SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST SPECIAL
SITUATIONS TRUST, SERIES 138
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
E. Title and Amount of
Securities Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Proposed Maximum Offering
Price to the Public of the
Securities Being Registered: Indefinite.
G. Amount of Filing Fee
(as required by Rule 24f-2): $500.00
H. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 138
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each Information as to
depositor Sponsor, Trustee and
Evaluator
3. Name and address of Information as to
trustee Sponsor, Trustee and
Evaluator
4. Name and address of Underwriting
principal underwriters
5. State of organization The First Trust Special
of trust Situations Trust
6. Execution and termination The First Trust Special
of trust agreement Situations Trust; Other
Information
7. Changes of name *
8. Fiscal Year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Rights of Unit Holders
securities
(b) Cumulative or distributive
securities The First Trust Special
Situations Trust
(c) Redemption Rights of Unit Holders
(d) Conversion, transfer, etc. Rights of Unit Holders
(e) Periodic payment plan
certificates *
(f) Voting rights Rights of Unit Holders;
Other Information
(g) Notice of certificate- Rights of Unit Holders;
holders Other Information
(h) Consents required Rights of Unit Holders;
Other Information
(i) Other provisions The First Trust Special
Situations Trust
11. Types of securities comprising The First Trust Special
units Situations Trust
12. Certain information
regarding periodic payment
plan certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The First Trust
Special Situations Trust
(b) Certain information
regarding periodic payment
plan certificates *
(c) Certain percentages Summary of Essential
Information; The First
Trust Special Situations
Trust; Public Offering
(d) Difference in price offered Public Offering
for any class of transactions
to any class or group of
individuals
(e) Certain other load fees, Rights of Unit Holders
expenses, etc. payable by
holders
(f) Certain profits receivable The First Trust Special
by depositor, principal Situations Trust
underwriters, trustee or
affiliated persons
(g) Ratio of annual charges to
income *
14. Issuance of trust's Rights of Unit Holders
securities
15. Receipt and handling of
payments from purchasers *
16. Acquisition and disposition
of underlying securities The First Trust Special
Situations Trust; Rights
of Unit Holders
17. Withdrawal or redemption The First Trust Special
Situations Trust; Public
Offering; Rights of Unit
Holders
18. (a) Receipt, custody and
disposition of income Rights of Unit Holders
(b) Reinvestment of
distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and
reports Rights of Unit Holders
20. Certain miscellaneous
provisions of trust
agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal and
successor Information as to
Sponsor, Trustee and
Evaluator
(e) and (f) Depositor, removal Information as to
and successor Sponsor, Trustee and
Evaluator
21. Loans to security holders *
22. Limitations on liability The First Trust Special
Situations Trust;
Information as to
Sponsor, Trustee and
Evaluator
23. Bonding arrangements Contents of Registration
Statement
24. Other material provisions
of trust agreement *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to *
officials and affiliated
persons of depositor
29. Voting securities of *
depositor
30. Persons controlling *
depositor
31. Payment by depositor for *
certain services rendered
to trust
32. Payment by depositor for *
certain other services
rendered to trust
33. Remuneration of other *
persons for certain
services rendered to trust
34. Remuneration of other *
persons for certain services
rendered to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's
securities by states Public Offering
36. Suspension of sales of
trust's securities *
37. Revocation of authority
to distribute *
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering;
Underwriting
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) N.A.S.D. membership of Information as to
principal underwriters Sponsor, Trustee and
Evaluator
40. Certain fee received by See Items 13(a) and 13(e)
principal underwriters
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal
underwriters *
42. Ownership of trust's
securities by certain
persons *
43. Certain brokerage
commissions received
by principal underwriters *
44. (a) Method of valuation Summary of Essential
Information; The First
Trust Special Situations
Trust; Public Offering
(b) Schedule as to offering
price *
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption
rights *
46. (a) Redemption Valuation Rights of Unit Holders
(b) Schedule as to redemption
price *
47. Maintenance of position Public Offering; Rights
in underlying securities of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation Information as to
of trustee Sponsor, Trustee and
Evaluator
49. Fees and expenses of trustee The First Trust Special
Situations Trust
50. Trustee's lien The First Trust Special
Situations Trust
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OR
SECURITIES
51. Insurance of holders of *
trust's securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust Special
agreement with respect Situations Trust; Rights
to selection or elimination of Unit Holders
of underlying securities
(b) Transactions involving
elimination of underlying
securities *
(c) Policy regarding The First Trust Special
substitution or elimination Situations Trust; Rights
of underlying securities of Unit Holders
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The First Trust Special
Situations Trust
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during
last ten years *
55. Certain information regarding
periodic payment plan
certificates
56. Certain information regarding
periodic payment plan
certificates
57. Certain information regarding *
periodic payment plan
certificates
58. Certain information regarding
periodic payment plan
certificates
59. Financial statements Report of Independent
(Instruction 1(b) to Auditors; Statement of
Form S-6) Net Assets
__________________________
* Inapplicable, answer negative or not required.
SUBJECT TO COMPLETION DATED JANUARY 4, 1996
Internet Growth Trust, Series 1
Internet Growth & Treasury Securities Trust, Series 2
The Trusts. The First Trust (registered trademark) Special Situations
Trust, Series 138 consists of the underlying separate unit investment
trusts set forth above. The various trusts are sometimes collectively
referred to herein as the "Trusts." The Internet Growth Trust,
Series 1 is sometimes referred to herein as the "Growth Trust."
