File No. 33-41835
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 7
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 142
(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 : August 31, 1998
: : 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
July 22, 1998.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
2,075 UNITS
PROSPECTUS
Part One
Dated August 26, 1998
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 Louisiana State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, Louisiana Trust,
Series 6 (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 Louisiana, 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 Louisiana State and
local income taxes under existing law. At July 16, 1998, each Unit
represented a 1/2,075 undivided interest in the principal and net income of
the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.40% of the Public Offering Price (4.603%
of the amount invested). At July 16, 1998, the Public Offering Price per Unit
was $851.22 plus net interest accrued to date of settlement (three business
days after such date) of $11.17 and $15.42 for the monthly and semi-annual
distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.98% per annum on July 16, 1998, and 5.91% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 3.09% per annum on July 16, 1998, and 3.02% 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $1,760,000
Number of Units 2,075
Fractional Undivided Interest in the Trust per Unit 1/2,075
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,688,570
Aggregate Value of Bonds per Unit $813.77
Sales Charge 4.603% (4.4% of Public Offering Price) $37.45
Public Offering Price per Unit $851.22*
Redemption Price and Sponsor's Repurchase Price per Unit
($37.45 less than the Public Offering Price per Unit) $813.77*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $614,000
</TABLE>
Date Trust Established August 21, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $921 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $52.78 $52.78
Less: Estimated Annual Expense $2.49 $1.87
Estimated Net Annual Interest Income $50.29 $50.91
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $50.29 $50.91
Divided by 12 and 2, Respectively $4.19 $25.46
Estimated Daily Rate of Net Interest Accrual $.1397 $.1414
Estimated Current Return Based on Public
Offering Price 5.91% 5.98%
Estimated Long-Term Return Based on Public
Offering Price 3.02% 3.09%
</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 142, The First Trust of Insured Municipal
Bonds - Multi-State, Louisiana Trust, Series 6
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 142, The First
Trust of Insured Municipal Bonds - Multi-State, Louisiana Trust, Series 6 as
of April 30, 1998, 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 April 30, 1998, 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 142, The First Trust of Insured Municipal Bonds - Multi-State,
Louisiana Trust, Series 6 at April 30, 1998, 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
July 31, 1998
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,616,499)
(Note 1) $1,703,988
Accrued interest 39,520
Cash 2,228
__________
1,745,736
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 10,247
Accrued liabilities 127
__________
10,374
__________
Net assets, applicable to 2,094 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $1,616,499
Net unrealized appreciation (Note 2) 87,489
Distributable funds 31,374
__________
$1,735,362
==========
Net asset value per unit $828.73
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
PORTFOLIO - See notes to portfolio.
April 30, 1998
<TABLE>
<CAPTION>
Coupon Standard
interest Date of Redemption & Poor's Principal Market
Name of issuer and title of bond(g) rate maturity provisions(a) rating(b) amount value
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
City of Kenner, Louisiana, Sales Tax, Series 1988
(FGIC Insured) (c) (f) 7.50% 6/01/2006 2000 @ 101 AAA $455,000 487,482
Louisiana Public Facilities Authority, Hospital
Revenue Refunding (General Health, Inc.), 1999 @ 100
Series 1989A (MBIA Insured) (c) (e) 6.50 11/01/2014 2007 @ 100 S.F. AAA 250,000 256,745
New Orleans Home Mortgage Authority, Single
Family Mortgage Revenue, 1985 Series A
(MBIA Insured) (c) -(d) 9/15/2016 2008 @ 40.245 S.F. AAA 205,000 30,780
St. Charles Parish, Louisiana, Construction
Waterworks and Wastewater, District 2001 @ 102
Number 1, Utility (MBIA Insured) (c) 7.15 7/01/2016 2007 @ 100 S.F. AAA 490,000 533,973
Sales Tax, Series 1988A of the Sales Tax District
No. Three of the Parish of St. Tammany, State
of Louisiana (FGIC Insured) (c) (f) 7.90 12/01/2005 1998 @ 102 AAA 65,000 67,526
Saint Tammany Parish School District No. 12,
Louisiana (General Obligation)
(FGIC Insured) (c) 6.50 3/01/2010 2001 @ 100 AAA 310,000 327,482
______________________
$1,775,000 1,703,988
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
NOTES TO PORTFOLIO
April 30, 1998
(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 88% of the aggregate principal amount of
the Bonds in the Trust is subject to call within four years.
(b) The ratings shown are those effective at April 30, 1998.
(c) Insurance has been obtained by the Bond issuer.
(d) These Bonds have no stated interest rate ("zero coupon bonds") and,
accordingly, will have no periodic interest payments to the Trust. Upon
maturity, the holders of these Bonds are entitled to receive 100% of the
stated principal amount. The Bonds were issued at an original issue
discount on March 2, 1985 at a price of 3.445% of their original
principal amount.
(e) These Bonds were issued at an original issue discount on November 1,
1989 at a price of 92.75% of their original principal amount.
(f) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(g) The Trust consists of six obligations of issuers located in Louisiana.
One of the Bonds, representing approximately 17% 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; Single Family Housing, 1;
Water and Sewer, 1; and Sales Tax Revenue, 2. Approximately 28% and 29%
of the aggregate principal amount of the bonds in the Trust consist of
water and sewer revenue bonds and sales tax revenue bonds, respectively.
Each of five Bond issues represents 10% or more of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
96%. The largest such issue represents approximately 28%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $112,554 131,271 165,302
Expenses:
Trustee's fees and related expenses (3,296) (3,717) (3,773)
Evaluator's fees (921) (921) (921)
Supervisory fees (534) (598) (641)
_______________________________
Investment income - net 107,803 126,035 159,967
Net gain (loss) on investments:
Net realized gain (loss) (1,577) (17,764) 2,368
Change in net unrealized appreciation
or depreciation 4,518 (12,705) (4,997)
_______________________________
2,941 (30,469) (2,629)
_______________________________
Net increase in net assets resulting
from operations $110,744 95,566 157,338
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $107,803 126,035 159,967
Net realized gain (loss) on investments (1,577) (17,764) 2,368
Change in net unrealized appreciation
or depreciation on investments 4,518 (12,705) (4,997)
___________________________________
110,744 95,566 157,338
Distributions to unit holders:
Investment income - net (107,387) (128,424) (159,485)
Principal from investment
transactions - (347,604) -
___________________________________
(107,387) (476,028) (159,485)
Unit redemptions (42, 256 and 195 in
1998, 1997 and 1996, respectively):
Principal portion (34,412) (217,606) (192,171)
Net interest accrued (672) (3,409) (2,941)
___________________________________
(35,084) (221,015) (195,112))
___________________________________
Total increase (decrease) in net
assets (31,727) (601,477) (197,259)
Net assets:
At the beginning of the year 1,767,089 2,368,566 2,565,825
___________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $31,374, $29,635 and
$37,268 at April 30, 1998, 1997
and 1996, respectively) $1,735,362 1,767,089 2,368,566
===================================
Trust units outstanding at the end
of the year 2,094 2,136 2,392
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
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, August 21, 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 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. Prior to
September 1, 1995, the Trustee was United States Trust Company of New York;
effective September 1, 1995, The Chase Manhattan Bank succeeded United States
Trust Company of New York as Trustee. Additionally, a fee of $921 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 April 30, 1998 follows:
<TABLE>
<S> <C>
Unrealized appreciation $90,504
Unrealized depreciation (3,015)
_______
$87,489
=======
</TABLE>
<PAGE>
3. Insurance
The issuers of all of the bond issues in the Trust have acquired insurance
coverage which provides for the scheduled payments of principal and interest
on those 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 April 30,
distribution
plan 1998 1997 1996
<S> <C> <C> <C>
Monthly $50.59 55.91 63.18
Semi-annual 51.35 56.52 63.69
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $53.21 57.56 65.76
Expenses (2.25) (2.30) (2.12)
_______________________________
Investment income - net 50.96 55.26 63.64
Distributions to unit holders:
Investment income - net (50.80) (56.16) (63.46)
Principal from investment transactions - (148.48) -
Net gain (loss) on investments 1.28 (13.53) (1.79)
_______________________________
Total increase (decrease) in
net assets 1.44 (162.91) (1.61)
Net assets:
Beginning of the year 827.29 990.20 991.81
_______________________________
End of the year $828.73 827.29 990.20
===============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
LOUISIANA TRUST, SERIES 6
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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
2,495 UNITS
PROSPECTUS
Part One
Dated August 26, 1998
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 13 (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 July 16, 1998, each Unit represented a
1/2,495 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 3.9% of the Public Offering Price (4.058%
of the amount invested). At July 16, 1998, the Public Offering Price per Unit
was $885.62 plus net interest accrued to date of settlement (three business
days after such date) of $9.23 and $13.63 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 5.94% per annum on July 16, 1998, and 5.87% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.57% per annum on July 16, 1998, and 2.50% 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $1,975,000
Number of Units 2,495
Fractional Undivided Interest in the Trust per Unit 1/2,495
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,123,436
Aggregate Value of Bonds per Unit $851.08
Sales Charge 4.058% (3.9% of Public Offering Price) $34.54
Public Offering Price per Unit $885.62*
Redemption Price and Sponsor's Repurchase Price per Unit
($34.54 less than the Public Offering Price per Unit) $851.08*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $585,000
</TABLE>
Date Trust Established August 21, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $878 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $54.34 $54.34
Less: Estimated Annual Expense $2.33 $1.71
Estimated Net Annual Interest Income $52.01 $52.63
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $52.01 $52.63
Divided by 12 and 2, Respectively $4.33 $26.32
Estimated Daily Rate of Net Interest Accrual $.1445 $.1462
Estimated Current Return Based on Public
Offering Price 5.87% 5.94%
Estimated Long-Term Return Based on Public
Offering Price 2.50% 2.57%
</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 142, The First Trust of Insured Municipal
Bonds - Multi-State, Missouri Trust, Series 13
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 142, The First
Trust of Insured Municipal Bonds - Multi-State, Missouri Trust, Series 13 as
of April 30, 1998, 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 April 30, 1998, 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 142, The First Trust of Insured Municipal Bonds - Multi-State, Missouri
Trust, Series 13 at April 30, 1998, 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
July 31, 1998
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,003,798)
(Note 1) $2,136,080
Accrued interest 34,535
Cash 8,820
__________
2,179,435
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 19,966
Accrued liabilities 159
__________
20,125
__________
Net assets, applicable to 2,501 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $2,003,798
Net unrealized appreciation (Note 2) 132,282
Distributable funds 23,230
__________
$2,159,310
==========
Net asset value per unit $863.38
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
PORTFOLIO - See notes to portfolio.
April 30, 1998
<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>
Reorganized School District No. 6 of Christian
County, Missouri, General Obligation School
Building, Series 1991 (AMBAC Insured) (c) 7.05 % 3/01/2011 2001 @ 100 AAA $300,000 322,815
Greene County, Missouri, Single Family Mortgage
Revenue, Series 1985 (AMBAC Insured) (c) -(d) 12/01/2016 2007 @ 37.825 S.F. AAA 30,000 4,485
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 240,000 272,292
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Refunding and Improvement Revenue (Southeast
Missouri Hospital Association), Series 1991
(MBIA Insured) (c) (e) 6.75 6/01/2016 2001 @ 102 AAA 410,000 445,651
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue (SSM Health Care Projects)
Series 1990B (MBIA Insured) (c) (e) 7.00 6/01/2015 2000 @ 102 AAA 320,000 344,035
Southwest Missouri State University,
Recreational Facility Revenue, 2001 @ 102
Series 1991 (AMBAC Insured) (c) 6.625 10/01/2009 2006 @ 100 S.F. AAA 500,000 545,391
City of West Plains, Missouri Improvement
Authority, Inc., Leasehold Revenue,
Series 1991 (City of West Plains, Missouri,
Civic Center Project) (FGIC Insured) (c) (e) 6.85 4/01/2006 1999 @ 102 AAA 190,000 201,411
______________________
$1,990,000 2,136,080
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
NOTES TO PORTFOLIO
April 30, 1998
(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) 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 98% of the aggregate principal amount of
the Bonds in the Trust is subject to call within five years.
(b) The ratings shown are those effective at April 30, 1998.
(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 August 1, 1985 at a price of 4.049% 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 seven obligations of issuers located in Missouri.
One of the Bonds in the Trust, representing approximately 15% 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, 2; Universities
and Schools, 1; Single Family Housing, 1; Water and Sewer, 1; and
Miscellaneous, 1. Approximately 25%, 37% and 2% of the aggregate
principal amount of the Bonds consist of university and school revenue
bonds, health care revenue bonds and single family residential mortgage
revenue bonds, respectively. Each of five Bond issues represents 10% or
more of the aggregate principal amount of the Bonds in the Trust or a
total of approximately 89%. The largest such issue represents
approximately 25%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $139,970 154,608 189,610
Expenses:
Trustee's fees and related expenses (3,786) (4,119) (4,413)
Evaluator's fees (878) (878) (878)
Supervisory fees (657) (711) (738)
_________________________________
Investment income - net 134,649 148,900 183,581
Net gain (loss) on investments:
Net realized gain (loss) 4,364 (6,930) (4,985)
Change in net unrealized appreciation
or depreciation 1,844 (27,699) 24,159
_________________________________
6,208 (34,629) 19,174
_________________________________
Net increase in net assets resulting
from operations $140,857 114,271 202,755
=================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $134,649 148,900 183,581
Net realized gain (loss) on
investments 4,364 (6,930) (4,985)
Change in net unrealized appreciation
or depreciation on investments 1,844 (27,699) 24,159
__________________________________
140,857 114,271 202,755
Distributions to unit holders:
Investment income - net (133,227) (153,027) (182,688)
Principal from investment
transactions - (371,941) -
__________________________________
(133,227) (524,968) (182,688)
Unit redemptions (127, 220 and 117 in
1998, 1997 and 1996, respectively):
Principal portion (108,770) (197,937) (117,603)
Net interest accrued (2,537) (4,547) (2,176)
__________________________________
(111,307) (202,484) (119,779)
__________________________________
Total increase (decrease) in
net assets (103,677) (613,181) (99,712)
Net assets:
At the beginning of the year 2,262,987 2,876,168 2,975,880
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $23,230, $29,592 and
$40,048 at April 30, 1998, 1997 and
1996, respectively) $2,159,310 2,262,987 2,876,168
==================================
Trust units outstanding at the end
of the year 2,501 2,628 2,848
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
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, August 21, 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 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. Prior to
September 1, 1995, the Trustee was United States Trust Company of New York;
effective September 1, 1995, The Chase Manhattan Bank succeeded United States
Trust Company of New York as Trustee. Additionally, a fee of $878 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 April 30, 1998 follows:
<TABLE>
<S> <C>
Unrealized appreciation $132,282
Unrealized depreciation -
________
$132,282
========
</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 April 30,
distribution
plan 1998 1997 1996
<S> <C> <C> <C>
Monthly $51.96 55.94 62.53
Semi-annual 52.71 56.61 63.06
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $54.46 56.26 64.97
Expenses (2.07) (2.08) (2.07)
____________________________
Investment income - net 52.39 54.18 62.90
Distributions to unit holders:
Investment income - net (52.24) (56.31) (62.78)
Principal from investment transactions - (133.84) -
Net gain (loss) on investments 2.12 (12.81) 6.10
____________________________
Total increase (decrease) in net assets 2.27 (148.78) 6.22
Net assets:
Beginning of the year 861.11 1,009.89 1,003.67
____________________________
End of the year $863.38 861.11 1,009.89
===========================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
MISSOURI TRUST, SERIES 13
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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
2,352 UNITS
PROSPECTUS
Part One
Dated August 26, 1998
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 New Mexico State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State, New Mexico Trust,
Series 1 (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 New Mexico, 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 New Mexico State
and local income taxes under existing law. At July 16, 1998, each Unit
represented a 1/2,352 undivided interest in the principal and net income of
the Trust (see "The Fund" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price of the Units is equal to the aggregate value of the
Bonds in the Portfolio of the Trust divided by the number of Units
outstanding, plus a sales charge of 4.7% of the Public Offering Price (4.932%
of the amount invested). At July 16, 1998, the Public Offering Price per Unit
was $1,043.19 plus net interest accrued to date of settlement (three business
days after such date) of $10.99 and $15.95 for the monthly and semi-annual
distribution plans, respectively (see "Market for Units" in Part Two).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
Estimated Current Return and Estimated Long-Term Return
Estimated Current Return to Unit holders under the semi-annual distribution
plan was 5.70% per annum on July 16, 1998, and 5.65% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.30% per annum on July 16, 1998, and 2.24% 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $2,290,000
Number of Units 2,352
Fractional Undivided Interest in the Trust per Unit 1/2,352
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,338,263
Aggregate Value of Bonds per Unit $994.16
Sales Charge 4.932% (4.7% of Public Offering Price) $49.03
Public Offering Price per Unit $1,043.19*
Redemption Price and Sponsor's Repurchase Price per Unit
($49.03 less than the Public Offering Price per Unit) $994.16*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $635,000
</TABLE>
Date Trust Established August 21, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $953 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $61.38 $61.38
Less: Estimated Annual Expense $2.49 $1.90
Estimated Net Annual Interest Income $58.89 $59.48
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $58.89 $59.48
Divided by 12 and 2, Respectively $4.91 $29.74
Estimated Daily Rate of Net Interest Accrual $.1636 $.1652
Estimated Current Return Based on Public
Offering Price 5.65% 5.70%
Estimated Long-Term Return Based on Public
Offering Price 2.24% 2.30%
</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 142, The First Trust of
Insured Municipal Bonds - Multi-State,
New Mexico Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 142, The First
Trust of Insured Municipal Bonds - Multi-State, New Mexico Trust, Series 1 as
of April 30, 1998, 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 April 30, 1998, 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 142, The First Trust of Insured Municipal Bonds - Multi-State, New
Mexico Trust, Series 1 at April 30, 1998, 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
July 31, 1998
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,228,742)
(Note 1) $2,390,908
Accrued interest 56,913
__________
2,447,821
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 16,889
Cash overdraft 7,020
Accrued liabilities 117
__________
24,026
__________
Net assets, applicable to 2,404 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $2,228,742
Net unrealized appreciation (Note 2) 162,166
Distributable funds 32,887
__________
$2,423,795
==========
Net asset value per unit $1,008.23
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
PORTFOLIO - See notes to portfolio.
