FY 1999 (July 1998 through January 1999),
Nebraska's general fund gross revenue surpassed estimates by 2.1%, but
net receipts are below projections by 1.1%. For the year to date, net
receipts total $1.17 billion, with individual and corporate income tax
revenues up 1.7% and 1.4%, respectively. Sales and use tax revenues are
currently 3.6% below year-to-date projections. Total FY 1999 revenues
are projected to reach $2.10 billion, slightly below FY 1998 revenues.
FY 1999 appropriations are estimated to rise 15.4% to $2.23 billion.
Appropriations are designated for the following areas: local tax relief
(39.2%), aid to individuals including Medicaid and tuition assistance
(19.1%), general government operations (18.8%), post-secondary education
(16.3%), capital construction (2.7%) and other (3.9%).
Despite the general fund deficit in FY 1999, FY 2000 is expected to
begin with a $166.1 million cash balance and FY 2001 with a $127.2
million cash balance. Estimated revenues for FY 2000 and FY 2001 are
projected to grow 7.9% and 5.3%, respectively. Appropriations for these
two years are also expected to increase by 2.2% and 3.4%, respectively.
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 Nebraska 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 Nebraska Trusts to pay interest on or
principal of the Bonds.
Page 7
NEBRASKA TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust Advantage
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 8
VIRGINIA TRUST SERIES
The First Trust(registered trademark) Combined Series
The First Trust Advantage
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
she receives any tax-exempt interest. A taxpayer whose modified adjusted
Page 3
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.
Virginia 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
Virginia income tax. Neither the Sponsor nor its counsel have
independently reviewed such opinions or examined the Bonds to be
deposited in and held by the Trusts and have assumed the correctness as
of the date of deposit of the opinions of Bond Counsel. It is assumed
for purposes of the opinion below the Bonds constitute debt for Federal
income tax purposes.
The assets of a Virginia Trust will consist of interest-bearing
obligations issued by or on behalf of the Commonwealth of Virginia
("Virginia") or counties, municipalities, authorities or political
subdivisions thereof (the "Bonds"). Neither the Sponsor nor its counsel
have independently examined the Bonds to be deposited in and held in a
Virginia Trust. However, although no opinion is expressed herein
regarding such matters, it is assumed that: (i) the Bonds were validly
issued, (ii) the interest thereon is excludible from gross income for
Federal income tax purposes and (iii) the interest thereon is exempt
from income tax imposed by Virginia that is applicable to individuals
and corporations (the "Virginia Income Tax"). The opinion set forth
below does not address the taxation of persons other than full-time
residents of Virginia.
At the time of closing for each Virginia Trust, Chapman and Cutler,
Special Counsel to the Fund for Virginia tax matters, rendered an
opinion under then existing Virginia income tax law applicable to
taxpayers whose income is subject to Virginia income taxation
substantially to the effect that:
(1) Each Virginia Trust is not an association taxable as a corporation
for purposes of the Virginia Income Tax and each Unit holder of a
Virginia Trust will be treated as the owner of a pro rata portion of the
assets held by a Virginia Trust and the Income of such portion of a
Virginia Trust will be treated as income of the Unit holder for purposes
of the Virginia Income Tax.
(2) Interest on the Bonds which is exempt from Virginia Income Tax when
received by a Virginia Trust and which would be exempt from Virginia
Income Tax if received directly by a Unit holder, will retain its status
as exempt from such tax when received by a Virginia Trust and
distributed to such Unit holder.
(3) The Virginia legislature has recently enacted a law, effective July
1, 1997, that would exempt from the Virginia Income Tax income derived
on the sale or exchange of obligations of the Commonwealth of Virginia
or any political subdivision or instrumentality of the Commonwealth of
Virginia. However, Virginia law does not address whether this exclusion
would apply to gains recognized through entities such as a Virginia
Trust. Accordingly, we express no opinion as to the treatment for
Virginia Income Tax purposes of any gain or loss recognized by a Unit
holder for Federal income tax purposes.
(4) The Virginia Income Tax does not permit a deduction of interest
paid on indebtedness incurred or continued to purchase or carry Units in
a Virginia Trust to the extent that interest income related to the
ownership of Units is exempt from the Virginia Income Tax.
In the case of Unit holders subject to the Virginia Bank Franchise Tax,
the income derived by such a Unit holder from his pro rata portion of
the Bonds held by the Virginia Trust may affect the determination of
Page 5
such Unit holder's Bank Franchise Tax. Chapman and Cutler has expressed
no opinion with respect to taxation under any other provision of law.