The Internet Growth & Treasury Securities Trust, Series 2 is sometimes
individually referred to herein as the "Growth & Treasury Trust."
The Internet Growth Trust, Series 1 is a unit investment trust
consisting of a portfolio containing common stocks issued by companies
that are currently involved with providing digital interactive
services, developing and marketing digital interactive software
or manufacturing digital interactive hardware and will benefit
from the rapid growth of the digital interactive web, commonly
referred to as the Internet.
The Internet Growth & Treasury Securities Trust, Series 2 is a
unit investment trust consisting of a portfolio containing zero
coupon U.S. Treasury bonds and common stocks issued by companies
that are currently involved with providing digital interactive
services, developing and marketing digital interactive software
or manufacturing digital interactive hardware and will benefit
from the rapid growth of the digital interactive web, commonly
referred to as the Internet.
The objective of the Internet Growth Trust, Series 1 is to provide
for potential capital appreciation by investing such Trust's portfolio
in common stocks ("Equity Securities"). The objective of the Internet
Growth & Treasury Securities Trust, Series 2 is to protect Unit
holders' capital and provide potential capital appreciation by
investing a portion of its portfolio in zero coupon U.S. Treasury
bonds ("Treasury Obligations") and the remainder of the Trust's
portfolio in common stocks ("Equity Securities"). Collectively,
the Treasury Obligations and the Equity Securities are referred
to herein as the "Securities." The Treasury Obligations evidence
the right to receive a fixed payment at a future date from the
U.S. Government and are backed by the full faith and credit of
the U.S. Government. The guarantee of the U.S. Government does
not apply to the market value of the Treasury Obligations or the
Units of the Growth & Treasury Trust, whose net asset value will
fluctuate and, prior to maturity, may be worth more or less than
a purchaser's acquisition cost. The Growth & Treasury Trust is
intended to achieve its objective over the life of the Trust and
as such, is best suited for those investors capable of holding
such Units to maturity.
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE
INVESTMENT RISK INCLUDING LOSS OF PRINCIPAL.
See "Schedule of Investments" for each Trust. There is, of course,
no guarantee that the objective of each Trust will be achieved.
Each Trust has a mandatory termination date (the "Mandatory Termination
Date" or "Trust Ending Date") as set forth under "Summary of Essential
Information."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE
TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
First Trust (registered trademark)
The date of this Prospectus is , 1996
Page 1
Each Unit of a Trust represents an undivided fractional interest
in all the Securities deposited in such Trust. The Growth & Treasury
Trust has been organized so that purchasers of Units should receive,
at the termination of the Trust, an amount per Unit at least equal
to $10.00 (which is equal to the per Unit value
upon maturity of the Treasury Obligations), even if such Trust
never paid a dividend and the value of the Equity Securities were
to decrease to zero, which the Sponsor considers highly unlikely.
This feature of the Growth & Treasury Trust provides Unit holders
who purchase Units at a price of $10.00 or less per Unit with
total principal protection, including any sales charges paid,
although they might forego any earnings on the amount invested.
To the extent that Units are purchased at a price less than $10.00
per Unit, this feature may also provide a potential for capital
appreciation. As a result of the volatile nature of the market
for zero coupon U.S. Treasury bonds, Units sold or redeemed prior
to maturity will fluctuate in price and the underlying Treasury
Obligations may be valued at a price greater or less than their
value as of the Initial Date of Deposit. UNIT HOLDERS DISPOSING
OF THEIR UNITS PRIOR TO THE MATURITY OF THE GROWTH & TREASURY
TRUST MAY RECEIVE MORE OR LESS THAN $10.00 PER UNIT, DEPENDING
ON MARKET CONDITIONS ON THE DATE UNITS ARE SOLD OR REDEEMED.
The Treasury Obligations deposited in the Growth & Treasury Trust
on the Initial Date of Deposit will mature on
(the "Treasury Obligations Maturity Date"). The Treasury
Obligations in the Growth & Treasury Trust have a maturity value
equal to or greater than the aggregate Public Offering Price (which
includes the sales charge) of the Units of the Trust on the Initial
Date of Deposit. The Equity Securities deposited in a Trust's
portfolio have no fixed maturity date and the value of these underlying
Equity Securities will fluctuate with changes in the values of
stocks in general and with changes in the conditions and performance
of the specific Equity Securities owned by such Trust. See "Portfolio."
With respect to the Growth Trust, the Sponsor may, from time to
time during a period of up to approximately 360 days after the
Initial Date of Deposit, deposit additional Equity Securities
in a Trust. Such deposits of additional Equity Securities will,
therefore, be done in such a manner that the original proportionate
relationship amongst the individual issues of the Equity Securities
shall be maintained. Any deposit by the Sponsor of additional
Equity Securities will duplicate, as nearly as is practicable,
the original proportionate relationship established on the Initial
Date of Deposit, and not the actual proportionate relationship
on the subsequent date of deposit, since the actual proportionate
relationship may be different than the original proportionate
relationship. Any difference may be due to the sale, redemption
or liquidation of any Equity Securities deposited in a Trust on
the Initial, or any subsequent, Date of Deposit. See "What is
The First Trust Special Situations Trust?" and "How May Securities
be Removed from a Trust?"