April 30, 1998
<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>
City of Albuquerque, New Mexico, Hospital
Revenue Series 1991A (St. Joseph Health Care
System) (MBIA Insured) (c) 6.625% 5/15/2010 2001 @ 102 AAA $715,000 771,063
City of Albuquerque, New Mexico, Municipal
Refunding, Collateralized Mortgage
Obligations, Series 1988-A (FGIC Insured) (c) -(d) 5/15/2010 AAA 160,000 77,436
City of Albuquerque, New Mexico, Refuse
Removal and Disposal Revenue, Series 1989
(AMBAC Insured) (c) (e) 7.25 7/01/2009 1999 @ 102 AAA 195,000 205,645
City of Gallup, New Mexico, Sales Tax 1999 @ 101.5
Refunding Revenue (MBIA Insured) (c) 6.75 6/01/2006 2003 @ 100 S.F. AAA 385,000 399,433
Board of Regents of New Mexico Highlands
University (Las Vegas, New Mexico), 2000 @ 100
System Revenue, Series 1991 (MBIA Insured) (c) 6.90 6/15/2011 2005 @ 100 S.F. AAA 500,000 524,875
Santa Fe Community College District, Santa Fe
County, New Mexico, General Obligation
Community College, Series October 1, 1990
(MBIA Insured) (c) (e) 6.75 8/01/2008 2001 @ 100 AAA 385,000 412,456
______________________
$2,340,000 2,390,908
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
NOTES TO PORTFOLIO
April 30, 1998
(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 93% of
the aggregate principal amount of Bonds in the Trust is subject to call
within four years.
(b) The ratings shown are those effective at April 30, 1998.
(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 February 15, 1989 at a price of 9.278% 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 six obligations of issuers located in New Mexico.
One of the Bonds in the Trust, representing approximately 16% of the
aggregate principal amount of 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; Single Family
Housing, 1; University and School, 1; and Miscellaneous, 2.
Approximately 21%, 31% and 7% of the aggregate principal amount of the
Bonds in the Trust consist of university and school revenue bonds,
health care revenue bonds and single family residential mortgage 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 85%. The largest such issue represents approximately 31%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $150,959 160,860 169,463
Expenses:
Trustee's fees and related expenses (3,858) (4,018) (3,776)
Evaluator's fees (953) (953) (953)
Supervisory fees (615) (655) (687)
________________________________
Investment income - net 145,533 155,234 164,047
Net gain (loss) on investments:
Net realized gain (loss) 68 4,717 5,803
Change in net unrealized appreciation
or depreciation 12,713 (31,315) 23,610
________________________________
12,781 (26,598) 29,413
________________________________
Net increase in net assets resulting
from operations $158,314 128,636 193,460
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $145,533 155,234 164,047
Net realized gain (loss) on investments 68 4,717 5,803
Change in net unrealized appreciation
or depreciation on investments 12,713 (31,315) 23,610
__________________________________
158,314 128,636 193,460
Distributions to unit holders:
Investment income - net (145,775) (153,782) (162,215)
Principal from investment transactions (18,099) (2,705) (3,352)
__________________________________
(163,874) (156,487) (165,567)
Unit redemptions (54, 170 and 150 in
1998, 1997 and 1996, respectively):
Principal portion (54,155) (170,737) (152,793)
Net interest accrued (655) (4,701) (3,435)
__________________________________
(54,810) (175,438) (156,228)
__________________________________
Total increase (decrease) in net assets (60,370) (203,289) (128,335)
Net assets:
At the beginning of the year 2,484,165 2,687,454 2,815,789
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $32,887, $33,402
and $39,326 at April 30, 1998,
1997 and 1996, respectively) $2,423,795 2,484,165 2,687,454
==================================
Trust units outstanding at the end
of the year 2,404 2,458 2,628
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
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, August 21, 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 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. Prior to
September 1, 1995, the Trustee was United States Trust Company of New York;
effective September 1, 1995, The Chase Manhattan Bank succeeded United States
Trust Company of New York as Trustee. Additionally, a fee of $953 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 April 30, 1998 follows:
<TABLE>
<S> <C>
Unrealized appreciation $162,166
Unrealized depreciation -
________
$162,166
========
</TABLE>
<PAGE>
3. Insurance
The issuers of all of the 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
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 April 30,
distribution
plan 1998 1997 1996
<S> <C> <C> <C>
Monthly $59.55 60.43 60.42
Semi-annual 60.08 61.15 60.99
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $61.91 62.58 62.84
Expenses (2.23) (2.19) (2.01)
_____________________________
Investment income - net 59.68 60.39 60.83
Distributions to unit holders:
Investment income - net (59.74) (60.72) (60.63)
Principal from investment transactions (7.43) (1.07) (1.23)
Net gain (loss) on investments 5.08 (10.58) 10.05
_____________________________
Total increase (decrease) in net assets (2.41) (11.98) 9.02
Net assets:
Beginning of each year 1,010.64 1,022.62 1,013.60
_____________________________
End of each year $1,008.23 1,010.64 1,022.62
=============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
NEW MEXICO TRUST, SERIES 1
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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
3,005 UNITS
PROSPECTUS
Part One
Dated August 26,1998
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 Ohio State and local income
taxes. Capital gains, if any, are subject to tax.
The Trust
The First Trust of Insured Municipal Bonds - Multi-State Ohio Trust, Series 36
(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 Ohio, 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 Ohio State and local income taxes under
existing law. At July 16, 1998, each Unit represented a 1/3,005 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 July 16, 1998, the Public Offering Price per Unit
was $975.95 plus net interest accrued to date of settlement (three business
days after such date) of $10.83 and $16.15 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 6.62% per annum on July 16, 1998, and 6.56% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.47% per annum on July 16, 1998, and 2.42% 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $2,690,000
Number of Units 3,005
Fractional Undivided Interest in the Trust per Unit 1/3,005
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $2,844,751
Aggregate Value of Bonds per Unit $946.67
Sales Charge 3.093% (3.0% of Public Offering Price) $29.28
Public Offering Price per Unit $975.95*
Redemption Price and Sponsor's Repurchase Price per Unit
($29.28 less than the Public Offering Price per Unit) $946.67*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $671,000
</TABLE>
Date Trust Established August 21, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $1,007 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 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $66.32 $66.32
Less: Estimated Annual Expense $2.27 $1.74
Estimated Net Annual Interest Income $64.05 $64.58
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $64.05 $64.58
Divided by 12 and 2, Respectively $5.34 $32.39
Estimated Daily Rate of Net Interest Accrual $.1779 $.1794
Estimated Current Return Based on Public
Offering Price 6.56% 6.62%
Estimated Long-Term Return Based on Public
Offering Price 2.42% 2.47%
</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 142, The First Trust of Insured Municipal
Bonds - Multi-State, Ohio Trust, Series 36
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 142, The First
Trust of Insured Municipal Bonds - Multi-State, Ohio Trust, Series 36 as of
April 30, 1998, 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 April 30, 1998, 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 142, The First Trust of Insured Municipal Bonds - Multi-State, Ohio
Trust, Series 36 at April 30, 1998, 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
July 31, 1998
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $2,837,536)
(Note 1) $2,885,460
Accrued interest 66,424
Cash 6,836
__________
2,958,720
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 29,636
Accrued liabilities 134
__________
29,770
__________
Net assets, applicable to 3,044 outstanding units
of fractional undivided interest:
Cost of Trust assets (Note 1) $2,837,536
Net unrealized appreciation (Note 2) 47,924
Distributable funds 43,490
__________
$2,928,950
==========
Net asset value per unit $962.20
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
PORTFOLIO - See notes to portfolio.
April 30, 1998
<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>
Hospital Facilities Revenue, Series 1989 A
(Mercy Health System, Province of Cincinnati),
County of Clermont, Ohio, (AMBAC Insured) 1999 @ 102
(c) (d) 7.50% 9/01/2019 2000 @ 100 S.F. AAA $390,000 415,274
County of Fairfield, Ohio, Hospital Facilities
Improvement Revenue, Series 1991A (Lancaster-
Fairfield Community Hospital) (MBIA Insured)
(c)(d) 7.10 6/15/2021 2001 @ 102 AAA 500,000 548,135
City of Hamilton, Ohio, Electric System Mortgage
Revenue, 1988 Series (FGIC Insured) (c)(d) 8.00 10/15/2022 1998 @ 102 AAA 310,000 321,572
City of Marysville, Ohio, Water System Mortgage
Revenue, Series 1991 (MBIA Insured) (c) (d) 7.05 12/01/2021 2001 @ 101 AAA 400,000 438,624
Northeast Ohio Regional Sewer District,
Wastewater Improvement Revenue,
Series 1991 (AMBAC Insured) (c) (d) 6.50 11/15/2016 2001 @ 101 AAA 250,000 269,450
City of Oberlin, Ohio, Sewerage System First
Mortgage Revenue, Series 1988 (BIG Insured)
(c) (d) 7.80 12/15/2008 1998 @ 102 AAA 355,000 370,134
Ohio Water Development Authority, State of Ohio,
Collateralized Pollution Control, Revenue
Refunding, 1990 Series A (The Toledo Edison
Company Project) (FSA Insured) (c) 7.75 5/15/2019 2000 @ 102 AAA 485,000 522,271
______________________
$2,690,000 2,885,460
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
NOTES TO PORTFOLIO
April 30, 1998
(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 Bonds in the
Trust are subject to call within four years.
(b) The ratings shown are those effective at April 30, 1998.
(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 seven obligations of issuers located in Ohio.
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; Electric, 2; Sewer, 2; and Water, 1.
Approximately 30%, 33% and 22% of the aggregate principal amount of the
Bonds consist of electric revenue bonds, healthcare revenue bonds and
sewer revenue bonds, respectively. Each of six Bond issues represents
10% or single family residential mortgage more of the aggregate
principal amount of the Bonds in the Trust or a total of approximately
91%. The largest such issue represents approximately 19%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $203,992 218,244 224,685
Expenses:
Trustee's fees and related expenses (4,525) (4,955) (4,599)
Evaluator's fees (1,007) (1,007) (1,007)
Supervisory fees (807) (843) (853)
_______________________________
Investment income - net 197,653 211,439 218,226
Net gain (loss) on investments:
Net realized gain (loss) (6,568) (1,605) (764)
Change in net unrealized appreciation
or depreciation (24,980) (65,617) 4,899
_______________________________
(31,548) (67,222) 4,135
_______________________________
Net increase in net assets resulting
from operations $166,105 144,217 222,361
===============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Net increase in net assets resulting
from operations:
Investment income - net $197,653 211,439 218,226
Net realized gain (loss) on investments (6,568) (1,605) 764
Change in net unrealized appreciation
or depreciation on investments (24,980) (65,617) 4,899
__________________________________
166,105 144,217 222,361
Distributions to unit holders:
Investment income - net (195,873) (212,428) (216,577)
Principal from investment transactions - (16,024) (3,629)
__________________________________
(195,873) (228,452) (220,206)
Unit redemptions (182, 146 and 39 in 1998,
1997 and 1996, respectively):
Principal portion (174,843) (142,177) (38,849)
Net interest accrued (4,380) (2,337) (1,056)
__________________________________
(179,223) (144,514) (39,905)
__________________________________
Total increase (decrease) in
net assets (208,991) (228,749) (37,750)
Net assets:
At the beginning of the year 3,137,941 3,366,690 3,404,440
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $43,490, $42,185
and $50,598 at April 30, 1998,
1997 and 1996, respectively) $2,928,950 3,137,941 3,366,690
==================================
Trust units outstanding at the end
of the year 3,044 3,226 3,372
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
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, August 21, 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 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. Prior to
September 1, 1995, the Trustee was United States Trust Company of New York;
effective September 1, 1995, The Chase Manhattan Bank succeeded United States
Trust Company of New York as Trustee. Additionally, a fee of $1,007 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 April 30, 1998 follows:
<TABLE>
<S> <C>
Unrealized appreciation $88,650
Unrealized depreciation (40,726)
_______
$47,924
=======
</TABLE>
<PAGE>
3. Insurance
The issuers of all of the 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
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 April 30,
distribution
plan 1998 1997 1996
<S> <C> <C> <C>
Monthly $63.43 63.98 63.49
Semi-annual 63.93 64.66 64.02
</TABLE>
<PAGE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $65.47 66.02 65.97
Expenses (2.03) (2.06) (1.90)
____________________________
Investment income - net 63.44 63.96 64.07
Distributions to unit holders:
Investment income - net (63.45) (64.34) (63.73)
Principal from investment transactions - (4.92) (1.07)
Net gain (loss) on investments (10.49) (20.43) 1.08
____________________________
Total increase (decrease) in
net assets (10.50) (25.73) .35
Net assets:
Beginning of the year 972.70 998.43 998.08
____________________________
End of the year $962.20 972.70 998.43
============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST OF INSURED MUNICIPAL BONDS - MULTI-STATE
OHIO TRUST, SERIES 36
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 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
1,972 UNITS
PROSPECTUS
Part One
Dated August 26, 1998
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 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
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 July
16, 1998, each Unit represented a 1/1,972 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 July 16, 1998, the Public Offering Price per Unit
was $789.48 plus net interest accrued to date of settlement (three business
days after such date) of $9.55 and $13.67 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 6.24% per annum on July 16, 1998, and 6.18% under the monthly
distribution plan. Estimated Long-Term Return to Unit holders under the semi-
annual distribution plan was 2.77% per annum on July 16, 1998, and 2.70% 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 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $1,485,000
Number of Units 1,972
Fractional Undivided Interest in the Trust per Unit 1/1,972
Public Offering Price:
Aggregate Value of Bonds in the Portfolio $1,510,161
Aggregate Value of Bonds per Unit $765.80
Sales Charge 3.093% (3.0% of Public Offering Price) $23.68
Public Offering Price per Unit $789.48*
Redemption Price and Sponsor's Repurchase Price per Unit
($23.68 less than the Public Offering Price per Unit) $765.80*
Discretionary Liquidation Amount of the Trust (20% of the
original principal amount of Bonds in the Trust) $562,000
</TABLE>
Date Trust Established August 21, 1991
Mandatory Termination Date December 31, 2040
Evaluator's Fee: $843 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 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
SUMMARY OF ESSENTIAL INFORMATION AS OF JULY 16, 1998
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 $51.15 $51.15
Less: Estimated Annual Expense $2.39 $1.86
Estimated Net Annual Interest Income $48.76 $49.29
Calculation of Interest Distribution:
Estimated Net Annual Interest Income $48.76 $49.29
Divided by 12 and 2, Respectively $4.06 $24.65
Estimated Daily Rate of Net Interest Accrual $.1354 $.1369
Estimated Current Return Based on Public Offering Price 6.18% 6.24%
Estimated Long-Term Return Based on Public Offering Price 2.70% 2.77%
</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>
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The First Trust Combined
Series 142, The First Trust Advantage,
Minnesota Trust, Series 5
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The First Trust Combined Series 142, The First
Trust Advantage, Minnesota Trust, Series 5 as of April 30, 1998, 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 April 30, 1998, 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 142, The First Trust Advantage, Minnesota Trust, Series 5 at April 30,
1998, 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
July 31, 1998
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Municipal bonds, at market value (cost $1,612,152)
(Note 1) $1,624,800
Accrued interest 32,464
Cash 3,559
__________
1,720,823
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Liabilities:
Distributions payable and accrued to unit holders 10,809
Accrued liabilities 131
__________
10,940
__________
Net assets, applicable to 2,183 outstanding
units of fractional undivided interest:
Cost of Trust assets (Note 1) $1,612,152
Net unrealized appreciation (Note 2) 72,648
Distributable funds 25,083
__________
$1,709,883
==========
Net asset value per unit $783.27
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
PORTFOLIO - See notes to portfolio.