Prospective investors subject to the Virginia Bank Franchise Tax should
consult their tax advisors. Ownership of the Units may result in
collateral Virginia tax consequences to certain taxpayers. Prospective
investors should consult their own 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
A Virginia Trust is susceptible to political, economic or regulatory
factors affecting issuers of Virginia Bonds. Without intending to be
complete, the following briefly summarizes some of these matters, as
well as some of the factors affecting the financial situation in the
Commonwealth of Virginia (the "Commonwealth" or "Virginia"). This
information is derived from sources that are generally available to
investors and is based in part on information obtained from various
agencies in Virginia. No independent verification has been made of the
accuracy or completeness of the following information.
There can be no assurance that current or future statewide or regional
economic difficulties, and the resulting impact on State or local
governmental finances, generally will not adversely affect the market
value of Virginia Bonds held in the portfolio of a Virginia Trust or the
ability of particular obligors to make timely payments of debt service
on (or relating to) those obligations.
Economic Outlook. The Commonwealth's financial condition is supported by
a broad-based economy, including manufacturing, tourism, agriculture,
ports, mining and fisheries. Manufacturing continues to be a major
source of employment, ranking behind only services, wholesale and retail
trade and government (federal, state and local). Defense activity is
also an important component of Virginia's economy.
The Virginia economy has experienced a significant and sustained period
of economic growth since 1991. During 1998, Virginia continued to
outpace national growth rates in most measures of economic activity.
While the Commonwealth's labor market remained tight, its citizens have
received benefits from increased job growth and higher real wages and
salaries. In 1998, the Virginia economy surpassed national growth rates
in personal income, total wages and salaries, total non-agricultural
employment and retail sales.
Virginia nonagricultural employment grew by 3.2% or 108,600 jobs during
1998, doubling the amount of new jobs created in 1996. The service
sector accounted for 64% of this growth, with the majority of these jobs
in high technology services. In addition, the strength of the
Commonwealth's retail sales and housing market was reflected in
employment growth in the retail trade and construction sectors. Although
job losses continued in the manufacturing and federal government
sectors, they were less severe than forecast.
The magnitude of job losses from federal government downsizing on the
Virginia economy is considerably smaller than it has been in the past
six fiscal years. From 1991 to 1998, job losses from federal government
downsizing numbered more than 60,000, nearly a typical year's job
growth. In 1999 and 2000, job losses in the federal sector are expected
to total only 4,000. Most job losses resulted from continued defense
downsizing and federal government cutbacks in Northern Virginia and
Hampton Roads.
Strong job growth pushed Virginia's unemployment rate down to a record
low 2.9% in 1998, falling further to 2.6% in March 1999. The
Commonwealth's population, however, grew by only 0.8%, causing
additional pressures on the labor market. Because of the tight labor
market, Virginia companies have been raising wages and salaries in order
to attract new workers. For the second straight year, Virginia's wage
growth (7.7%) outpaced the national rate (7.3%). Per capita personal
income in the state grew 4.9% to $27,385, the highest in the twelve-
state Southeast region and 104% of the national per capita personal
income level ($26,412). Increases in income also translated into
increases in spending. Virginia retail sales grew by $2.7 billion to
reach $58.4 billion in 1998. This increase amounts to 4.9% for the
Commonwealth, while national retail sales grew 4.6%.
With $11 billion in exports in 1997, Virginia ranks 17th among the
states in terms of total foreign exports. Its exports accounted for
about 5% of Virginia's Gross State Product (GSP). Canada and Japan are
its most important trade partners, followed by Belgium, South Korea,
Germany and Mexico. Of course, sagging Asian markets have begun to slow
Page 6
export growth in the United States. Given that approximately 20% of
Virginia's exports are to Japan and South Korea, it is likely that
Virginia will experience some of the impact of the Asian crisis.
However, the relatively small share of GSP that could be affected and
the strength of other sectors in Virginia's economic base should temper
such concerns.
Revenues and Expenditures. Virginia uses a cash basis of accounting for
budgetary purposes. Revenues and expenditures are recorded at the time
cash is actually received or disbursed according to the provisions of
the Appropriation Act. The Commonwealth's total revenue comprises two
major resources: the General Fund and non-general funds. More than half
of the state's revenues (53%) are "non-general funds" or funds earmarked
by law for specific purposes. For example, motor vehicle and gasoline
taxes must pay for transportation programs, student tuition and fees
must support higher education, and federal grants are designated for
specific activities. General Fund revenues are derived from general
taxes paid by citizens and businesses in Virginia.