With respect to the Growth & Treasury Trust, the Sponsor may,
from time to time during a period of up to approximately 360 days
after the Initial Date of Deposit, deposit additional Securities
in the Trust, provided it maintains the original percentage relationship
between the Treasury Obligations and Equity Securities in the
Trust's portfolio. Such deposits of additional Securities will,
therefore, be done in such a manner that the maturity value of
each Unit should always be an amount at least equal to $10.00,
and that the original proportionate relationship amongst the individual
issues of the Equity Securities in the Trust shall be maintained.
Any deposit by the Sponsor of additional Securities will duplicate,
as nearly as is practicable, the original proportionate relationship
established on the Initial Date of Deposit, and not the actual
proportionate relationship on the subsequent date of deposit,
since the actual proportionate relationship may be different than
the original proportionate relationship. Any such difference may
be due to the sale, redemption or liquidation of any Securities
deposited in the Trust on the Initial, or any subsequent, Date
of Deposit. See "What is the First Trust Special Situations Trust?"
and "How May Securities be Removed from a Trust?"
Public Offering Price. With respect to the Growth Trust, the Public
Offering Price per Unit of a Trust during the initial offering
period is equal to the aggregate underlying value of the Equity
Securities in such Trust (generally determined by the closing
sale prices of listed Equity Securities and the ask prices of
over-the-counter traded Equity Securities) plus or minus a pro
rata share of cash, if any, in the Capital and Income Accounts
of such Trust, plus a maximum sales charge of 4.9% (equivalent
to 5.152% of the net amount invested). The secondary market Public
Offering Price per Unit will be based upon the aggregate underlying
value of the Equity Securities in a Trust (generally determined
by the closing sale prices of listed Equity Securities and the
bid prices of over-the-counter traded Equity Securities) plus or minus
Page 2
a pro rata share of cash, if any, in the Capital and Income Accounts
of such Trust plus a maximum sales charge of 4.9% (equivalent
to 5.152% of the net amount invested), subject to reduction beginning
1, 1997.
With respect to the Growth & Treasury Trust, the Public Offering
Price per Unit of the Trust during the initial offering period
is equal to a pro rata share of the offering prices of the Treasury
Obligations and the aggregate underlying value of the Equity Securities
in the Trust (generally determined by the closing sale prices
of listed Equity Securities and the ask prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust, plus
a maximum sales charge of 5.5% (equivalent to 5.820% of the net
amount invested). A pro rata share of accumulated dividends, if
any, in the Income Account is included in the Public Offering
Price. The secondary market Public Offering Price per Unit will
be based upon a pro rata share of the bid prices of the Treasury
Obligations and the aggregate underlying value of the Equity Securities
in the Trust (generally determined by the closing sale prices
of listed Equity Securities and the bid prices of over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of the Trust plus a
maximum sales charge of 5.5% (equivalent to 5.820% of the net
amount invested), subject to a reduction beginning 1, 1997.
The minimum purchase for each Trust is $1,000 ($250 for Individual
Retirement Accounts or other retirement plans). The sales charge
for each Trust is reduced on a graduated scale for sales involving
at least 5,000 Units with respect to the Growth Trust and 10,000
Units with respect to the Growth & Treasury Trust. See "How is
the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions of dividends
and capital, if any, received by a Trust will be paid in cash
on the Distribution Date to Unit holders of record on the Record
Date as set forth in the "Summary of Essential Information." Distributions
of funds in the Capital Account, if any, will be made at least
annually in December of each year. Any distribution of income
and/or capital will be net of the expenses of a Trust. Income
with respect to the accrual of original issue discount on the
Treasury Obligations in the Growth & Treasury Trust will not be
distributed currently, although Unit holders of the Growth & Treasury
Trust will be subject to income tax at ordinary income rates as
if a distribution had occurred. INCOME WITH RESPECT TO THE ACCRUAL
OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY OBLIGATIONS IN THE
GROWTH & TREASURY TRUST WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS OF THE GROWTH & TREASURY TRUST WILL BE SUBJECT TO
INCOME TAX AT ORDINARY INCOME RATES AS IF A DISTRIBUTION HAD OCCURRED.
See "What is the Federal Tax Status of Unit Holders?" Additionally,
upon termination of a Trust, the Trustee will distribute, upon
surrender of Units for redemption, to each Unit holder his pro
rata share of such Trust's assets, less expenses, in the manner
set forth under "Rights of Unit Holders-How are Income and Capital
Distributed?"