April 30, 1998
<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 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 (e) 8.00% 8/15/2019 2000 @ 102 AAA $580,000 637,037
Northern Municipal Power Agency (Minnesota),
Electric System Revenue Refunding, 1999 @ 102
Series 1989 A - Uninsured 7.25 1/01/2016 2012 @ 100 S.F. A 370,000 384,707
Series 1989 A - AMBAC Insured - (c) 1/01/2010 AAA 135,000 75,070
Owatonna, Minnesota, Public Utilities,
Revenue (e) 6.75 1/01/2016 2001 @ 100 A1(d) 250,000 265,440
City of Robbinsdale, Minnesota, Hospital
Revenue (North Memorial Medical Center
Project), Series 1989 (AMBAC Insured) (e) 7.375 1/01/2019 1999 @ 102 AAA 205,000 213,310
Wright County, Minnesota, General Obligation,
Capital Improvement Plan, Series 1990 A
(the "Capital Improvement Plan") (e) 7.00 12/01/2009 1999 @ 100 NR 105,000 109,236
______________________
$1,645,000 1,684,800
======================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
NOTES TO PORTFOLIO
April 30, 1998
(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 92% 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 April 30, 1998. All ratings
are by Standard & Poor's Corporation unless otherwise indicated ("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 2, 1989 at a price of 21.658% of their original
principal amount.
(d) Rating by Moody's Investors Service, Inc.
(e) This issue of Bonds is secured by, and payable from, escrowed U.S.
Government securities.
(f) The Trust consists of five obligations of issuers located in Minnesota.
One of the Bonds in the Trust, representing approximately 6% of the
aggregate principal amount of 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: Electric, 1; Utility, 1; and
Health Care, 2. Approximately 48% and 31% 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 94%. The largest such issue represents
approximately 35%.
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $118,507 135,688 172,823
Expenses:
Trustee's fees and related expenses (3,411) (3,706) (4,042)
Evaluator's fees (843) (843) (843)
Supervisory fees (584) (619) (707)
________________________________
Investment income - net 113,669 130,520 167,231
Net gain (loss) on investments:
Net realized gain (loss) 269 1,439 19,302
Change in net unrealized appreciation
or depreciation (12,737) (38,329) (27,574)
________________________________
(12,468) (36,890) (8,272)
________________________________
Net increase in net assets resulting
from operations $101,201 93,630 158,959
================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA TRUST, SERIES 5
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $113,669 130,520 167,231
Net realized gain (loss) on
investments 269 1,439 19,302
Change in net unrealized appreciation
or depreciation on investments (12,737) (38,329) (27,574)
__________________________________
101,201 93,630 158,959
Distributions to unit holders:
Investment income - net (115,988) (133,913) (165,353)
Principal from investment transactions - (198,015) (313,623)
__________________________________
(115,988) (331,928) (478,976)
Unit redemptions (152, 140 and 395 in
1998, 1997 and 1996, respectively):
Principal portion (118,144) (121,862) (369,846)
Net interest accrued (1,997) (1,912) (8,057)
__________________________________
(120,141) (123,774) (377,903)
__________________________________
Total increase (decrease) in net assets (134,928) (362,072) (697,920)
Net assets:
At the beginning of the year 1,844,811 2,206,883 2,904,803
__________________________________
At the end of the year (including
distributable funds applicable to
Trust units of $25,083, $28,545
and $36,555 at April 30, 1998, 1997
and 1996, respectively) $1,709,883 1,844,811 2,206,883
=================================
Trust units outstanding at the end
of the year 2,183 2,335 2,475
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA 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, August 21, 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 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. Prior to
September 1, 1995, the Trustee was United States Trust Company of New York;
effective September 1, 1995, The Chase Manhattan Bank succeeded United States
Trust Company of New York as Trustee. Additionally, a fee of $843 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 April 30, 1998 follows:
<TABLE>
<S> <C>
Unrealized appreciation $72,648
Unrealized depreciation -
_______
$72,648
=======
</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 April 30,
distribution
plan 1998 1997 1996
<S> <C> <C> <C>
Monthly $50.70 55.83 61.20
Semi-annual 51.09 56.44 61.70
</TABLE>
Selected data for a unit of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended April 30,
1998 1997 1996
<S> <C> <C> <C>
Interest income $51.92 56.78 62.78
Expenses (2.12) (2.16) (2.03)
______________________________
Investment income - net 49.80 54.62 60.75
Distributions to unit holders:
Investment income - net (50.86) (56.01) (61.34)
Principal from investment transactions - (84.66) (115.60)
Net gain (loss) on investments (5.74) (15.55) (4.27)
______________________________
Total increase (decrease) in
net assets (6.80) (101.60) (120.46)
Net assets:
Beginning of the year 790.07 891.67 1,012.13
______________________________
End of the year $783.27 790.07 891.67
==============================
</TABLE>
<PAGE>
THE FIRST TRUST COMBINED SERIES 142
THE FIRST TRUST ADVANTAGE
MINNESOTA 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 29, 1998 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 INDEMNITY
CORPORATION BY THE INSURED TRUSTS OR WAS DIRECTLY OBTAINED BY THE BOND
ISSUER, THE UNDERWRITERS, THE SPONSOR OR OTHERS PRIOR TO THE INITIAL
DATE OF DEPOSIT FROM FINANCIAL GUARANTY INSURANCE COMPANY, AMBAC
INDEMNITY CORPORATION, OR OTHER INSURERS (THE "PREINSURED BONDS").
INSURANCE OBTAINED BY AN INSURED TRUST APPLIES ONLY WHILE BONDS ARE
RETAINED IN SUCH TRUST, WHILE INSURANCE ON PREINSURED BONDS IS EFFECTIVE
SO LONG AS SUCH BONDS ARE OUTSTANDING. PURSUANT TO AN IRREVOCABLE
COMMITMENT OF FINANCIAL GUARANTY INSURANCE COMPANY, AND/OR AMBAC
INDEMNITY CORPORATION IN THE EVENT OF A SALE OF A BOND INSURED UNDER AN
INSURANCE POLICY OBTAINED BY AN INSURED TRUST, THE TRUSTEE HAS THE RIGHT
TO OBTAIN PERMANENT INSURANCE FOR SUCH BOND UPON THE PAYMENT OF A SINGLE
PREDETERMINED INSURANCE PREMIUM FROM THE PROCEEDS OF THE SALE OF SUCH
BOND. THE INSURANCE, IN EITHER CASE, RELATES ONLY TO THE BONDS IN THE
INSURED TRUSTS AND NOT TO THE UNITS OFFERED HEREBY. AS A RESULT OF SUCH
INSURANCE, THE UNITS OF EACH INSURED TRUST HAVE RECEIVED A RATING OF
"AAA" BY STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL,
INC. ("STANDARD & POOR'S"). SEE "WHY AND HOW ARE THE INSURED TRUSTS
INSURED?" ON PAGE 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.
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
Indemnity Corporation ("AMBAC Indemnity") or was obtained directly by
the Bond issuer, the underwriters, the Sponsor or others prior to the
Initial Date of Deposit from Financial Guaranty, AMBAC Indemnity, or
other insurers (the "Preinsured Bonds"). NO PORTFOLIO INSURANCE POLICY
HAS BEEN OBTAINED BY THE TRUSTS WITH THE NAME DESIGNATION OF "THE FIRST
TRUST ADVANTAGE" (THE "ADVANTAGE TRUSTS"). The portfolio insurance
obtained by the Insured Trusts is effective only while the Bonds thus
insured are held in such Trusts, while insurance on Preinsured Bonds is
effective so long as such Bonds are outstanding. See "Why and How are
the Insured Trusts Insured?" THERE IS, OF COURSE, NO GUARANTEE THAT THE
FUND'S OBJECTIVES WILL BE ACHIEVED. AN INVESTMENT IN THE FUND SHOULD BE
MADE WITH AN UNDERSTANDING OF THE RISKS WHICH AN INVESTMENT IN FIXED
RATE LONG-TERM DEBT OBLIGATIONS MAY ENTAIL, INCLUDING THE RISK THAT THE
VALUE OF THE UNITS WILL DECLINE WITH INCREASES IN INTEREST RATES.
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 Indemnity with respect to such Bond upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust of the
Fund is eligible to be sold on an insured basis. Standard & Poor's and
Moody's Investors Service, Inc. have rated the claims-paying ability of
Financial Guaranty and AMBAC Indemnity "AAA" and "Aaa," respectively.
See "Why and How are the Insured Trusts Insured?"
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.
The economy of Puerto Rico is closely integrated with that of the
mainland United States. During fiscal 1996 approximately 88% of Puerto
Rico's exports were to the U.S. mainland, which was also the source of
approximately 62% of Puerto Rico's imports. The economy of Puerto Rico
is dominated by the manufacturing and service sectors. The manufacturing
sector has experienced fundamental changes over the years as a result of
increased emphasis on higher wage, high technology industries such as
pharmaceuticals, electronics, computers, microprocessors, professional
and scientific instruments, and certain high technology machinery and
equipment. The service sector, including finance, insurance and real
estate, also plays a major role in the economy. It ranks second only to
manufacturing in contribution to the gross domestic product and leads
all sectors in providing employment. In recent years, the service sector
has experienced significant growth in response to the expansion of the
manufacturing sector.
The Puerto Rican economy is affected by a number of Commonwealth and
federal investment incentive programs. Aid for Puerto Rico's economy has
traditionally depended heavily on federal programs, and current federal
budgetary policies suggest that an expansion of aid to Puerto Rico is
unlikely. An adverse effect on the Puerto Rican economy could result
from other U.S. policies, including further reduction in transfer
payment programs such as food stamps, curtailment of military spending
and policies which could lead to a stronger dollar. One of the factors
assisting the development of the Puerto Rican economy has been the tax
incentives offered by the federal and Puerto Rico governments.
Puerto Rico's future will be determined by the leadership and
initiatives of both the private and public sector to compensate for the
loss of the federal tax credit under Section 936 of the U.S. tax code.
This important credit which enabled companies to repatriate profits at a
40-60% reduction in federal taxes was terminated as of July 1996.
Existing U.S. companies operating in Puerto Rico were given a ten year
grace period, but new U.S. manufacturing companies coming to Puerto Rico
will have to pay U.S. deferral taxes when repatriating their profits to
the mainland.
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
Page 7
proceeds or manner of operation of the project financed from Bond
proceeds that may affect the exemption of interest on such Bonds from
Federal income taxation. Although at the time of issuance of each of the
Bonds in the Trusts an opinion of bond counsel was rendered as to the
exemption of interest on such obligations from Federal income taxation,
there can be no assurance that the respective issuers or other obligors
on such obligations will fulfill the various continuing requirements
established upon issuance of the Bonds. A failure to comply with such
requirements may cause a determination that interest on such obligations
is subject to Federal income taxation, perhaps even retroactively from
the date of issuance of such Bonds, thereby reducing the value of the
Bonds and subjecting Unit holders to unanticipated tax liabilities.
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with
their terms and because the proceeds from such events will be
distributed to Unit holders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
Certain of the Bonds contained in the Trusts may be subject to being
called or redeemed in whole or in part prior to their stated maturities
pursuant to optional redemption provisions, sinking fund provisions,
special or extraordinary redemption provisions or otherwise. 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.
Page 8
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
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.
Page 9
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
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
Indemnity Corporation ("AMBAC Indemnity" or "AMBAC"), a Wisconsin-
domiciled stock insurance company, or obtained by the Bond issuer, the
underwriters, the Sponsor or others prior to the Initial Date of Deposit
directly from Financial Guaranty, AMBAC Indemnity or other insurers (the
"Preinsured Bonds"). The insurance policy obtained by each Insured Trust
is noncancellable and will continue in force for such Trust so long as
such Trust is in existence and the Bonds described in the policy
continue to be held by such Trust (see "Portfolio" for each Insured
Trust). Nonpayment of premiums on the policy obtained by each Insured
Trust will not result in the cancellation of insurance, but will permit
Financial Guaranty and/or AMBAC Indemnity to take action against the
Trustee to recover premium payments due it. Premium rates for each issue
of Bonds protected by the policy obtained by each Insured Trust are
fixed for the life of such Trust. The premium for any Preinsured Bonds
has been paid in advance by the Bond issuer, the underwriters, the
Sponsor or others and any such policy or policies are noncancellable and
will continue in force so long as the Bonds so insured are outstanding
and the insurer and/or insurers thereof remain in business. If the
provider of an original issuance insurance policy is unable to meet its
obligations under such policy, or if the rating assigned to the claims-
paying ability of such insurer deteriorates, Financial Guaranty and/or
AMBAC Indemnity has no obligation to insure any issue adversely affected
by either of the above described events. A monthly premium is paid by
each Insured Trust for the insurance obtained by such Trust, which is
payable from the interest income received by such Trust. In the case of
Preinsured Bonds, no premiums for insurance are paid by the Insured Trust.
Financial Guaranty Insurance Company. Under the provisions of the
aforementioned portfolio insurance issued by Financial Guaranty,
Financial Guaranty unconditionally and irrevocably agrees to pay to
Citibank, N.A., or its successor, as its agent (the "Fiscal Agent"),
that portion of the principal of and interest on the Bonds covered by
the policy which shall become due for payment but shall be unpaid by
reason of nonpayment by the issuer of the Bonds. The term "due for
payment" means, when referring to the principal of a Bond, its stated
maturity date or the date on which it shall have been called for
mandatory sinking fund redemption and does not refer to any earlier date
on which payment is due by reason of call for redemption (other than by
Page 10
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on a Bond, the stated
date for payment of interest, except that when the interest on a Bond
shall have been determined, as provided in the underlying documentation
relating to such Bond, to be subject to Federal income taxation, "due
for payment" also means, when referring to the principal of such Bond,
the date on which such Bond has been called for mandatory redemption as
a result of such determination of taxability, and when referring to
interest on such Bond, the accrued interest at the rate provided in such
documentation to the date on which such Bond has been called for such
mandatory redemption, together with any applicable redemption premium.
The term "due for payment" will not include, when referring to either
the principal of a Bond or the interest on a Bond, any acceleration of
payment unless such acceleration is at the sole option of Financial
Guaranty.
Financial Guaranty will make such payments to the Fiscal Agent on the
date such principal or interest becomes due for payment or on the
business day next following the day on which Financial Guaranty shall
have received notice of nonpayment, whichever is later. The Fiscal Agent
will disburse to the Trustee the face amount of principal and interest
which is then due for payment but is unpaid by reason of nonpayment by
the issuer but only upon receipt by the Fiscal Agent of (i) evidence of
the Trustee's right to receive payment of the principal or interest due
for payment and (ii) evidence, including any appropriate instruments of
assignment, that all of the rights to payment of such principal or
interest due for payment shall thereupon vest in Financial Guaranty.
Upon such disbursement, Financial Guaranty shall become the owner of the
Bond, appurtenant coupon or right to payment of principal or interest on
such Bond and shall be fully subrogated to all of the Trustee's rights
thereunder, including the right to payment thereof.