At the end of Fiscal Year 1998 (ended June 30), Virginia's General Fund
ending balance totaled $1.44 billion, nearly double the Fiscal 1997
balance. Of this amount, $1.41 billion was reserved or designated,
including $542 million for the Revenue Stabilization Reserve ("Rainy
Day") Fund, and $743.3 million designated for other appropriation or
reappropriation in Fiscal 1999. After all 1998 designations, there is an
undesignated fund balance of $33 million available for future uses.
During Fiscal 1998, General Fund revenues totaled $9.20 billion. The
overall revenue increase of 8.3% is attributable to favorable individual
income and sale and use tax revenue collections, which reported 14.3%
and 5.1% growth, respectively. Individual income taxes accounted for 59%
of General Fund resources, while sales taxes made up 21%. These revenues
plus other direct revenues from outside sources totaled $8.8 billion or
96% of all resources. The remaining monies totaling $391 million came
through transfers from other funds, including alcoholic beverage sales
and lottery profits.
The Commonwealth of Virginia has historically operated on a fiscally
conservative basis and is required by its Constitution to have a
balanced biennial budget. General Fund disbursements including transfers
for Fiscal 1998 totaled $8.7 billion, up 7.3% from the previous fiscal
year. Expenditures totaled $7.3 billion and transfers to other funds
were $1.4 billion. Education accounted for 44%, while social services,
Medicaid, public health and mental health accounted for 27% of the
General Fund. Expenditures, not including transfers, increased by $431
million over the prior year. Of the total increase, justice
administration and economic development both accounted for about 10%.
When the General Fund was accounted for on a GAAP basis, the Fund had a
positive balance of $1.01 billion in Fiscal Year 1998, compared to a
balance of $491.8 million in Fiscal 1997 and $180.4 million in Fiscal
1996. Virginia fully adopted GAAP financial reporting in Fiscal Year
1983 and experienced GAAP deficits from Fiscal 1990-92 as a result of a
recession. The deficit in Fiscal 1995 was primarily the result of the
federal retiree lawsuit Harper v. Department of Taxation. GAAP deficits
may occur in Virginia without violating the state Constitution or
statutes which prohibit deficit spending. However, if a General Fund
GAAP deficit were to continue over time, agencies that rate state debt
would view this issue as a problem for state finances.
The Revenue Stabilization Reserve ("Rainy Day") Fund is required by an
amendment to the State Constitution approved by the voters on November
7, 1992. This Fund is a reserve of fund balances which can only be used
if state revenues decline sharply from the previous year. Reserved funds
must be appropriated by the General Assembly when revenue collections
are strong compared to the average for the previous six years. The total
amount reserved in Fiscal Year 1998 was $542.2 million, compared to
$214.9 million at the end of Fiscal 1997.
Debt Management. The total outstanding debt of the Commonwealth as of
the end of Fiscal Year 1998 was $11.75 billion. Long term bonds and
notes represent 96% of all debt, while the remaining 4% consists of
capital leases, installment purchase contracts and various other
payables. A total of $1.14 billion, or 9.7% of all debt, is a general
obligation of Virginia taxpayers and supported by a pledge of all tax
revenues and other monies of the Commonwealth. Other tax-supported debt
(limited obligations) totaled $2.6 billion and was outstanding at the
end of Fiscal 1998. This accounted for 21.9% of all debt on the books of
the Commonwealth. Non-tax supported debt makes up 68.4% of all debt in
the Commonwealth. The majority of this debt is issued by various
authorities that are created under state law to issue bonds to finance
Page 7
various programs considered to provide a benefit to the public. Total
debt in this category at the end of Fiscal 1998 was $8.04 billion.
Ratings. The Commonwealth of Virginia maintains a "triple-A" bond rating
from Standard & Poor's Ratings Services, Moody's Investors Service, Inc.
and Fitch IBCA, Inc. on its general obligation indebtedness, reflecting
in part its sound fiscal management, diversified economic base and low
debt ratios. There can be no assurances that these conditions will
continue. Nor are these same conditions necessarily applicable to
securities which are not general obligations of the Commonwealth.
Securities issued by specific municipalities, governmental authorities
or similar issuers may be subject to the economic risks or uncertainties
peculiar to the issuers of such securities or to the sources from which
they are to be paid.
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 Virginia 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 Virginia Trusts to pay interest on or
principal of the Bonds.
Page 8
Virginia Trust Series
The First Trust(registered trademark) Combined Series
The First Trust Advantage
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 9
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 132, 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 June 30, 1999.
THE FIRST TRUST COMBINED SERIES 132
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert 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, ) June 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 June 4, 1999 in this
Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Combined Series dated June
29, 1999.
ERNST & YOUNG LLP
Chicago, Illinois
June 28, 1999