Secondary Market for Units. After the initial offering period,
while under no obligation to do so, the Sponsor may maintain a
market for Units of a Trust and offer to repurchase such Units,
in the case of the Growth Trust, at prices which are based on
the aggregate underlying value of Equity Securities in a Trust
(generally determined by the closing sale prices of listed Equity
Securities and the bid prices of over-the-counter traded Equity
Securities) plus or minus cash, if any, in the Capital and Income
Accounts of such Trust; in the case of the Growth & Treasury Trust,
at prices which are based on the aggregate bid side evaluation
of the Treasury Obligations and the aggregate underlying value
of Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices
of over-the-counter traded Equity Securities) plus or minus cash,
if any, in the Capital and Income Accounts of the Trust. In the
case of the Growth Trust, if a secondary market is maintained
during the initial offering period, the prices at which Units
will be repurchased will be based upon the aggregate underlying
value of the Equity Securities in a Trust (generally determined
by the closing sale prices of listed Equity Securities and the
ask prices of over-the-counter traded Equity Securities) plus
or minus cash, if any, in the Capital and Income Accounts of such
Trust. If a secondary market is maintained during the initial
offering period, in the case of the Growth & Treasury Trust, the
prices at which Units will be repurchased will be based upon the
aggregate offering side evaluation of the Treasury Obligations
and the aggregate underlying value of the Equity Securities in
the Trust (generally determined by the closing sale prices of
listed Equity Securities and the ask prices of over-the-counter
traded Equity Securities) plus or minus cash, if any, in the Capital
Page 3
and Income Accounts of the Trust. In the case of the Growth Trust,
if a secondary market is not maintained, a Unit holder may redeem
Units through redemption at prices based upon the aggregate underlying
value of the Equity Securities in a Trust (generally determined
by the closing sale prices of listed Equity Securities and the
bid prices of over-the-counter traded Equity Securities) plus
or minus a pro rata share of cash, if any, in the Capital and
Income Accounts of such Trust. If a secondary market is not maintained,
a Unit holder may redeem Units of the Growth & Treasury Trust
through redemption at prices based upon the aggregate bid price
of the Treasury Obligations plus the aggregate underlying value
of the Equity Securities in the Trust (generally determined by
the closing sale prices of listed Equity Securities and the bid
prices of over-the-counter traded Equity Securities) plus or minus
a pro rata share of cash, if any, in the Capital and Income Accounts
of the Trust. With respect to the Growth Trust, a Unit holder
tendering 2,500 Units of a Trust or more for redemption may request
a distribution of shares of Equity Securities (reduced by customary
transfer and registration charges) in lieu of payment in cash.
See "How May Units be Redeemed?"
Termination. Commencing on the Mandatory Termination Date for
the Growth Trust and on the Treasury Obligations Maturity Date
for the Growth & Treasury Trust, Equity Securities will begin
to be sold in connection with the termination of each Trust. The
Sponsor will determine the manner, timing and execution of the
sale of the Equity Securities. Written notice of any termination
of each Trust specifying the time or times at which Unit holders
may surrender their certificates for cancellation shall be given
by the Trustee to each Unit holder at his address appearing on
the registration books of such Trust maintained by the Trustee.
At least 60 days prior to the Mandatory Termination Date for the
Growth Trust and at least 60 days prior to the Treasury Obligations
Maturity Date for the Growth & Treasury Trust, the Trustee will
provide written notice thereof to all Unit holders and will include
with such notice a form to enable Unit holders to elect a distribution
of shares of Equity Securities (reduced by customary transfer
and registration charges) if such Unit holder owns at least 2,500
Units of a Trust, rather than to receive payment in cash for such
Unit holder's pro rata share of the amounts realized upon the
disposition by the Trustee of Equity Securities. All Unit holders
of the Growth & Treasury Trust will receive their pro rata portion
of the Treasury Obligations in cash upon the termination of the
Trust. To be effective, the election form, together with surrendered
certificates and other documentation required by the Trustee,
must be returned to the Trustee at least five business days prior
to the Mandatory Termination Date for the Growth Trust and at
least five business days prior to the Treasury Obligations Maturity
Date for the Growth & Treasury Trust. Unit holders not electing
a distribution of shares of Equity Securities will receive a cash
distribution from the sale of the remaining Securities within
a reasonable time after a Trust is terminated. See "Rights of
Unit Holders-How are Income and Capital Distributed?"
Risk Factors. An investment in a Trust should be made with an
understanding of the risks associated therewith, including, among
other factors, the possible deterioration of either the financial
condition of the issuers of the Equity Securities which make up
a Trust or the general condition of the stock market, volatile
interest rates, economic recession and potential increased regulation
on the computer and technology industries. Each Trust is not diversified
and is concentrated in the computer and technology industries.
These concentrations increase the risks to investors because adverse
industry conditions will generally negatively impact all issuers
in that industry. Volatility in the market prices of Equity Securities
in the Trusts also changes the value of Units of the Trusts. Unit
holders tendering Units for redemption during periods of market
volatility may receive redemption proceeds which are more or less
than they paid for the Units. The Trusts are not actively managed
and Equity Securities will not be sold by the Trusts to take advantage
of market fluctuations or changes in anticipated rates of appreciation.
See "What are Equity Securities?-Risk Factors."
Page 4
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities- , 1996
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Internet Growth Trust, Series 1
General Information
<S> <C>
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (1) $
Aggregate Offering Price Evaluation of Securities per Unit $
Sales Charge of 4.9% of the Public Offering Price per Unit,
(5.152% of the net amount invested) $
Public Offering Price per Unit (2) $
Sponsor's Initial Repurchase Price per Unit $
Redemption Price per Unit (based on aggregate underlying value
of Equity Securities) ($ less than Public Offering
Price per Unit) (3) $
</TABLE>
CUSIP Number
First Settlement Date , 1996
Mandatory Termination Date , 2003
Discretionary Liquidation Amount The Trust may be terminated
if the value thereof is less
than the lower of $2,000,000 or
20% of the total value of Equity
Securities deposited in the Trust
during the primary offering period.