Pursuant to an irrevocable commitment of Financial Guaranty, the
Trustee, upon the sale of a Bond covered under a policy obtained by an
Insured Trust has the right to obtain permanent insurance with respect
to such Bond (i.e., insurance to maturity of the Bonds regardless of the
identity of the holder thereof) (the "Permanent Insurance") upon the
payment of a single predetermined insurance premium from the proceeds of
the sale of such Bond. Accordingly, any Bond in an Insured Trust is
eligible to be sold on an insured basis. It is expected that the Trustee
will exercise the right to obtain Permanent Insurance only if upon such
exercise the Insured Trust would receive net proceeds (sale of Bond
proceeds less the insurance premium attributable to the Permanent
Insurance) from such sale in excess of the sale proceeds if such Bonds
were sold on an uninsured basis. The insurance premium with respect to
each Bond eligible for Permanent Insurance is determined based upon the
insurability of each Bond as of the Initial Date of Deposit and will not
be increased or decreased for any change in the creditworthiness of such
Bond.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a wholly-
owned subsidiary of General Electric Capital Corporation ("GECC").
Neither the Corporation nor GECC is obligated to pay the debts of or the
claims against Financial Guaranty. Financial Guaranty is 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 December 31, 1997, the total capital and surplus of Financial
Guaranty was approximately $1,225,590,411. 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 Indemnity Corporation ("AMBAC Indemnity"). The Insurance Policy of
AMBAC Indemnity obtained by an Insured Trust is noncancellable and will
Page 11
continue in force for so long as the Bonds described in the Insurance
Policy are held by an Insured Trust. A monthly premium is paid by an
Insured Trust for the Insurance Policy obtained by it. The Trustee will
pay, when due, successively, the full amount of each installment of the
insurance premium. Pursuant to a binding agreement with AMBAC Indemnity,
in the event of a sale of a Bond covered by the AMBAC Indemnity
Insurance Policy, the Trustee has the right to obtain permanent
insurance for such Bond upon payment of a single predetermined premium
from the proceeds of the sale of such Bond.
Under the terms of the Insurance Policy, AMBAC Indemnity agrees to pay
to the Trustee that portion of the principal of and interest on the
Bonds insured by AMBAC Indemnity which shall become due for payment but
shall be unpaid by reason of nonpayment by the issuer of the Bonds. The
term "due for payment" means, when referring to the principal of a Bond
so insured, its stated maturity date or the date on which it shall have
been called for mandatory sinking fund redemption and does not refer to
any earlier date on which payment is due by reason of call for
redemption (other than by mandatory sinking fund redemption),
acceleration or other advancement of maturity and means, when referring
to interest on a Bond, the stated date for payment of interest.
AMBAC Indemnity will make payment to the Trustee not later than thirty
days after notice from the Trustee is received by AMBAC Indemnity that a
nonpayment of principal or of interest on a Bond has occurred, but not
earlier than the date on which the Bonds are due for payment. AMBAC
Indemnity will disburse to the Trustee the face amount of principal and
interest which is then due for payment but is unpaid by reason of
nonpayment by the issuer in exchange for delivery of Bonds, not less in
face amount than the amount of the payment in bearer form, free and
clear of all liens and encumbrances and uncancelled. In cases where
Bonds are issuable only in a form whereby principal is payable to
registered holders or their assigns, AMBAC Indemnity shall pay principal
only upon presentation and surrender of the unpaid Bonds uncancelled and
free of any adverse claim, together with an instrument of assignment in
satisfactory form, so as to permit ownership of such Bonds to be
registered in the name of AMBAC Indemnity or its nominee. In cases where
Bonds are issuable only in a form whereby interest is payable to
registered holders or their assigns, AMBAC Indemnity shall pay interest
only upon presentation of proof that the claimant is the person entitled
to the payment of interest on the Bonds and delivery of an instrument of
assignment, in satisfactory form, transferring to AMBAC Indemnity all
right under such Bonds to receive the interest in respect of which the
insurance payment was made.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance corporation
regulated by the Office of the Commissioner of Insurance of the State of
Wisconsin and licensed to do business in fifty states, the District of
Columbia and the Commonwealth of Puerto Rico, with admitted assets of
approximately $2,967,246,831 (unaudited) and statutory capital of
approximately $1,715,481,691 (unaudited) as of March 31, 1998. Statutory
capital consists of AMBAC Indemnity's policyholders' surplus and
statutory contingency reserve. AMBAC Indemnity is a wholly owned
subsidiary of AMBAC Inc., a 100% publicly-held company. Moody's
Investors Service, Inc. and Standard & Poor's have both assigned a
triple-A claims-paying ability rating to AMBAC Indemnity.
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 Company, a Wisconsin-domiciled insurance company.
Copies of AMBAC Indemnity's financial statements prepared in accordance
with statutory accounting standards are available from AMBAC Indemnity.
The address of AMBAC Indemnity's administrative offices and its
telephone number are One State Street Plaza, 17th Floor, New York, New
York 10004 and (212) 668-0340.
The information relating to AMBAC Indemnity contained above has been
furnished by AMBAC Indemnity. No representation is made herein as to the
accuracy or adequacy of such information, or as to the existence of any
adverse changes in such information, subsequent to the date hereof.
In determining whether to insure bonds, Financial Guaranty and/or AMBAC
Indemnity has applied its own standards which are not necessarily the
same as the criteria used in regard to the selection of bonds by the
Sponsor. This decision is made prior to the Initial Date of Deposit, as
bonds not covered by such insurance are not deposited in an Insured
Trust, unless such bonds are Preinsured Bonds. The insurance obtained by
Page 12
an Insured Trust covers Bonds deposited in such Trust and physically
delivered to the Trustee in the case of bearer bonds or registered in
the name of the Trustee or its nominee or delivered along with an
assignment in the case of registered bonds or registered in the name of
the Trustee or its nominee in the case of Bonds held in book-entry form.
Contracts to purchase Bonds are not covered by the insurance obtained by
an Insured Trust although Bonds underlying such contracts are covered by
insurance upon physical delivery to the Trustee.
Insurance obtained by each Insured Trust or by the Bond issuer, the
underwriters, the Sponsor or others does not guarantee the market value
of the Bonds or the value of the Units of such Trust. The insurance
obtained by an Insured Trust is effective only as to Bonds owned by and
held in such Trust. In the event of a sale of any such Bond by the
Trustee, the insurance terminates as to such Bond on the date of sale.
In the event of a sale of a Bond insured by an Insured Trust, the
Trustee has the right to obtain Permanent Insurance upon the payment of
an insurance premium from the proceeds of the sale of such Bond. Except
as indicated below, insurance obtained by an Insured Trust has no effect
on the price or redemption value of Units. It is the present intention
of the Evaluator to attribute a value to such insurance obtained by an
Insured Trust (including the right to obtain Permanent Insurance) for
the purpose of computing the price or redemption value of Units only if
the Bonds covered by such insurance are in default in payment of
principal or interest or, in the Sponsor's opinion, in significant risk
of such default. The value of the insurance will be equal to the
difference between (i) the market value of a Bond which is in default in
payment of principal or interest or in significant risk of such default
assuming the exercise of the right to obtain Permanent Insurance (less
the insurance premium attributable to the purchase of Permanent
Insurance) and (ii) the market value of such Bonds not covered by
Permanent Insurance. See "Public Offering-How is the Public Offering
Price Determined?" herein for a more complete description of the
Evaluator's method of valuing defaulted Bonds and Bonds which have a
significant risk of default. Insurance on a Preinsured Bond is effective
as long as such Bond is outstanding. Therefore, any such insurance may
be considered to represent an element of market value in regard to the
Bonds thus insured, but the exact effect, if any, of this insurance on
such market value cannot be predicted.
A contract of insurance obtained by an Insured Trust and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and/or AMBAC Indemnity and the Fund. Otherwise
neither Financial Guaranty nor its parent, FGIC Corporation, or any
affiliate thereof, nor AMBAC Indemnity nor its parent, AMBAC, Inc., or
any affiliate thereof has any significant relationship, direct or
indirect, with the Fund or the Sponsor, except that the Sponsor has in
the past and may from time to time in the future, in the normal course
of its business, participate as sole underwriter or as manager or as a
member of underwriting syndicates in the distribution of new issues of
municipal bonds in which the investors or the affiliates of FGIC
Corporation and/or AMBAC Inc. have or will be participants or for which
a policy of insurance guaranteeing the scheduled payment of interest and
principal has been obtained from Financial Guaranty and/or AMBAC
Indemnity. Neither the Fund nor the Units of a Trust nor the portfolio
of such Trust is insured directly or indirectly by FGIC Corporation
and/or AMBAC Inc.
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, 1996, MBIA had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total
capital and surplus of $1.4 billion (audited) determined in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities. As of December 31, 1997, MBIA had admitted
Page 13
assets of $5.3 billion (audited), total liabilities of $3.5 billion
(audited), and total capital and surplus of $1.8 billion (audited),
determined in accordance with statutory accounting practices prescribed
or permitted by insurance regulatory authorities. Copies of MBIA's
financial statements prepared in accordance with statutory accounting
practices are available from MBIA. The address of MBIA is 113 King
Street, Armonk, New York 10504. 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. For further
description, see "Financial Security Assurance Inc." herein. The address
of FSA Maryland and its telephone number are Steuart Tower, One Market
Plaza, San Francisco, CA 94105-1413 and (415) 995-8000.
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., U S West Capital Corporation 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, 1998, 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 $808,603,000 (unaudited) and $503,683,000
(unaudited), and the total shareholders' equity and the unearned premium
reserve, respectively, of Financial Security and its consolidated
Page 14
subsidiaries were, in accordance with generally accepted accounting
principles, approximately $923,047,000 (audited), and $428,158,000
(audited). Copies of Financial Security's financial statements may be
obtained by writing to Financial Security at 350 Park Avenue, New York,
New York, 10022, Attention Communications Department. Financial
Security's telephone number is (212) 826-0100.
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security
or any of its domestic operating insurance company subsidiaries
(including FSA Maryland) 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 and FSA Maryland reinsure a portion of
their liabilities under certain of their 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 or FSA Maryland under any financial guaranty
insurance policy.
The claims-paying ability of Financial Security and FSA Maryland 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 Company, a
Wisconsin-domiciled insurance company.
As of December 31, 1997, the total policyholders' surplus of Connie Lee
was $92,563,017 (unaudited) and total admitted assets were $233,237,273
(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.
CCLIA's consolidated annual (audited) and quarterly (unaudited)
financial statements prepared in accordance with generally accepted
accounting principles are filed periodically with the Nationally
Recognized Municipal Securities Information Repositories designated
under Rule 15c2-12 of the Securities and Exchange Commission. The
information contained in these financial statements is incorporated
herein by reference. 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
Page 15
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.
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
Page 16
from Financial Guaranty and/or AMBAC Indemnity 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;
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
Page 17
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:
<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
Page 18
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
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
Indemnity 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.
Page 19
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
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.
Page 20
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification. Certificates
for Units will bear an appropriate notation on their face indicating
which plan of distribution has been selected in respect thereof. When a
change is made, the existing certificate must be surrendered to the
Trustee and a new certificate issued to reflect the then currently
effective plan of distribution. There is no charge for this service.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred for reasons other than to change the plan of distribution,
and to pay any governmental charge that may be imposed in connection
with each such transfer or exchange. For new certificates issued to
replace destroyed, stolen or lost certificates, the Unit holder may be
required to furnish indemnity satisfactory to the Trustee and pay such
expenses as the Trustee may incur. Mutilated certificates must be
surrendered to the Trustee for replacement.
How are Interest and Principal Distributed?
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).
Page 21
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of each Trust and, to the extent funds are not
sufficient therein, from the Principal Account of each Trust, amounts
necessary to pay the expenses of such Trust. The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the
Trustee may withdraw from the Interest Account and the Principal Account
of a Trust such amounts as may be necessary to cover redemption of Units
of such Trust by the Trustee.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an existing account. For
example, at a Unit holder's direction, the Trustee would distribute
automatically on the applicable distribution date interest income or
principal on the participant's Units to, among other investment
vehicles, a Unit holder's checking, bank savings, money market,
insurance, reinvestment or any other account. All such distributions, of
course, are subject to the minimum investment and sales charges, if any,
of the particular investment vehicle to which distributions are
directed. The Trustee will notify the participant of each distribution
pursuant to the Universal Distribution Option. The Trustee will
distribute directly to the Unit holder any distributions which are not
accepted 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.
Page 22
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of each Trust in connection with
each distribution a statement of the amount of interest, if any, and the
amount of other receipts, if any, which are being distributed, expressed
in each case as a dollar amount per Unit. Within a reasonable time after
the last business day of each calendar year, the Trustee will furnish to
each person who at any time during the calendar year was a Unit holder
of a Trust of record, a statement as to (1) the Interest Account:
interest received by such Trust (including amounts representing interest
received upon any disposition of Bonds of such Trust), the amount of
such interest representing insurance proceeds (if applicable),
deductions for payment of applicable taxes and for fees and expenses of
the Trust, redemption of Units and the balance remaining after such
distributions and deductions, expressed both as a total dollar amount
and as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (2) the
Principal Account: the dates of disposition of any Bonds of such Trust
and the net proceeds received therefrom (excluding any portion
representing interest and the premium attributable to the exercise of
the right, if applicable, to obtain Permanent Insurance), deduction for
payment of applicable taxes and for fees and expenses of the Trust,
redemptions of Units, and the balance remaining after such distributions
and deductions, expressed both as a total dollar amount and as a dollar
amount representing the pro rata share of each Unit outstanding on the
last business day of such calendar year; (3) the Bonds held and the
number of Units of such Trust outstanding on the last business day of
such calendar year; (4) the Redemption Price per Unit based upon the
last computation thereof made during such calendar year; and (5) the
amounts actually distributed during such calendar year from the Interest
Account and from the Principal Account of such Trust, separately stated,
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the Record Date for such distributions.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their Trust furnished to it by the Evaluator.
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
Page 23
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
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.
Page 24
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor, either pursuant to
the portfolio insurance, if any, or otherwise, within thirty days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails
to instruct the Trustee to sell or to hold such Bond within thirty days
after notification by the Trustee to the Sponsor of such default, the
Trustee may, in its discretion, sell the defaulted Bond and not be
liable for any depreciation or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made by an
issuer of any of the Bonds to issue new obligations in exchange and
substitution for any Bonds pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept such an offer
or to take any other action with respect thereto as the Sponsor may deem
proper if the issuer is in default with respect to such Bonds or in the
written opinion of the Sponsor the issuer will probably default in
respect to such Bonds in the foreseeable future. Any obligations so
received in exchange or substitution will be held by the Trustee subject
to the terms and conditions in the Indenture to the same extent as Bonds
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under "What
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 $9 billion in First Trust unit investment trusts have
been deposited. The Sponsor's employees include a team of professionals
with many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1997, the total
partners' capital of Nike Securities L.P. was $11,724,071 (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.
Page 25
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Bonds. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the Fund which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trusts as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is Securities Evaluation Service, Inc., 531 East Roosevelt
Road, Suite 200, Wheaton, Illinois 60187. The Evaluator may resign or
may be removed by the Sponsor 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
Page 26
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 &
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 Indemnity
Corporation, Municipal Bond Investors Assurance Corporation, Connie Lee
Insurance Company, Financial Security Assurance and Capital Guaranty
Insurance Company are automatically rated "AAA" by Standard & Poor's.
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? 20
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? 22
What Reports will Unit Holders Receive? 23
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 26
Who is the Evaluator? 26
Other Information:
How May the Indenture be Amended or
Terminated? 26
Legal Opinions 27
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.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
FIRST TRUST (REGISTERED TRADEMARK)
THE FIRST TRUST
COMBINED SERIES
Prospectus
Part Two
May 29, 1998
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.
Page 31
LOUISIANA 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 June 30, 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 the environmental
tax is reinstated) (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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
Page 2
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 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 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, 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.
For taxpayers other than corporations, net capital gains (which is
defined as net long-term capital gain over net short-term capital loss
for the taxable year) are subject to a maximum marginal stated tax rate
of either 28% or 20%, depending upon the holding period of the capital
assets. 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. Generally, capital gain realized from
assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized
from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of
certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same
rate as ordinary income. Legislation is currently pending that provides
the appropriate methodology that should be applied in netting the
realized capital gains and losses. Such legislation is proposed to be
effective retroactively for tax years ending after May 6, 1997. 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. It should be
noted that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
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, or REMIC) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "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
Page 4
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
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.
Louisiana Tax Status of Unit Holders
The following opinion applies to Louisiana Trusts that on the Initial
Date of Deposit contained only Bonds of issuers located in Louisiana. At
the time of the closing for each Louisiana Trust, Special Counsel to the
Fund for Louisiana tax matters, which relied explicitly on the opinion
of Chapman and Cutler regarding Federal income tax matters, rendered an
opinion under then existing Louisiana income tax law applicable to
taxpayers whose income is subject to Louisiana income taxation
substantially to the effect that:
The State of Louisiana imposes a tax upon the net income of resident
individuals, and with certain exceptions, resident corporations, estates
and trusts, and upon the income from Louisiana sources of non-resident
individuals, corporations, estates and trusts.
The mere ownership of Units will not subject a nonresident Unit holder
to the tax jurisdiction of Louisiana. Amounts received by a nonresident
Unit holder (who may for other reasons be subject to the tax
jurisdiction of Louisiana) with respect to Units held outside of
Louisiana will not constitute income from Louisiana sources, upon which
the Louisiana income tax would be imposed.
In the case of resident individuals, the calculation of Louisiana tax
table income begins with Federal adjusted gross income with certain
modifications, including the addition of interest on obligations of a
state or political subdivision thereof other than Louisiana. However,
Louisiana law specifically provides that interest on obligations of the
State of Louisiana, its political subdivisions, public corporations
created by them and constituted authorities thereof authorized to issue
obligations on their behalf, title to which obligations are vested with
a resident individual shall be excluded from tax table income and are
exempt from Louisiana income taxation. In addition, to the extent that
any such interest paid to a Unit holder is derived from the proceeds of
a bond insurance policy issued to the Trustee of the Fund or under
individual policies obtained by the issuer of the Bonds, the
underwriter, the Sponsor or others, such interest would be exempt from
Louisiana income tax.
In the case of corporations, estates, trusts, insurance companies and
foreign corporations, interest received upon obligations of the State of
Louisiana, or any political or municipal subdivision thereof, is exempt
from Louisiana income taxation.
A Louisiana Trust is not an "association" taxable as a corporation under
Louisiana law with the result that income of a Louisiana Trust will be
deemed to be income of the Unit holders.
Interest on the Bonds that is exempt from Louisiana income tax when
received by a Louisiana Trust will retain its tax-exempt status when
received by the Unit holders.
As a general rule, to the extent that gain (or loss) from the sale of
obligations held by a Louisiana Trust (whether as a result of the sale
of such obligations by a Louisiana Trust or as a result of the sale of a
Unit by a Unit holder) is includable in (or deductible in the
calculation of) the Federal adjusted gross income of a resident
individual or the Federal taxable income of a resident corporation,
estate or trust, such gain will be included (or loss deducted) in the
calculation of the Unit holder's Louisiana taxable income.
The State of Louisiana does not impose an intangible tax on investments,
and therefore, Unit holders will not be subject to Louisiana intangibles
tax on their Units of a Louisiana Trust.
The following opinion applies to Louisiana Trusts that on the Initial
Date of Deposit contained Bonds of issuers located in Louisiana and
Bonds of issuers located in the Commonwealth of Puerto Rico. At the time
Page 5
of the closing for each Louisiana Trust, Special Counsel to the Fund for
Louisiana tax matters rendered an opinion under then existing Louisiana
income tax law applicable to taxpayers whose income is subject to
Louisiana income taxation substantially to the effect that:
(1) A Louisiana Trust will be treated as a trust for Louisiana income
tax purposes and not as an association taxable as a corporation.
(2) The Louisiana income tax on resident individuals is imposed upon
the "tax table income" of resident individuals. The calculation of the
"tax table income" of a resident individual begins with federal adjusted
gross income. Certain modifications are specified, but no such
modification requires the addition of interest on obligations of the
State of Louisiana and its political subdivisions, public corporations
created by them and constitutional authorities thereof authorized to
issue obligations on their behalf. Accordingly, amounts representing
interest excludable from gross income for federal income tax purposes
received by a Louisiana Trust with respect to such obligations will not
be taxed to a Louisiana Trust, or, except as provided below, to the
resident individual Unit holder, for Louisiana income tax purposes. In
addition to the foregoing, interest on the respective Securities may
also be exempt from Louisiana income taxes pursuant to the statutes
authorizing their issuance.
(3) To the extent that gain from the sale, exchange or other
disposition of obligations held by a Louisiana Trust (whether as a
result of a sale or exchange of such obligations by a Louisiana Trust or
as a result of a sale or exchange of a Unit by a Unit holder) is
includable in the federal adjusted gross income of a resident
individual, such gain will be included in the calculation of the Unit
holder's Louisiana taxable income.
(4) Gain or loss on the Unit or as to underlying bonds for Louisiana
income tax purposes would be determined by taking into account the basis
adjustments for federal income tax purposes described in this Prospectus.
As no opinion is expressed regarding the Louisiana tax consequences of
Unit holders other than individuals who are Louisiana residents, tax
counsel should be consulted by other prospective Unit holders. The
Internal Revenue Code of 1986, as amended (the "1986 Code"), contains
provisions relating to investing in tax-exempt obligations (including,
for example, corporate minimum tax provisions which treat certain tax-
exempt interest and corporate book income which may include tax-exempt
interest, as tax preference items, provisions reducing the deductibility
of interest expense by financial institutions) which could have a
corresponding effect on the Louisiana tax liability of the Unit holders.
In rendering the opinions expressed above, counsel has relied upon the
opinion of Chapman and Cutler that a Louisiana Trust is not an
association taxable as a corporation for Federal income tax purposes,
that each Unit holder of a Louisiana Trust will be treated as the owner
of a pro rata portion of such Louisiana Trust under the 1986 Code and
that the income of a Louisiana Trust will be treated as income of the
Unit holders under the 1986 Code.
Tax counsel should be consulted as to the other Louisiana tax
consequences not specifically considered herein, and as to the Louisiana
tax status of taxpayers other than resident individuals who are Unit
holders in a Louisiana Trust. In addition, no opinion is being rendered
as to Louisiana tax consequences resulting from any proposed or future
federal or state tax legislation.
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 the financial condition of the State
government may not be relevant to general obligation or revenue bonds
issued by political subdivisions of and other issuers in the State of
Louisiana ("the State"). Such information, and the following discussion
regarding the economy of the State, is based upon information about
general economic conditions that may or may not affect issuers of the
Louisiana obligations. The Sponsor has not independently verified any of
the information contained in such publicly available documents, but is
not aware of any facts which would render such information inaccurate.
Economic Outlook. Louisiana has experienced ten consecutive years of
employment growth and, during the 1990s, employment has grown faster
Page 6
than the national average. The State's annual average employment growth
during this decade is 2.3%, while the United States has experienced an
average 1.4% increase. Louisiana had two strong years of employment
growth in 1994 and 1995, with increases of 4.3% and 3.7%, respectively.
During 1996 and 1997, however, the average rate stabilized at about 2.5%.
The State expects a boom in the oil and gas extraction and chemical
sectors to lead employment growth for these sectors and cause similar
expansion in related sectors, including industrial construction,
shipbuilding, fabricated metals and machinery manufacturing. Mining
sector employment, accounting for 3.0% of total nonfarm employment,
reached 56,000 during March 1998, up 6,000 jobs or 11% over the previous
year. As of the latest available figures (1995), Louisiana ranks 2nd in
the nation in terms of natural gas production and primary petrochemical
production and 3rd in crude oil production. Earnings from the mining
sector increased by $287 million during 1997, the largest gain in the
nation following Texas and California.
The services sector, led by the health sector and gambling industry,
provides the largest number of jobs in Louisiana. Employment in services
totaled 511,000 in March 1998, up 16,000 jobs or 3.2%. Earnings in
services increased $1.104 billion during 1997. Transportation and public
utilities have also contributed significantly to employment gains.
Employment in the transportation and public utilities sector increased
by 2.7% to 113,000 through March 1998. Earnings for this sector
increased by $203 million during 1997. Employment growth in the
wholesale and retail trade sectors improved by 2.1% and 1.8% to 97,000
and 340,000, respectively, during the same period. During 1997, earnings
improved by $197 million in wholesale trade and $263 million in retail
trade.
Manufacturing employment growth was slow during 1997, at 0.5% for
191,000 jobs in March 1998. Durable goods manufacturing experienced 6.7%
growth in employment during 1997, but nondurable manufacturing was
limited to a 1.2% increase. Earnings in the manufacturing sector, which
accounts for 10.2% of total nonfarm employment, increased by $238
million during 1997. More manufacturing growth is expected for the next
two years, but the textile and apparel sectors will continue to be
adversely affected by the North American Free Trade Agreement and the
General Agreements on Tariffs and Trade.
The State's total employment during April 1998 is estimated at
1,940,310, compared with 1,893,785 during April 1997. The labor force
grew more slowly, by 1.7% from 2,019,273 to 2,053,783 during the same
twelve-month period. Louisiana ranks near the bottom among all states in
terms of total labor force participation, with only about 58% of the
civilian population employed. The State expects employment to increase
by an additional 56,000 new jobs during 1998-99.
Although agricultural earnings dropped by $118 million during 1997,
agriculture and agricultural services remains an important part of
Louisiana's economy. Employment in this sector is just under 1% of total
employment, but (according to 1996 figures) Louisiana ranks: 1st in the
United States in shrimp, oyster, hard blue crab and crawfish production;
2nd in sugar cane and sweet potato production; 3rd in rice production;
4th in pecan production; 6th in cotton production; and 15th in soybean
production.
The State's unemployment rate for 1997 averaged 6.1%, down from 6.7% in
1996, while the United States averaged 5.4% in 1996 and 5.0% in 1997.
During February 1998, unemployment in Louisiana averaged 3.4% but then
jumped to 5.5% in April. The United States' unemployment rate averaged
4.7% during the first four months of 1998.
Louisiana's per capita personal income reached $20,680 in 1997, up from
$19,709 in 1996. This gain represents 4.9% growth, compared to the
State's 3.7% gain in 1996. The State's per capita personal income is
currently 80.8% of the national average ($25,598), up from 80.6% in
1996. In 1997, Louisiana's growth rate was comparable to the nation as a
whole (4.8%), but the State moved up three rankings to 40th among all
the states in terms of per capita personal income. In terms of total
personal income, however, Louisiana ranked 25th in the nation, with a
5.2% gain during 1997. The national growth rate in total personal income
during 1997 was 5.7%.
The U.S. Census Bureau reports that Louisiana's population was recorded
at 4,221,826 during the 1990 Census. The population is estimated to have
reached 4,351,769 during July 1997. Between 1990 and 1997, Louisiana's
population has increased at less than half the rate of the nation as a
whole, with gains of 3.1% and 7.6%, respectively. Between July 1996 and
July 1997, the State's population grew by 10,951 people, a 0.3%
increase. Net in-migration has been negative every year during the
Page 7
1990s, with the State losing about 106,000 residents since April 1990
and dropping from the 21st largest state in 1996 to the 22nd in 1997.
Louisiana's population is expected to increase at a much slower rate
than the nation through 2025.
Revenue and Expenditures. The Louisiana Revenue Estimating Conference
(the "Conference") was established by Act No. 814 of the 1987 Regular
Session of the Legislature and given constitutional status in 1990
(Article VII, Section 10 of the State Constitution). The Conference was
established to provide an official forecast of anticipated State
revenues upon which the executive budget shall be based, to provide for
a more stable and accurate method of financial planning and budgeting
and to facilitate the adoption of a balanced budget as is required by
Article VII, Section 10(E) of the State Constitution. In developing the
official forecast, the Conference can only consider revenues that are
projected to accrue to the State as a result of laws and rules enacted
and in effect during the forecast period. The Conference is prohibited
from including revenues which would be raised by proposed legislation or
rules. During the 1990 Regular Session of the Louisiana Legislature, a
constitutional amendment was approved (Act No. 1096), granting
constitutional status to the existence of the Revenue Estimating
Conference without altering its structure, powers, duties or
responsibilities which are currently provided by statute.
The Conference is required to prepare and publish initial and revised
estimates of money to be received by the General Fund and dedicated
funds for the current and next fiscal years which are available for
appropriation. All Conference decisions to adopt these estimates must be
by unanimous vote of its members who meet four times annually: October
15, January 1, the third Monday in March and August 15. The most
recently adopted estimate of money available for appropriation shall be
the official forecast. Appropriations by the Legislature from the
General Fund shall not exceed the official forecast in effect at the
time the appropriations are made.
Fiscal Year 1997 general fund revenues totaled $4.537 billion, a 1.7% or
$78.696 million decrease from Fiscal 1996 receipts. The Revenue
Estimating Conference had presented an official forecast of available
general fund revenue of $5.488 billion for Fiscal 1997. Total receipts
for governmental fund types (general, special revenue, debt service and
capital projects) reached $12.501 billion during Fiscal 1997, a 2.0%
increase from the previous year. The largest source of these receipts
was the federal government, at 38% or $4.790 billion, down 1.7% from
Fiscal 1996. Sales tax revenues amounted to 17.7% of receipts or $2.214
billion, up 0.7% over Fiscal 1996. Income tax revenues increased
substantially during Fiscal 1997, due mainly to Louisiana's improving
economy and the growth of personal income. Income taxes accounted for
13.2% or $1.649 billion of these revenues, up 10.7% from Fiscal 1996.
Additional sources of revenue include motor vehicle fuel taxes (3.5%),
gaming taxes (3.3%), and corporate and public utility taxes (2.0%).
Total expenditures for the governmental fund types reached $11.952
billion during Fiscal Year 1997. The expenditures include the following:
health and welfare, $4.627 billion or 39% (down 5% from Fiscal Year 1996
expenditures); education, $2.854 billion or 24% (up 6%); debt service,
$1.019 billion or 9% (up 58%); general government, $725 million or 6%
(down 0.3%); capital outlay, $642 million or 5% (down 23%); corrections,
$407 million or 4% (up 19%); and transportation and development, $245
million or 2% (up 3%). The unreserved/undesignated general fund ending
balance for Fiscal Year 1997 (ended June 30, 1997) was $135.1 million.
The Revenue Estimating Conference's official forecast of available tax
revenue is $5.047 billion for Fiscal Year 1998. As of December 31, 1997,
total Fiscal Year 1998 year-to-date tax collections are 2.79% above
Fiscal 1997 year-to-date receipts. Current income tax revenues total
$520.1 million, 14.23% above the previous year's collections. The sales
tax is up 2.75%, with receipts of $813.2 million. Corporate income tax,
motor fuels tax and severance tax collections, however, are down by
8.18%, 1.02% and 10.91%, respectively.
Only local governmental units levy ad valorem taxes at present. Under
the 1921 State Constitution, a 5.75 mills ad valorem tax was being
levied by the State until January 1, 1973, at which time a
constitutional amendment to the 1921 Constitution abolished the ad
valorem tax. Under the 1974 State Constitution, a State ad valorem tax
of up to 5.75 mills was provided for but is not presently being levied.
The property tax is underutilized at the parish level due to a
constitutional homestead exemption from the property tax applicable to
the first $75,000 of the full market value of single family residences.
Homestead exemptions do not apply to ad valorem property taxes levied by
municipalities, with the exception of the City of New Orleans. Since
Page 8
local governments are also prohibited from levying an individual income
tax by the Constitution, their reliance on State government is increased
under the existing tax structure.
Debt Management. The Louisiana Constitution of 1974 provides that the
State shall have no power, directly or indirectly, through any State
board, agency, commission or otherwise to incur debt or issue bonds
except by law enacted by two-thirds of the elected members of each house
of the legislature.
LRS 39:1365(25) limits the legislative authorization of general
obligation bonds and other general obligations secured by the full faith
and credit of the State by prohibiting total authorized bonds from
exceeding an amount equal to two times the average annual revenues of
the Bond Security and Redemption Fund for the last three fiscal years
prior to such authorization. The bond authorization limitation is
$13,722,258,000. The total general obligation bonds authorized is
$1,932,390,000 on June 30, 1997, or 14.08% of the bond authorization
limit.
LRS 39:1402(D) limits issuance by the Louisiana State Bond Commission of
general obligation bonds or other general obligations secured by the
full faith and credit of the State. The highest annual debt service
requirement for the current or any subsequent fiscal years for general
obligation debt, including the debt service on any bonds or other
obligations that are proposed to be sold by the Louisiana State Bond
Commission, may not exceed 10% of the average annual revenues of the
Bond Security and Redemption Fund for the last three fiscal years
completed prior to the issuance being proposed. The general obligation
debt issuance limitation is $686,113,000. On June 30, 1997, the highest
current or future annual general obligation debt service requirement is
$266,336,000, which represents 38.82% of the debt issuance limitation.