Trustee's Annual Fee $ per Unit outstanding.
Evaluator's Annual Fee (4) $ per Unit outstanding.
Evaluations for purposes of sale,
purchase or redemption of Units are
made as of the close of trading (4:00
p.m. eastern standard time) on the
New York Stock Exchange on each day
on which it is open.
Supervisory Fee (5) Maximum of $ per Unit out-
standing annually payable to an
affiliate of the Sponsor.
Estimated Organizational and
Offering Expenses (6) $ per Unit.
Income Distribution Record Date Fifteenth day of each December,
commencing December 15, 1996.
Income Distribution Date (7) Last business day of each December,
commencing December 31, 1996.
[FN]
________________
(1) Each Equity Security listed on a national securities exchange
or the NASDAQ National Market System is valued at the last closing
sale price, or if no such price exists or if the Equity Security
is not so listed, at the closing ask price thereof.
(2) On the Initial Date of Deposit there will be no accumulated
dividends in the Income Account. Anyone ordering Units after such
date will pay a pro rata share of any accumulated dividends in
such Income Account. The Public Offering Price as shown reflects
the value of the Equity Securities at the opening of business
on the Initial Date of Deposit and establishes the original proportionate
relationship amongst the individual securities. No sales to investors
will be executed at this price. Additional Equity Securities will
be deposited during the day of the Initial Date of Deposit which
will be valued as of 4:00 p.m. eastern standard time and sold
to investors at a Public Offering Price per Unit based on this valuation.
(3) See "How May Units be Redeemed?"
(4) The minimum and maximum evaluation fee for any one calendar
year will be $1,000 and 2,500, respectively.
(5) In addition, the Sponsor will also be reimbursed for bookkeeping
and other administrative expenses currently at a maximum annual
rate of $ per Unit.
(6) The Trust (and therefore Unit holders) will bear all or
a portion of its organizational and offering costs (including
costs of preparing the registration statement, the trust indenture
and other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of each
Trust portfolio and the initial fees and expenses of the Trustee
but not including the expenses incurred in the printing of preliminary
and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and
any other selling expenses) as is common for mutual funds. Total
organizational and offering expenses will be charged off over
a period not to exceed five years from the Initial Date of Deposit.
See "What are the Expenses and Charges?" and "Statements of Net
Assets." Historically, the sponsors of unit investment trusts
have paid all the costs of establishing such trusts.
(7) Distributions from the Capital Account, if any, will be made
monthly on the last day of the month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be
made in December of each year.
Page 5
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities- , 1996
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank (National Association)
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Internet Growth & Treasury Securities Trust, Series 2
General Information
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited $
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (1) $
Aggregate Offering Price Evaluation of Securities per Unit $
Sales Charge of 5.5% of the Public Offering Price per Unit,
(5.820% of the net amount invested) $
Public Offering Price per Unit (2) $
Sponsor's Initial Repurchase Price per Unit $
Redemption Price per Unit (based on bid price evaluation of underlying
Treasury Obligations and aggregate underlying value of Equity Securities)
($ less than Public Offering Price per Unit;
$ less than Sponsor's Initial Repurchase Price per Unit) (3) $
</TABLE>
CUSIP Number
First Settlement Date , 1996
Treasury Obligations Maturity Date
Mandatory Termination Date
Trustee's Annual Fee $ per Unit outstanding.
Evaluator's Annual Fee (4) $ per Unit outstanding.
Evaluations for purposes of sale,
purchase or redemption of Units are
made as of the close of trading (4:00
p.m. eastern standard time) on the
New York Stock Exchange on each day
on which it is open.
Supervisory Fee (5) Maximum of $ per Unit out-
standing annually payable to an
affiliate of the Sponsor.
Estimated Organizational and
Offering Expenses (6) $ per Unit.
Income Distribution Record Date Fifteenth day of each December,
commencing December 15, 1996.
Income Distribution Date (7) Last day of each December, commencing
December 31, 1996.
[FN]
________________
(1) Each Equity Security listed on a national securities exchange
or the NASDAQ National Market System is valued at the last closing
sale price, or if no such price exists or if the Equity Security
is not so listed, at the closing ask price thereof. The Treasury
Obligations are valued at their aggregate offering side evaluation.
(2) On the Initial Date of Deposit there will be no accumulated
dividends in the Income Account. Anyone ordering Units after such
date will pay a pro rata share of any accumulated dividends in
such Income Account. The Public Offering Price as shown reflects
the value of the Equity Securities at the opening of business
on the Initial Date of Deposit and establishes the original proportionate
relationship amongst the individual securities. No sales to investors
will be executed at this price. Additional Equity Securities will
be deposited during the day of the Initial Date of Deposit which
will be valued as of 4:00 p.m. eastern standard time and sold
to investors at a Public Offering Price per Unit based on this valuation.
(3) See "How May Units be Redeemed?"
(4) The minimum and maximum evaluation fee for any one calendar
year will be $1,000 and 2,500, respectively.
(5) In addition, the Sponsor will also be reimbursed for bookkeeping
and other administrative expenses currently at a maximum annual
rate of $ per Unit.