During Fiscal Year 1997, Louisiana's general obligation debt service
expenditures accounted for 5.57% of general governmental expenditures,
compared to 4.20% during Fiscal 1996. Total general obligation bond and
note principal balances on June 30, 1997 are as follows: general long
term debt, $1,861,616,000 in principal (3.5-10.7% interest rates,
maturing 2017); higher education, $1,231,000 in principal (3-6% interest
rates, maturing 2003); and Charity Hospital of New Orleans, $740,000 in
principal (3.6-5.0% interest rates, maturing 1999).
The Omnibus Bond Authorization Act of 1996 provides for the repeal of
State general obligation bond authorizations for projects no longer
found feasible or desirable. As a result, there were no authorized but
unissued bonds outstanding on June 30, 1997.
Bond Rating: State of Louisiana general obligation bonds have been given
the following ratings: Standard & Poor's Ratings Services, A-; Moody's
Investors Service, Inc., A2 (upgraded from Baa1); and Fitch IBCA, Inc.
(formerly known as Fitch Investors Service, L.P.), A. There can be no
assurance that the economic conditions on which these ratings were based
will continue or that particular bond issues may not be adversely
affected by changes in 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 Louisiana 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 Louisiana Trusts to pay interest on or
principal of the Bonds.
Page 9
LOUISIANA TRUST SERIES
The First Trust (registered trademark) Combined Series
The First Trust of Insured Municipal Bonds-Multi-State
PART THREE PROSPECTUS
Must be Accompanied by Parts One and Two
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
PLEASE RETAIN ALL PARTS OF THIS PROSPECTUS FOR FUTURE REFERENCE.
Page 10
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 29, 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 (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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
Page 2
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 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 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, 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.
For taxpayers other than corporations, net capital gains (which is
defined as net long-term capital gain over net short-term capital loss
for the taxable year) are subject to a maximum marginal stated tax rate
of either 28% or 20%, depending upon the holding period of the capital
assets. 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. Generally, capital gain realized from
assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized
from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of
certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same
rate as ordinary income. Legislation is currently pending that provides
the appropriate methodology that should be applied in netting the
realized capital gains and losses. Such legislation is proposed to be
effective retroactively for tax years ending after May 6, 1997. 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. It should be
noted that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
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, or REMIC) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "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
Page 4
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
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 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"). 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
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.
Page 5
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.
As a major manufacturing, financial, and agricultural state, Missouri's
economic health is tied closely to that of the nation. The economic
outlook is for continued improvement in Fiscal Year 1998. Missouri's
personal income, which directly impacts individual income tax and sales
tax, rose at a 5.9% rate during Fiscal Year 1997. Personal income in
1996 grew 5.6%. The Missouri economy has produced exceptional job growth
over the past three years. Missouri's employment stood at 2.8 million as
of November 1997, an increase of over 317,000 since January of 1993. At
the end of November 1997, the State unemployment rate was 3.5%, which
compares favorably to the national unemployment rate of 4.3%.
Agriculture is a significant part of Missouri's economy, with an
industry of approximately $5.0 billion in Fiscal Year 1997. Missouri is
among the nation's leading livestock producers, with livestock and
related products accounting for $2.5 billion of the State's agricultural
receipts in Fiscal Year 1997.
Balancing Missouri's budget in Fiscal Year 1997 was achieved through
sound financial management. The growing economy produced general
revenues that were better than projected. The Governor and General
Assembly adopted a conservative State budget meeting mandated
expenditure increases and providing limited funding for new and expanded
program. In future years, Missouri will focus on controlling the growth
of mandatory programs though welfare reform, managed care, and cost-
effective alternatives. Major funding priorities include education,
corrections, economic development, mental health, children's services,
and repairs and upgrades to existing State facilities.
The State of Missouri completed Fiscal Year 1997 in sound financial
condition due to strong revenue collections and efficient management of
State programs. Net general revenue collections increased over Fiscal
Year 1996 due to a strong national and State economy. Expenditures were
lower than anticipated in Fiscal Year 1997 as prudent State agency
managers did not use all available spending authority. General revenue
collections in Fiscal Year 1997 were $5,843.4 million, 7.4% above Fiscal
Year 1996 collections. General Revenue expenditures in Fiscal Year 1997
for the operating budget were $5,926.1 million. The Fiscal Year 1998
budget is conservatively based upon general revenue collections of
$6,029.6 million.
Preliminary calculations made pursuant to Article X of the Missouri
Constitution show that total State revenues for Fiscal Year 1997
exceeded the total State revenue limit by $318.8 million. Therefore, in
accordance with Article X, the entire amount of excess revenues will be
refunded to Missouri income taxpayers in calendar year 1998. The Office
of Administration projects that total State revenues will exceed the
total State revenue limit by approximately $125 million in Fiscal Year
1998. The Office of Administration projects that revenues will not
exceed the revenue limit in Fiscal Year 1999 if the Governor's
recommended tax reductions of $120 million are enacted. Together with
the 1997 tax cut, this brings the total tax reduction for Fiscal Year
1999 to $375 million.
The State ended Fiscal Year 1997 with an ending balance (surplus) of
$49.5 million for the General Revenue Fund. An appropriation of $86.55
million was transferred to the Budget Stabilization Fund to bring that
Fund to 2.5% of net general revenue collections. The ending General Fund
balance for Fiscal Year 1998 is projected at $172.4 million.
Page 6
Missouri will continue to see reduced desegregation costs. Federal court-
ordered payments for the St. Louis and Kansas City desegregation plans
were $254.9 million in Fiscal Year 1997 which is about 3.9% of the
State's general revenue budget. The estimate for Fiscal Year 1998 is
$255.9 million. In Fiscal Year 1999, ongoing savings totaling $91.7
million from Kansas City and $2.1 million from St. Louis will have been
used to boost State aid to all Missouri schools. In addition, cumulative
one-time savings of $77.8 million have been redirected to Missouri
schools. State law requires that desegregation savings go toward the
school foundation formula.
As of December 31, 1997, the State has spent $3.1 billion on the
desegregation cases in St. Louis and Kansas City. At the end of Fiscal
Year 1998, that total will reach an estimated $3.2 billion. The
appropriation for Fiscal Year 1998 is $264 million, and the revised
estimate is $255.9 million. Desegregation expenditures, court orders,
and other developments are continually monitored to provide the best
possible anticipation and forecast of future costs.
State desegregation costs could significantly be affected by a State
determination of liability for costs incurred by the Special School
District for Phase I part-time transfer students. If a liability is
determined, amounts from retroactive claims and accrued interest (if
any) could be significant. For Kansas City, under the terms of a
settlement agreement approved by the federal district court on March 25,
1997, state court-ordered desegregation payments will end in Fiscal Year
1999. The payment schedule is $110 million, $105 million and $99 million
for Fiscal Years 1997, 1998 and 1999, respectively.
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 the amount of $1
million. Total general obligation bonds issued as of November 30, 1997,
was $1,147.4 million of which $979.4 was outstanding. As of November 30,
1997, total revenue bonds issued was $148.5 million with $114.68 million
outstanding. Total state indebtedness as of November 30, 1997, was
$1,624,746,207 with $1,289,911,009 outstanding.
As of January 1, 1998, $194,465,000 principal remains outstanding of the
$200,000,000 issued fourth State building bonds (approved in August
1994); and $128,590,000 principal remains outstanding of the
$439,494,240 issued water pollution control bonds (both amounts
excluding refunding issuances). With the final $75 million issuance on
December 1, 1987, all $600 million in third State building bonds
authorized by Missouri voters in 1982 were issued. With the final
issuance in Fiscal Year 1998, Missouri will have issued all $250 million
in fourth State building bonds authorized by Missouri voters.
In Fiscal Year 1997, Missouri invested a total of $276.5 million in its
capital assets with appropriations for maintenance and construction
projects throughout the State. Appropriations for Fiscal Year 1998 are
estimated at $237.6 million. Capital improvements of $192.5 million are
recommended for Fiscal Years 1998-99 biennial budget. Of this amount,
$20.8 million is for vital maintenance and repairs to State-owned
facilities to initiate the voter-approved maintenance funding mechanism.
Also included is $171.8 million for planning, major renovation, new
construction, land acquisition, and other improvements. Amounts are
designated to prison construction, projects at elementary and secondary
education institutions, and facilities for veterans.
The State's general obligation bond issues received triple "A" ratings
from Moody's Investors Service, Inc., Standard & Poor's Rating Group,
and Fitch IBCA, Inc. (formerly Fitch Investors Service, L.P.). Missouri
is one of only eight states that have this rating from all three rating
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 7
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 8
NEW MEXICO 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 August 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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
if any, is attributable to original issue discount not yet accrued),
subject to 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 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
Page 2
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 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, 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.
For taxpayers other than corporations, net capital gains (which is
defined as net long-term capital gain over net short-term capital loss
for the taxable year) are subject to a maximum marginal stated tax rate
of either 28% or 20%, depending upon the holding period of the capital
assets. 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. Generally, capital gain realized from
assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized
from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of
certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same
rate as ordinary income. Note also that legislation has passed under
which net capital gains realized from property (with certain exclusions)
held for more than one year (rather than more than 18 months) will be
taxed at the maximum marginal state rate of 20% (10% for certain
taxpayers) provided by the 1997 Act. Such legislation is effective
retroactively for amounts properly taken into account on or after
January 1, 1998. 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. It should be noted that legislative proposals are introduced from
time to time that affect tax rates and could affect relative differences
at which ordinary income and capital gains are taxed.
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
Page 4
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
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.
New Mexico Tax Status of Unit Holders
At the time of the closing for each New Mexico Trust, Chapman and
Cutler, Special Counsel to the Fund for New Mexico tax matters, rendered
an opinion under then existing New Mexico income tax law applicable to
taxpayers whose income is subject to New Mexico income taxation
substantially to the effect that:
The assets of the New Mexico Trusts will consist of interest-bearing
obligations issued by or on behalf of the State of New Mexico ("New
Mexico") or counties, municipalities, authorities or political
subdivisions thereof the interest on which is expected to qualify as
exempt from New Mexico income taxes (the "New Mexico Bonds") or by the
Commonwealth of Puerto Rico, Guam or 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 New Mexico 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 New Mexico income taxes applicable to
individuals and corporations (collectively, the "New Mexico State Income
Tax"). At the respective times of issuance of the Bonds, opinions
relating to the validity thereof and to the exemption of interest
thereon from Federal income tax were rendered by bond counsel to the
respective issuing authorities. In addition, with respect to the New
Mexico Bonds, bond counsel to the issuing authorities rendered opinions
as to the exemption of interest from the New Mexico State Income Tax.
Neither the Sponsor nor its counsel has made any review for a New Mexico
Trust 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 New Mexico.
The New Mexico Trusts will not be subject to tax under the New Mexico
State Income Tax.
Interest on the Bonds which is exempt from the New Mexico State Income
Tax when received by a New Mexico Trust, and which would be exempt from
the New Mexico State Income Tax if received directly by a Unit holder,
will retain its status as exempt from such tax when received by a New
Mexico Trust and distributed to such Unit holder provided that the New
Mexico Trusts comply with the reporting requirements contained in the
New Mexico State Income Tax regulations.
To the extent that interest income derived from a New Mexico Trust by a
Unit holder with respect to Possession Bonds is exempt from state taxes
pursuant to 48 U.S.C. Section 745, 48 U.S.C. Section 1423a or 48 U.S.C.
Section 1403, such interest income will not be subject to the New Mexico
State Income Tax.
Each Unit holder will recognize gain or loss for New Mexico 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 New
Mexico 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 New Mexico State Income Tax does not permit a deduction of interest
paid on indebtedness incurred (or continued) in connection with the
purchase or carrying of Units in the New Mexico Trusts to the extent
that interest income related to the ownership of Units is exempt from
Page 5
the New Mexico State Income Tax, or is a deduction for expenses related
to the earning of income from such investments.
Investors should consult their tax advisors regarding collateral tax
consequences under New Mexico law relating to the ownership of the
Units, including, but not limited to, the inclusion of income
attributable to ownership of the Units in "modified gross income" for
purposes of determining eligibility for and the amount of the low income
comprehensive tax rebate, the child day care credit, the elderly
taxpayers' property tax rebate and the applicability of other New Mexico
taxes, such as the New Mexico estate tax.
FOR INFORMATION WITH RESPECT TO THE FEDERAL INCOME TAX STATUS AND OTHER
MATTERS, SEE "WHAT IS THE FEDERAL TAX STATUS OF UNIT HOLDERS?"
Certain Considerations
Economic Outlook. After slowing down significantly in 1996, economic
growth in New Mexico appears to have stabilized at a relatively slow
growth rate. Nonagricultural employment growth has been about 1.6% per
quarter on an annualized basis. Personal income growth appears to have
stabilized at just over 4.0%. Wage and salary disbursements have grown
by about 3.5% per year since mid-1996.
Major industries in the State are energy resources, services,
construction, trade, tourism, agriculture-agribusiness, manufacturing,
mining and government. From 1995-96, the value of construction contracts
increased 4.9% to $2.2 billion. In 1996, the total of gas and oil sales
was $4.45 billion, a dramatic increase of 41% from 1995. In 1995, the
value of mineral production (i.e., crude petroleum, natural gas, uranium
and coal) was approximately $4.9 billion, with figures showing an
increase for 1996. Major federally funded scientific research facilities
at Los Alamos, Albuquerque and White Sands are also a notable part of
the State's economy.
The State has a thriving tourist industry which has slowed since 1995.
In 1996, there were approximately 2.18 million visits to national parks
and about 5.0 million visits to State parks. According to the New Mexico
Department of Labor, the State's tourist industry generated about $2.1
billion in revenue and more than 66,000 jobs. Total gross receipts for
hotels and other lodging places increased 3.4% in 1996, compared with a
1.4% decrease in 1995. Yet visits to New Mexico's national parks and
monuments, affected partly by federal government shutdowns in the fall
and winter, dropped 3.1% in 1996.
Agriculture is a major part of the State's economy, producing an
estimated $1.468 billion in 1996. This was a 3.8% increase from 1995. As
a high, relatively dry region with extensive grasslands, the State is
ideal for raising cattle, sheep, and other livestock. Livestock receipts
increased 2.8% from 1995-96, to $991 million. This was after a 3.0%
decrease from 1994-95 due to significant declines in prices for beef
cattle and calves. Because of irrigation and a variety of climatic
conditions, the State's farmers are able to produce a diverse assortment
of quality products. The State's farmers are major producers of alfalfa
hay, wheat, chile peppers, cotton, fruits and pecans. Crop revenues in
1996 rose 5.7% to $478 million. Agricultural businesses include chile
canneries, wineries, alfalfa pellets, chemical and fertilizer plants,
farm machinery, feed lots and commercial slaughter plants.
New Mexico's economic growth has definitely slowed since 1995.
Nonagricultural employment growth was only 1.8% in 1997 and 1.7% in
1996, following growth rates of 3.8% in 1995, 5.0% in 1994 and 4.1% in
1993. Causes for the slowdown can be traced to developments in several
sectors of the economy. Construction, particularly, has been an
important factor. After an increase of 6.0% in 1995, construction
employment declined 3.2% in 1996 and an additional 1.2% in 1997 due to
the completion of numerous large construction projects and public works
projects funded by the 1994 New Mexico Legislature, as well as a large
drop in housing construction. In addition, the finance, insurance and
real estate sector lost 0.3% of its jobs during 1997, after a strong
increase of 4.7% in 1996. New Mexico's manufacturing suffered one of the
largest decreases in the country during 1997, with a 0.4% drop in
employment. In the trade sector, a weak tourism year and slow growth in
real disposable income resulted in a small trade employment growth of
only 0.9% during 1996, the lowest since 1991, although employment in
this sector improved slightly during 1997 with 1.4% growth.
In 1997, employment in services increased by 2.6%. According to the New
Mexico Department of Labor, service occupations will continue to
experience the highest growth rates through 2006, with food service and
preparation occupations accounting for almost half of all new jobs in
this sector. During 1996, services, usually the fastest growing sector
in the economy, managed only a 2.0% employment increase. This sector was
Page 6
significantly affected by a reclassification of employees of enterprises
owned by Indian tribes and tribal governments from services and other
sectors to the local government sector. Without this reclassification,
the 1996 growth rate would have been close to 4.5%.
Employment in the government sector and the combined transportation and
public utilities sectors both experienced 2.5% growth during 1997. Among
all the states, the growth rate of the government sector in New Mexico
was the 8th largest. This substantial increase stands in contrast to
significant drops in government employment during the previous two
years, including a 3.3% decrease in federal employment during 1996 due
in large part to layoffs at Los Alamos National Lab and the switchover
from F-111 to F-16 aircraft at Cannon Air Force Base in Clovis which
cost the State more than 1,000 jobs. At the State level, government
employment dropped 1.7% during 1996 because of an austerity program
implemented during that year.
In comparison to other states, New Mexico continues to rank low in terms
of per capita personal income, despite growth in this area. The rapid
growth of the State's population, at 14.2% from 1990-97 compared to only
7.6% for the nation, has had a negative impact on per capita personal
income. New Mexico's 1996 per capita personal income of $18,814 was
approximately 77% of the national figure ($24,426), and the State ranked
49th out of the fifty states and the District of Columbia. During 1997,
per capita personal income in the State climbed by 4.1% to $19,587,
moving New Mexico to a 48th place ranking. However, this gain is
substantially lower than the increases in the 6.0% to 8.5% range from
1993 to 1995. The national growth rate in total personal income during
1997 was 5.7%.
After remaining stable at 6.3% in 1994 and 1995, New Mexico's
unemployment rate was a very high 8.1% in 1996. During 1997, however,
the State's unemployment rate averaged 6.2%. In comparison, the average
national unemployment rate during 1997 was 4.9%. In March 1998, New
Mexico's unemployment rate was recorded at 6.4%, the third highest in
the nation.
The outlook for the New Mexico economy is for slow to moderate income
and employment growth. Nonagricultural employment is projected to grow
at about 1.7% through 1999. The fastest growing industries will be
services and trade, with expansion expected in all sectors except
mining. Personal income growth will be in the 4.0-4.5% range through
1999. Wages and salaries are expected to improve somewhat, reflecting
tight labor markets nationwide. Finally, unemployment is expected to
remain in the 6.5% range through 1999.
Revenues and Expenditures. The State derives the bulk of its recurring
General Fund revenues from five major sources: general and selective
sales taxes, income taxes, the emergency school tax on oil and gas
production, rents and royalties from State and federal land, and
interest earnings from its two Permanent Funds. Effective July 1, 1981,
the Legislature abolished all property taxes for State operating purposes.
For the Fiscal Year ending June 30, 1997, recurring revenue totaled
$2.964 billion, an increase of 5.5% over the previous fiscal year. Total
General Fund Revenue was $3.033 billion, up 10% from fiscal year 1996.
In general, weakness in broad-based taxes was offset by strength in
revenue related to the production of natural gas and crude oil.
Preliminary results for fiscal year 1998 show recurring appropriations
at $2.999 billion, up 4.7% from the previous fiscal year. Nonrecurring
appropriations for fiscal year 1997 were $85.2 million, and are
estimated at $4.4 million for fiscal year 1998. The net transfer
necessary from the operating reserve was $15.2 million and is within the
$30 million transfer authority authorized by the 1996 legislature.
The 1996 legislature also established the risk reserve fund within the
general fund. General fund balances including the risk reserve fund are
projected to total $231.6 million. Without the risk reserve, balances
would be $95.4 million. The fiscal year 1997 balance in the operating
reserve was $80.8 million, or only 2.7% of fiscal year 1997 total revenue.
Disaster allotments from the appropriation contingency fund totaled $5.1
million, and the ending balance in the appropriation contingency fund is
$9.4 million.
General Fund recurring revenue is projected to reach $3.08 billion in
fiscal year 1998, a 4.0% increase over fiscal year 1997. When
nonrecurring revenue is included, total General Fund receipts will reach
$3.13 billion of recurring revenue and $3.14 billion total revenue,
increases of 1.5% and 0.3%, respectively. Current and projected growth
in recurring revenue is slow when compared to the 1993 and 1995 period.
Page 7
Slow growth is largely attributable to declines in severance-related
taxes and declines in revenue from rents and royalties. Lower natural
gas and oil prices are responsible for stagnation in severance-related
taxes which are expected to grow only 0.9% in fiscal year 1998 and
decline by 13.7% in fiscal year 1999. Gross receipts taxes will grow in
fiscal year 1998 by 5.0% and income taxes will increase by 7.4%. The
growth in income taxes is augmented by increased capital gains
realizations due to new federal legislation. Nonrecurring revenue will
decline 37.5% in fiscal year 1998 and an additional 79.1% in fiscal year
1999. Fiscal year 1997 nonrecurring revenue was attributable to new
estimated payments required for personal income tax purposes. Fiscal
year 1998 nonrecurring revenue includes higher than usual reversions in
the Medicaid program thanks to significant cost savings.
Debt Administration. The principal sources of funding for capital
projects by the State are surplus general fund balances, general
obligation bonds, and Severance Tax Bonds. The 1994 Legislature
authorized the largest capital program in the State's history, $383
million. The Executive Capital outlay recommendation for the 1998
session totals $265.9 million. These authorizations fund a broad range
of State and local capital needs for various public school and higher
education acquisitions as well as correction facilities, museum and
cultural facilities, health facilities, State building repairs, water
rights, wastewater and water systems, State parks, local roads, and
senior citizens facilities projects.
General Obligation Bonds. General obligation bonds of the State are
issued and the proceeds thereof appropriated to various purposes
pursuant to an act of the Legislature of the State. The State
Constitution requires that any law which authorizes general obligation
debt of the State shall provide for an annual tax levy sufficient to pay
the interest and to provide a sinking fund to pay the principal of the
debts. General obligation bonds are general obligations of the State for
the payment of which the full faith and credit of the State are pledged.
The general obligation bonds are payable from "ad valorem" taxes levied
without limit as to rate or amount on all property in the State subject
to taxation for State purposes. For the fiscal year ended June 30, 1997,
the total amount outstanding on General Obligation Bonds was
$247,313,874. Of this amount, $42,018,874 is in interest.
The State of New Mexico General Obligation Capital Projects Improvements
Bonds Series 1997 in the principal amount of $64,825,000 are authorized
by the 1996 Capital Projects General Obligation Bond Act (the "Act")
passed by the State Legislature in 1996, have been approved by the
voters in a Statewide election in November 1996 and will be issued
pursuant to a resolution of the State Board of Finance. General
obligation bond recommendations for fiscal year 1998-99 total $83.3
million. Of this amount, $72.1 million is for public and higher
education facilities, and $11.2 million is for Statewide projects.
Severance Tax Bonds. Severance Tax Bonds are not general obligations of
the State and the State is prohibited by law from using the proceeds of
property taxes as a source of payment of revenue bonds, including
Severance Tax Bonds. The State Treasurer keeps separate accounts for all
money collected as Severance Taxes, and is directed by State statute to
pay Severance Tax Bonds from monies on deposit in the Bonding Fund. For
the fiscal year ended June 30, 1997, the total amount outstanding on
Severance Tax Bonds was $444,723,257. Of this amount, $58,953,257 is in
interest.
The Severance Tax Bonds, Series 1995A funds 55 projects for schools,
local governments, universities, and State agencies. Total amount of
principal and interest due on Series 1995-B and Series 1996-A as of June
30, 1997 is $66,176,318 and $47,067,458, respectively. Total amount of
principal and interest outstanding as of June 30, 1997 for the Series
1997-A Refunding Bonds is $68,515,621. The Severance Tax Bond
recommendation for the 1998 session totals $140 million. Of this amount,
$68.6 million is for public and higher education facilities, $12.7
million is for adult corrections projects and facility purchase and
$58.7 million is for other Statewide projects.
Severance taxes have been collected by the State since the adoption of
the Severance Tax Act in 1937. Since 1959, certain severance tax
receipts and certain other monies determined by the Legislature have
been deposited into the Bonding Fund and used, in part, to retire bond
issues which have funded a variety of capital improvements in the State.
The main minerals extracted from the State which contribute the largest
portion of Severance Tax revenues are natural gas, oil and coal.
Severance tax collections totaled $181.6 million in fiscal year 1997 and
are projected at $183.3 million for 1998.
Page 8
Bond Ratings. Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services have assigned the bond ratings of "Aa1" and "AA+,"
respectively, to State of New Mexico general obligation bonds and "Aa"
and "AA," respectively, to the Severance Tax Bonds, Series 1995A.
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 New Mexico 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 New Mexico Trusts to pay interest on or
principal of the Bonds.
Page 9
New Mexico 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 10
OHIO 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 March 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 (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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
Page 2
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 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 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, 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.
For taxpayers other than corporations, net capital gains (which is
defined as net long-term capital gain over net short-term capital loss
for the taxable year) are subject to a maximum marginal stated tax rate
of either 28% or 20%, depending upon the holding period of the capital
assets. 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. Generally, capital gain realized from
assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized
from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of
certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same
rate as ordinary income. Legislation is currently pending that provides
the appropriate methodology that should be applied in netting the
realized capital gains and losses. Such legislation is proposed to be
effective retroactively for tax years ending after May 6, 1997. 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. It should be
noted that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
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, or REMIC) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "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
Page 4
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
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.
Ohio Tax Status of Unit Holders
Each Ohio Insured Trust is comprised of interest-bearing obligations
issued by or on behalf of the State of Ohio, political subdivisions
thereof, or agencies or instrumentalities thereof ("Ohio Obligations"),
or by the governments of Puerto Rico, the Virgin Islands or Guam
(collectively, "Territorial Obligations"). At the time of the closing
for each Ohio Trust, Special Counsel to the Fund for Ohio tax matters
rendered an opinion under then existing Ohio income tax law applicable
to taxpayers whose income is subject to Ohio income taxation
substantially to the effect that:
Each Ohio Insured Trust is not taxable as a corporation or otherwise for
purposes of the Ohio personal income tax, Ohio school district income
taxes, the Ohio corporation franchise tax, or the Ohio dealers in
intangibles tax.
Income of an Ohio Insured Trust will be treated as the income of the
Unit holders for purposes of the Ohio personal income tax, Ohio school
district income taxes, Ohio municipal income taxes and the Ohio
corporation franchise tax in proportion to the respective interest
therein of each Unit holder.
Interest on Ohio Obligations and Territorial Obligations held by an Ohio
Insured Trust is exempt from the Ohio personal income tax, Ohio
municipal income taxes and Ohio school district income taxes and is
excluded from the net income base of the Ohio corporation franchise tax
when distributed or deemed distributed to Unit holders.
Proceeds paid under insurance policies, if any, to the Trustee of an
Ohio Insured Trust, representing maturing interest on defaulted
obligations held by an Ohio Insured Trust will be exempt from the Ohio
personal income tax, Ohio school district income taxes, Ohio municipal
income taxes and the net income base of the Ohio corporation franchise
tax if, and to the same extent as, such interest would be exempt from
such taxes if paid directly by the issuer of such obligations.
Gains and losses realized on the sale, exchange or other disposition by
an Ohio Insured Trust of Ohio Obligations are excluded in determining
adjusted gross and taxable income for purposes of the Ohio personal
income tax, Ohio municipal income taxes and Ohio school district income
taxes and are excluded from the net income base of the Ohio corporation
franchise tax when distributed or deemed distributed to Unit holders.
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
As described above, an Ohio Insured Trust will invest most of its net
assets in securities issued by or on behalf of (or in certificates of
participation in lease-purchase obligations of) the State of Ohio,
political subdivisions of the State, or agencies or instrumentalities of
the State or its political subdivisions (Ohio Obligations). An Ohio
Insured Trust is therefore susceptible to general or particular
political, economic or regulatory factors that may affect issuers of
Ohio Obligations. The following information constitutes only a brief
summary of some of the many complex factors that may have an effect. The
information does not apply to "conduit" obligations on which the public
issuer itself has no financial responsibility. This information is
derived from official statements of certain Ohio issuers published in
connection with their issuance of securities and from other publicly
Page 5
available information, and is believed to be accurate. No independent
verification has been made of any of the following information.
Generally, the creditworthiness of Ohio Obligations of local issuers is
unrelated to that of obligations of the State itself, and the State has
no responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in
connection with investment in particular Ohio Obligations or in those
obligations of particular Ohio issuers. It is possible that the
investment may be in particular Ohio Obligations, or in those of
particular issuers, as to which those factors apply. However, the
information below is intended only as a general summary, and is not
intended as a discussion of any specific factors that may affect any
particular obligation or issuer.
The timely payment of principal of and interest on Ohio Obligations has
been guaranteed by bond insurance purchased by the issuers, the Ohio
Trusts or other parties. Those Ohio Obligations may not be subject to
the factors referred to in this section of the Prospectus.
Ohio is the seventh most populous state; the 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census
estimate for 1996 is 11,173,000.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods
manufacturing largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. As a result, general
economic activity, as in many other industrially-developed states, tends
to be more cyclical than in some other states and in the nation as a
whole. Agriculture is an important segment of the economy, with over
half the State's area devoted to farming and approximately 16% of total
employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported 1990
average monthly State rate was 5.7%, compared to the 5.5% national
figure. However, for the last six years, the State rates were below the
national rates (4.9% versus 5.4% in 1996). The unemployment rate and its
effects vary among geographic areas of the State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local
government finances generally, will not adversely affect the market
value of Ohio Obligations held in the Ohio Trusts or the ability of
particular obligors to make timely payments of debt service on (or lease
payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its
July 1 to June 30 fiscal year (FY) or fiscal biennium in a deficit
position. Most State operations are financed through the General Revenue
Fund (GRF), for which the personal income and sales-use taxes are the
major sources. Growth and depletion of GRF ending fund balances show a
consistent pattern related to national economic conditions, with the
ending FY balance reduced during less favorable and increased during
more favorable economic periods. The State has well-established
procedures for, and has timely taken, necessary actions to ensure
resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in
appropriations spending.
The 1992-93 biennium presented significant challenges to State finances,
which were successfully addressed. To allow time to resolve certain
budget differences, an interim appropriations act was enacted effective
July 1, 1991; it included GRF debt service and lease rental
appropriations for the entire biennium, while continuing most other
appropriations for a month. Pursuant to the general appropriations act
for the entire biennium, passed on July 11, 1991, $200 million was
transferred from the Budget Stabilization Fund (BSF, a cash and
budgetary management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that fiscal
year, both in light of a continuing uncertain nationwide economic
situation, there was projected, and then timely addressed, an FY 1992
imbalance in GRF resources and expenditures. In response, the Governor
ordered most State agencies to reduce GRF spending in the last six
months of FY 1992 by a total of approximately $184 million; the $100.4
million BSF balance and additional amounts from certain other funds were
transferred late in the FY to the GRF, and adjustments were made in the
timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million
in selected GRF spending reductions and subsequent executive and
legislative action (a combination of tax revisions and additional
Page 6
spending reductions). The June 30, 1993 ending GRF fund balance was
approximately $111 million, of which, as a first step to replenishment,
$21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed
for debt service or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture.
Based on June 30, 1994 balances, an additional $260 million was
deposited in the BSF. The biennium ended June 30, 1995 with a GRF ending
fund balance of $928 million, of which $535.2 million was transferred
into the BSF. The significant GRF fund balance, after leaving in the GRF
an unreserved and undesignated balance of $70 million, was transferred
to the BSF and other funds including school assistance funds and, in
anticipation of possible federal program changes, a human services
stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer
network purposes and $30 million to a new State transportation
infrastructure fund. Approximately $400.8 million served as a basis for
temporary 1996 personal income tax reductions aggregating that amount.
The 1996-97 biennium-ending GRF fund balance was $834.9 million. Of
that, $250 million goes to school building construction and renovation,
$94 million to the school computer network, $44.2 million for school
textbooks and instructional materials and a distance learning program,
and $34 million to the BSF (which had a January 8, 1998 balance of
$862.7 million), with the $263 million balance to a State income tax
reduction fund.
The GRF appropriations act for the 1997-98 biennium was passed on June
25, 1997 and promptly signed (after selective vetoes) by the Governor.
All necessary GRF appropriations for State debt service and lease rental
payments then projected for the biennium were included in that act.
The State's incurrence or assumption of debt without a vote of the
people is, with limited exceptions, prohibited by current State
constitutional provisions. The State may incur debt, limited in amount
to $750,000, to cover casual deficits or failures in revenues or to meet
expenses not otherwise provided for. The Constitution expressly
precludes the State from assuming the debts of any local government or
corporation. (An exception is made in both cases for any debt incurred
to repel invasion, suppress insurrection or defend the State in war.)