(6) The Trust (and therefore Unit holders) will bear all or
a portion of its organizational and offering costs (including
costs of preparing the registration statement, the trust indenture
and other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of each
Trust portfolio and the initial fees and expenses of the Trustee
but not including the expenses incurred in the printing of preliminary
and final prospectuses, and expenses incurred in the preparation
and printing of brochures and other advertising materials and
any other selling expenses) as is common for mutual funds. Total
organizational and offering expenses will be charged off over
a period not to exceed five years from the Initial Date of Deposit.
See "What are the Expenses and Charges?" and "Statements of Net
Assets." Historically, the sponsors of unit investment trusts
have paid all the costs of establishing such trusts.
(7) Distributions from the Capital Account, if any, will be made
monthly on the last day of the month to Unit holders of record
on the fifteenth day of such month if the amount available for
distribution equals at least $0.01 per Unit. Notwithstanding,
distributions of funds in the Capital Account, if any, will be
made in December of each year.
Page 6
Internet Growth Trust, Series 1
Internet Growth & Treasury Securities Trust, Series 2
The First Trust Special Situations Trust, Series 138
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 138 is one of
a series of investment companies created by the Sponsor under
the name of The First Trust Special Situations Trust, 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 designated as: Internet Growth
Trust, Series 1 and Internet Growth & Treasury Securities Trust,
Series 2 (collectively, the "Trusts," and each individually, a
"Trust"). The Internet Growth Trust, Series 1 is sometimes referred
to herein as the "Growth Trust." The Internet Growth & Treasury
Securities Trust, Series 2 is sometimes individually referred
to herein as the "Growth & Treasury Trust." The Series was created
under the laws of the State of New York pursuant to a Trust Agreement
(the "Indenture"), dated the Initial Date of Deposit, with Nike
Securities L.P., as Sponsor, The Chase Manhattan Bank (National
Association), as Trustee, and First Trust Advisors L.P., as Portfolio
Supervisor and Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the
Trustee confirmations of contracts for the purchase of zero coupon
U.S. Treasury bonds and common stocks (in the case of the Growth
Trust, only confirmations of contracts for the purchase of common
stocks), together with an irrevocable letter or letters of credit
of a financial institution in an amount at least equal to the
purchase price of such securities. In exchange for the deposit
of securities or contracts to purchase securities in a Trust,
the Trustee delivered to the Sponsor documents evidencing the
entire ownership of such Trust.
The objective of the Internet Growth Trust, Series 1 is to provide
for potential capital appreciation through an investment in equity
securities issued by companies that are currently involved with
providing digital interactive services, developing and marketing
digital interactive software or manufacturing digital interactive
hardware and will benefit from the rapid growth of the digital
interactive web, commonly referred to as the Internet. See "What
are Equity Securities?" There is, of course, no guarantee that
the objectives of the Trust will be achieved.
The objective of the Internet Growth & Treasury Securities Trust,
Series 2 is to protect Unit holders' capital and provide potential
capital appreciation by investing a portion of its portfolio in
zero coupon U.S. Treasury bonds ("Treasury Obligations") and the
remainder of the Trust's portfolio in common stocks issued by
companies that are currently involved with providing digital interactive
services, developing and marketing digital interactive software
or manufacturing digital interactive hardware and will benefit
from the rapid growth of the digital interactive web, commonly
referred to as the Internet ("Equity Securities"). Collectively,
the Treasury Obligations and the Equity Securities are referred
to herein as the "Securities." See "Schedule of Investments" for
the Growth & Treasury Trust. The Growth & Treasury Trust has a
Mandatory Termination Date as set forth under "Summary of Essential
Information." The Treasury Obligations evidence the right to receive
a fixed payment at a future date from the U.S. Government and
are backed by the full faith and credit of the U.S. Government.
The guarantee of the U.S. Government does not apply to the market
value of the Treasury Obligations or the Units of the Trust, whose
net asset values will fluctuate and, prior to maturity, may be
worth more or less than a purchaser's acquisition cost. There
is, of course, no guarantee that the objective of the Growth &
Treasury Trust will be achieved.
With respect to the Growth Trust, with the deposit of the Securities
on the Initial Date of Deposit, the Sponsor established a percentage
relationship between the Equity Securities in each Trust's portfolio.
With the deposit of the Securities in the Growth & Treasury Trust
on the Initial Date of Deposit, the Sponsor established a percentage
relationship between the principal amounts of Treasury Obligations
and Equity Securities in the Trust's portfolio. From time to time
following the Initial Date of Deposit, the Sponsor, pursuant to
the Indenture, may deposit additional Securities in a Trust and
Units may be continuously offered for sale to the public by means
of this Prospectus, resulting in a potential increase in the outstanding
number of Units of a Trust. Any additional Equity Securities deposited
in a Growth Trust will maintain, as nearly as is practicable,
Page 7
the original proportionate relationship of the Equity Securities
in the Trust's portfolio. Any additional Securities deposited
in the Growth & Treasury Trust will maintain, as nearly as is
practicable, the original proportionate relationship of the Treasury
Obligations and Equity Securities in such Trust's portfolio. Such
deposits of additional Securities in the Growth & Treasury Trust
will, therefore, be done in such a manner that the maturity value
of the Treasury Obligations represented by each Unit should always
be an amount at least equal to $10.00, and that the original proportionate
relationship amongst the individual issues of the Equity Securities
shall be maintained. Any deposit by the Sponsor of additional
Securities in a Trust will duplicate, as nearly as is practicable,
the original proportionate relationship and not the actual proportionate
relationship on the subsequent date of deposit, since the actual
proportionate relationship may be different than the original
proportionate relationship. Any such difference may be due to
the sale, redemption or liquidation of any of the Securities deposited
in a Trust on the Initial, or any subsequent, Date of Deposit.