By 14 constitutional amendments, approved from 1921 to date (the last
adopted in 1995), Ohio voters have authorized the incurrence of State
debt and the pledge of taxes or excises to its payment. At January 8,
1998, $1.07 billion (excluding certain highway bonds payable primarily
from highway use receipts) of this debt was outstanding or sold and
awaiting delivery. The only such State debt at that date still
authorized to be incurred were portions of the highway bonds and the
following: (a) up to $100 million of obligations for coal research and
development may be outstanding at any one time ($30.9 million
outstanding); (b) of a total $2.4 billion which may be issued, $240
million of obligations previously authorized for local government
infrastructure improvements, no more than $120 million of which may be
issued in any calendar year ($946.9 million outstanding or sold and
awaiting delivery); and (c) up to $200 million in general obligation
bonds for parks, recreation and natural resources purposes which may be
outstanding at any one time ($90.9 million outstanding with no more than
$50 million to be issued in any one year).
The electors approved in November 1995 a constitutional amendment that
extends the local infrastructure bond program (authorizing an additional
$1.2 billion of State full faith and credit obligations to be issued
over 10 years for that purpose), and authorizes additional highway bonds
(expected to be payable primarily from highway use receipts). The latter
supersedes the prior $500 million outstanding authorization, and
authorizes not more that $1.2 billion to be outstanding at any time and
not more than $220 million to be issued in a fiscal year.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have
excises or taxes levied to pay debt service. Those special obligations
include obligations issued by the Ohio Public Facilities Commission and
the Ohio Building Authority, and certain obligations issued by the State
Treasurer, over $4.8 billion of which were outstanding at January 8, 1998.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of
housing. The General Assembly may for that purpose authorize the
issuance of State obligations secured by a pledge of all or such portion
as it authorizes of State revenues or receipts (but not by a pledge of
the State's full faith and credit).
Page 7
A 1994 constitutional amendment pledges the full faith and credit and
taxing power of the State to meeting certain guarantees under the
State's tuition credit program which provides for purchase of tuition
credits, for the benefit of State residents, guaranteed to cover a
specified amount when applied to the cost of higher education tuition.
(A 1965 constitutional provision that authorized student loan guarantees
payable from available State moneys has never been implemented, apart
from a "guarantee fund" approach funded essentially from program
revenues).
State and local agencies issue obligations that are payable from
revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within
constitutional provisions. In general, payment obligations under lease-
purchase agreements of Ohio public agencies (in which certificates of
participation may be issued) are limited in duration to the agency's
fiscal period, and are renewable only upon appropriations being made
available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide
aggregate approximately 44% in recent years) of their operating moneys
from State subsidies, but are dependent on local property taxes, and in
119 districts from voter-authorized income taxes, for significant
portions of their budgets. Litigation, similar to that in other states,
has been pending questioning the constitutionality of Ohio's system of
school funding. The Ohio Supreme Court has concluded that aspects of the
system (including basic operating assistance and the loan program
referred to below) are unconstitutional, and ordered the State to
provide for and fund a system complying with the Ohio Constitution,
staying its order for a year (to March 1998) to permit time for
responsive corrective actions. A small number of the State's 612 local
school districts have in any year required special assistance to avoid
year-end deficits. A program has provided for school district cash need
borrowing directly from commercial lenders, with diversion of State
subsidy distributions to repayment if needed. Recent borrowings under
this program totalled $41.1 million for 28 districts in FY 1994, $71.1
million for 29 districts in FY 1995 (including $29.5 million for one
district), $87.2 million for 20 districts in FY 1996 (including $42.1
million for one district) and $113.2 million for 12 districts in 1997
(including $90 million to one for restructuring its prior loans).
Ohio's 943 incorporated cities and villages rely primarily on property
and municipal income taxes for their operations. With other
subdivisions, they also receive local government support and property
tax relief moneys distributed by the State. For those few municipalities
and school districts that on occasion have faced significant financial
problems, there are statutory procedures for a joint State/local
commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar
procedures have recently been extended to counties and townships.) Since
inception for municipalities in 1979, these "fiscal emergency"
procedures have been applied to 24 cities and villages; for 18 of them
the fiscal situation was resolved and the procedures terminated (one
village is in preliminary "fiscal watch" status). As of January 27,
1998, the 1996 school district "fiscal emergency" provision has been
applied to five districts and 12 districts were placed on preliminary
"fiscal watch" status.
At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political
subdivisions and other local taxing districts. The Constitution has
since 1934 limited to 1% of true value in money the amount of the
aggregate levy (including a levy for unvoted general obligations) of
property taxes by all overlapping subdivisions, without a vote of the
electors or a municipal charter provision, and statutes limit the amount
of that aggregate levy to 10 mills per $1 of assessed valuation
(commonly referred to as the "ten-mill limitation"). Voted general
obligations of subdivisions are payable from property taxes that are
unlimited as to amount or rate.
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 Ohio 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 Ohio Trusts to pay interest on or principal of
the Bonds.
Page 8
Ohio 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, 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 (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 "Tax Act") subjects tax-
exempt bonds to the market discount rules of the Code effective for
bonds purchased after April 30, 1993. In general, market discount is the
amount (if any) by which the stated redemption price at maturity exceeds
an investor's purchase price (except to the extent that such difference,
Page 2
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 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 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, 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.
For taxpayers other than corporations, net capital gains (which is
defined as net long-term capital gain over net short-term capital loss
for the taxable year) are subject to a maximum marginal stated tax rate
of either 28% or 20%, depending upon the holding period of the capital
assets. 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. Generally, capital gain realized from
assets held for more than one year but not more than 18 months are taxed
at a maximum marginal stated tax rate of 28% and capital gains realized
from assets (with certain exclusions) held for more than 18 months are
taxed at a maximum marginal stated tax rate of 20% (10% in the case of
certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same
rate as ordinary income. Legislation is currently pending that provides
the appropriate methodology that should be applied in netting the
realized capital gains and losses. Such legislation is proposed to be
effective retroactively for tax years ending after May 6, 1997. 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. It should be
noted that legislative proposals are introduced from time to time that
affect tax rates and could affect relative differences at which ordinary
income and capital gains are taxed.
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, or REMIC) is an amount equal to 75% of the excess of such
corporation's "adjusted current earnings" over an amount equal to its
AMTI (before such adjustment item and the alternative tax net operating
loss deduction). "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
Page 4
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
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
Page 5
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
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
Minnesota's economy continued to out perform the national averages
during 1996-97. The annual unemployment rate in Minnesota has been below
the U.S. every year since 1985. In November 1997, the state's
unemployment rate, on a seasonally adjusted basis, stood at 2.8%, down
1.2 percentage points from the 4.0% observed one year earlier. That
unemployment rate was well below the national rate of 4.6%. From
November 1996 to November 1997, Minnesota's economy added 53,700 jobs,
an increase of 2.2%. This is comparable to the national increase of
2.4%. Services accounted for 41.3% of Minnesota's over-the-year growth,
adding 22,200 jobs. Of the major industries, only mining experienced a
decrease in employment over the year, down 200 jobs.
Construction continues to boast the highest growth rate of the major
industries, up 4.6%. Minnesota continues to outpace the nation in
construction employment growth, whose growth rate was 3.6% from November
1996 to November 1997. During this time period, employment in the
manufacturing sector rose 2.2%, up 9,500 jobs. The national rate was 0.8%.
In 1996, Minnesota's per capita personal income rose to $25,663, an
increase of 6.7% from 1995. The U.S. increase for 1996 was 4.6%.
Personal income in Minnesota is now estimated to have grown at a 6.6%
annual rate during fiscal year 1997, well above the national average of
5.3%. Wage growth was strong, but as in neighboring Midwestern states,
all of whom also had strong growth in personal income, the agricultural
sector was a major contributor. Prices were higher than average, yields
were strong, and federal farm program payments under the 1996 farm bill
were much larger than they would have been under the previous program.
Personal income in Minnesota is forecast to grow by 5.0% during the 1998
fiscal year, slightly below the average rate forecast for the nation.
Payroll employment is expected to grow at a 2.1% annual rate, consistent
with the national average. Wage and salary income growth, however, is
projected to lag 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.
Farm income in the 1998 fiscal year is also forecast to be down from the
high levels reported during fiscal year 1997 since commodity prices have
returned to more normal levels.
Minnesota's fiscal period is a biennium. General Fund revenues and
transfers-in totaled $10.202 billion for fiscal year 1997, up 6.1% from
those for fiscal year 1996. Actual total resources were $11.546 billion.
General Fund expenditures and transfers-out for the year totaled $9.551
billion, a decrease of almost 1% from the previous year. Of this amount,
Page 6
$3.3 billion went to education, children and families. The actual ending
balance for fiscal year 1997 was $1.995 billion, $364 million higher
than forecast. Much of the unexpected growth was due to higher than
anticipated capital gains realizations in 1996.
The top three revenue producers of the State's $11.546 billion total
resources were: individual income tax at $4.768 billion, sales tax at
$3.03 billion, and non-dedicated revenue at $974.4 million. These three
sources comprised approximately 41%, 26% and 8.5%, respectively, of the
total resources.
As of November 1997, revenues for the 1998-99 biennium are forecast at
$21.045 billion, a 3.6% or $729 million increase from end of the session
estimates. The higher revenue base for Fiscal Year 1997 and a slight
improvement in the outlook for Minnesota's economy were the major
sources of additional revenue. The reduction in the federal capital
gains tax rate is expected to encourage investors to realize profits
more rapidly than in the past, further adding to state revenues.
Expenditures and transfers for the biennium are estimated at $20.669
billion, leaving a budgetary balance of $1.360 billion. Expenditures are
$256 million (1.2%) below earlier estimates. Slower growth in human
services spending accounts for nearly all of the forecast expenditure
savings. The available general fund balance at the end of the biennium
is projected at $453 million.
General Fund debt service for the 1998-99 biennium is estimated to be
$581 million. This amount is for funding outstanding general obligation
bonds, new bonds to be sold for currently authorized projects and a
projected capital budget of $500 million in the 1998 legislative session.
The State's budget reserve for the 1998-99 biennium is doubled to $522
million (an increase from $233.5 million in fiscal year 1997) or 5% of
fiscal year 1999 spending to protect against economic uncertainty.
The state issued $170.0 million of new general obligation bonds, and
$172.1 million of general obligation bonds were redeemed during 1997,
leaving an outstanding balance of $2.2 billion. General obligation bonds
authorized but unissued as of June 30, 1997 were $912.6 million.
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 to cover the deficiency. No
such property tax has been levied since 1969 when the law was enacted
requiring the appropriation. In fiscal year 1996, total operating
transfers to the Debt Service Fund were $277.522 million.
The Governor's budget recommends a General Fund appropriation of $545.6
million for fiscal year 1998-99 for debt service on bonds sold for
existing authorizations, bonds authorized but unissued, and new bonds
anticipated to be authorized in the 1998 legislative session. This
amount represents 2.8% of total general fund spending. The Governor also
proposed $16.6 million be appropriated to pay remaining state claims
from the Cambridge Bank Litigation judgment, rather than issuing
additional revenue bonds for this purpose.
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 to AAA from AA+. Fitch's
rates Minnesota bonds at 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 7
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 8
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
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Combined Series 142, 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 August 31, 1998.
THE FIRST TRUST COMBINED SERIES 142
(Registrant)
ByNIKE SECURITIES L.P.
(Depositor)
ByRobert M. Porcellino
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, ) August 31, 1998
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 July 31, 1998 in
this Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Combined Series dated
August 26, 1998.
ERNST & YOUNG LLP
Chicago, Illinois
August 25, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety by reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> Louisiana Trust Series
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 1,616,499
<INVESTMENTS-AT-VALUE> 1,703,988
<RECEIVABLES> 39,520
<ASSETS-OTHER> 2,228
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,745,736
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,374
<TOTAL-LIABILITIES> 10,374
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,616,499
<SHARES-COMMON-STOCK> 2,094
<SHARES-COMMON-PRIOR> 2,136
<ACCUMULATED-NII-CURRENT> 31,374
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 87,489
<NET-ASSETS> 1,735,362
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 112,554
<OTHER-INCOME> 0
<EXPENSES-NET> 4,751
<NET-INVESTMENT-INCOME> 107,803
<REALIZED-GAINS-CURRENT> (1,577)
<APPREC-INCREASE-CURRENT> 4,518
<NET-CHANGE-FROM-OPS> 110,744
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 107,387
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 42
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (31,727)
<ACCUMULATED-NII-PRIOR> 29,635
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety by reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> Missouri Trust Series
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 2,003,798
<INVESTMENTS-AT-VALUE> 2,136,080
<RECEIVABLES> 34,535
<ASSETS-OTHER> 8,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,179,435
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,125
<TOTAL-LIABILITIES> 20,125
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,003,798
<SHARES-COMMON-STOCK> 2,501
<SHARES-COMMON-PRIOR> 2,628
<ACCUMULATED-NII-CURRENT> 23,230
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 132,282
<NET-ASSETS> 2,159,310
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 139,970
<OTHER-INCOME> 0
<EXPENSES-NET> 5,321
<NET-INVESTMENT-INCOME> 134,649
<REALIZED-GAINS-CURRENT> 4,364
<APPREC-INCREASE-CURRENT> 1,844
<NET-CHANGE-FROM-OPS> 140,857
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 133,227
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 127
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (103,677)
<ACCUMULATED-NII-PRIOR> 29,592
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety by reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> New Mexico Trust
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 2,228,742
<INVESTMENTS-AT-VALUE> 2,390,908
<RECEIVABLES> 56,913
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,447,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,026
<TOTAL-LIABILITIES> 24,026
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,228,742
<SHARES-COMMON-STOCK> 2,404
<SHARES-COMMON-PRIOR> 2,458
<ACCUMULATED-NII-CURRENT> 32,887
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 162,166
<NET-ASSETS> 2,423,795
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 150,959
<OTHER-INCOME> 0
<EXPENSES-NET> 5,426
<NET-INVESTMENT-INCOME> 145,533
<REALIZED-GAINS-CURRENT> 68
<APPREC-INCREASE-CURRENT> 12,713
<NET-CHANGE-FROM-OPS> 158,314
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 145,775
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 18,099
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 54
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (60,370)
<ACCUMULATED-NII-PRIOR> 33,402
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety by reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 036
<NAME> Ohio Trust Series
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 2,837,536
<INVESTMENTS-AT-VALUE> 2,885,460
<RECEIVABLES> 66,424
<ASSETS-OTHER> 6,836
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,958,720
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,770
<TOTAL-LIABILITIES> 29,770
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,837,536
<SHARES-COMMON-STOCK> 3,044
<SHARES-COMMON-PRIOR> 3,226
<ACCUMULATED-NII-CURRENT> 43,490
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47,924
<NET-ASSETS> 2,928,950
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 203,992
<OTHER-INCOME> 0
<EXPENSES-NET> 6,339
<NET-INVESTMENT-INCOME> 197,653
<REALIZED-GAINS-CURRENT> (6,568)
<APPREC-INCREASE-CURRENT> (24,980)
<NET-CHANGE-FROM-OPS> 166,105
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 195,873
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 182
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (208,991)
<ACCUMULATED-NII-PRIOR> 42,185
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from Post Effective
Amendment to form S-6 and is qualified in its
entirety by reference to such Post Effective
Amendment to form S-6.
</LEGEND>
<SERIES>
<NUMBER> 005
<NAME> Minnesota Adv. Trust
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 1,612,152
<INVESTMENTS-AT-VALUE> 1,684,800
<RECEIVABLES> 32,464
<ASSETS-OTHER> 3,559
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,720,823
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,940
<TOTAL-LIABILITIES> 10,940
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,612,152
<SHARES-COMMON-STOCK> 2,183
<SHARES-COMMON-PRIOR> 2,335
<ACCUMULATED-NII-CURRENT> 25,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,648
<NET-ASSETS> 1,709,883
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 118,507
<OTHER-INCOME> 0
<EXPENSES-NET> 4,838
<NET-INVESTMENT-INCOME> 113,669
<REALIZED-GAINS-CURRENT> 269
<APPREC-INCREASE-CURRENT> (12,737)
<NET-CHANGE-FROM-OPS> 101,201
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 115,988
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 152
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (134,928)
<ACCUMULATED-NII-PRIOR> 28,545
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