See "How May Securities be Removed from a Trust?" On a cost basis
to the Growth & Treasury Trust, the original percentage relationship
on the Initial Date of Deposit was approximately
% Treasury Obligations and approximately % Equity
Securities. The original percentage relationship of each Equity
Security in the Trusts is set forth herein under "Schedule of
Investments" for each Trust. Since the prices of the underlying
Equity Securities in the Growth Trust will fluctuate daily, the
ratio, on a market value basis, will also change daily. Likewise,
the prices of the underlying Treasury Obligations and Equity Securities
in the Growth & Treasury Trust will fluctuate daily and the ratio,
on a market value basis, will also change daily. The portion of
Equity Securities represented by each Unit of the Growth Trust
will not change as a result of the deposit of additional Equity
Securities in the Growth Trust. The maturity value of the Treasury
Obligations and the portion of Equity Securities represented by
each Unit of the Growth & Treasury Trust will not change as a
result of the deposit of additional Securities in the Growth & Treasury Trust.
On the Initial Date of Deposit, each Unit of a Trust represented
the undivided fractional interest in the Securities deposited
in such Trust set forth under "Summary of Essential Information."
The Growth & Treasury Trust has been organized so that purchasers
of Units should receive, at the termination of the Trust, an amount
per Unit at least equal to $10.00 per Unit (which is equal to
the per Unit value upon maturity of the Treasury Obligations),
even if the Equity Securities never paid a dividend and the value
of the Equity Securities in the Trust were to decrease to zero,
which the Sponsor considers highly unlikely. Furthermore, the
Sponsor will take such steps in connection with the deposit of
additional Securities in the Growth & Treasury Trust as are necessary
to maintain a maturity value of the Units of the Trust at least
equal to $10.00 per Unit. The receipt of only $10.00 per Unit
upon the termination of the Growth & Treasury Trust (an event
which the Sponsor believes is unlikely) represents a substantial
loss on a present value basis. At current interest rates, the
present value of receiving $10.00 per Unit as of the termination
of the Growth & Treasury Trust would be approximately $
per Unit (the present value is indicated by the amount per Unit
which is invested in Treasury Obligations). Furthermore, the $10.00
per Unit in no respect protects investors against diminution in
the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining
prevailing interest rates, which in turn determine present values).
If inflation were to occur at the rate of 5% per annum during
the period ending at the termination of the Growth & Treasury
Trust, the present dollar value of $10.00 per Unit at the termination
of the Trust would be approximately $ per Unit. To
the extent that Units of a Trust are redeemed, the aggregate value
of the Securities in such Trust will be reduced and the undivided
fractional interest represented by each outstanding Unit of the
Trust will increase. However, if additional Units are issued by
a Trust in connection with the deposit of additional Securities
by the Sponsor, the aggregate value of the Securities in such
Trust will be increased by amounts allocable to additional Units,
and the fractional undivided interest represented by each Unit
of such Trust will be decreased proportionately. See "How May
Units be Redeemed?" The Trusts each have a Mandatory Termination
Date as set forth herein under "Summary of Essential Information."
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to each Trust, for which the Sponsor will be reimbursed
in amounts as set forth under "Summary of Essential Information,"
the Sponsor
Page 8
will not receive any fees in connection with its activities relating
to each Trust. Such bookkeeping and administrative charges may
be increased without approval of the Unit holders by amounts not
exceeding proportionate increases under the category "All Services
Less Rent of Shelter" in the Consumer Price Index published by
the United States Department of Labor. The fees payable to the
Sponsor for such services may exceed the actual costs of providing
such services for these Trusts, but at no time will the total
amount received for such services rendered to unit investment
trusts of which Nike Securities L.P. is the Sponsor in any calendar
year exceed the actual cost to the Sponsor of supplying such services
in such year. First Trust Advisors L.P. will receive an annual
supervisory fee, which is not to exceed the amount set forth under
"Summary of Essential Information," for providing portfolio supervisory
services for each Trust. Such fee is based on the number of Units
outstanding in a Trust on January 1 of each year except for the
year or years in which an initial offering period occurs in which
case the fee for a month is based on the number of Units outstanding
at the end of such month. This fee may exceed the actual costs
of providing such supervisory services for these Trusts, but at
no time will the total amount received for portfolio supervisory
services rendered to unit investment trusts of which Nike Securities
L.P. is the Sponsor in any calendar year exceed the aggregate
cost to First Trust Advisors L.P. of supplying such services in such year.
Subsequent to the initial offering period, the Evaluator, an affiliate
of the Sponsor, will receive a fee as indicated in the "Summary
of Essential Information." The fee may exceed the actual costs
of providing such evaluation services for these Trusts, but at
no time will the total amount received for evaluation services
rendered to unit investment trusts of which Nike Securities L.P.
is the Sponsor in any calendar year exceed the aggregate cost
to First Trust Advisors L.P. of supplying such services in such
year. 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 each Trust an annual fee as indicated
in "Summary of Essential Information" for each Trust. Such fee
will be based upon the largest aggregate number of Units of such
Trust outstanding at any time during the year. 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 from the Income
Account of a Trust to the extent funds are available and then
from the Capital Account of a Trust. Since the Trustee has the
use of the funds being held in the Capital and Income Accounts
for payment of expenses and redemptions and since such Accounts
are noninterest-bearing to Unit holders, the Trustee benefits
thereby. Part of the Trustee's compensation for its services to
a Trust is expected to result from the use of these funds. Both
fees may be increased without approval of the Unit holders by
amounts not exceeding proportionate increases under the category
"All Services Less Rent of Shelter" in the Consumer Price Index
published by the United States Department of Labor.
Expenses incurred in establishing each Trust, including costs
of preparing the registration statement, the trust indenture and
other closing documents, registering Units with the Securities
and Exchange Commission and states, the initial audit of each
Trust portfolio and the initial fees and expenses of the Trustee
and any other out-of-pocket expenses, will be paid by such Trust
and amortized over a five-year period. The following additional
charges are or may be incurred by a Trust: all legal and annual
auditing expenses of the Trustee incurred by or in connection
with its responsibilities under the Indenture; the expenses and
costs of any action undertaken by the Trustee to protect such
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 such 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 such Trust; all taxes and other government charges
imposed upon the Securities or any part of such Trust (no such
taxes or charges are being levied or made or, to the knowledge
of the Sponsor, contemplated). The above expenses and the Trustee's
annual fee, when paid or owing to the Trustee, are secured by
a lien on each Trust. In addition, the Trustee is empowered to
sell Securities in a Trust in order to make funds available to
pay all these amounts if funds are not otherwise available in the
Page 9
Income and Capital Accounts of such Trust except that the Trustee
shall not sell Treasury Obligations to pay Growth & Treasury Trust
expenses. Since the Equity Securities are all common stocks and
the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of a Trust. As described
above, if dividends are insufficient to cover expenses, it is
likely that Equity Securities will have to be sold to meet such
Trust's expenses. These sales may result in capital gains or losses
to Unit holders. See "What is the Federal Tax Status of Unit Holders?"
The Indenture requires each Trust to be audited on an annual basis
at the expense of such Trust by independent auditors selected
by the Sponsor. So long as the Sponsor is making a secondary market
for the Units of a Trust, the Sponsor is required to bear the
cost of such annual audit to the extent such cost exceeds $0.0050
per Unit for such Trust. Unit holders of a Trust covered by an
audit may obtain a copy of the audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal
income tax consequences of the purchase, ownership and disposition
of the Units. The summary is limited to investors who hold the
Units as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code
of 1986 (the "Code"). Unit holders should consult their tax advisers
in determining the Federal, state, local and any other tax consequences
of the purchase, ownership and disposition of Units in the Trusts.
In the opinion of Chapman and Cutler, special counsel for the
Sponsor, under existing law:
1. Each Trust is not an association taxable as a corporation
for Federal income tax purposes; each Unit holder will be treated
as the owner of a pro rata portion of the assets of a Trust under
the Code; and the income of each Trust will be treated as income
of the Unit holders thereof under the Code. Each Unit holder will
be considered to have received his pro rata share of income derived
from each Trust asset when such income is received by a Trust.
2. Each Unit holder will have a taxable event when a Trust disposes
of an Equity Security (whether by sale, exchange, redemption,
or payment at maturity) or upon the sale or redemption of Units
by such Unit holder. The price a Unit holder pays for his Units,
including sales charges, is allocated among his pro rata portion
of each Security held by a Trust (in proportion to the fair market
values thereof on the date the Unit holder purchases his Units)
in order to determine his initial cost for his pro rata portion
of each Security held by such Trust. The Treasury Obligations
held by the Growth & Treasury Trust are treated as stripped bonds
and may be treated as bonds issued at an original issue discount
as of the date a Unit holder purchases his Units. Because the
Treasury Obligations represent interests in "stripped" U.S. Treasury
bonds, a Unit holder's initial cost for his pro rata portion of
each Treasury Obligation held by the Growth & Treasury Trust shall
be treated as its "purchase price" by the Unit holder. Original
issue discount is effectively treated as interest for Federal
income tax purposes and the amount of original issue discount
in this case is generally the difference between the bond's purchase
price and its stated redemption price at maturity. A Unit holder
of the Growth & Treasury Trust will be required to include in
gross income for each taxable year the sum of his daily portions
of original issue discount attributable to the Treasury Obligations
held by the Trust as such original issue discount accrues and
will in general be subject to Federal income tax with respect
to the total amount of such original issue discount that accrues
for such year even though the income is not distributed to the
Unit holders during such year to the extent it is not less than
a "de minimis" amount as determined under a Treasury Regulation
issued on December 28, 1992 relating to stripped bonds. To the
extent the amount of such discount is less than the respective
"de minimis" amount, such discount shall be treated as zero. In
general, original issue discount accrues daily under a constant
interest rate method which takes into account the semi-annual
compounding of accrued interest. In the case of the Treasury Obligations,
this method will generally result in an increasing amount of income
to the Unit holders of the Growth & Treasury Trust each year.
Page 10
Unit holders of the Growth & Treasury Trust should consult their
tax advisers regarding the Federal income tax consequences and
accretion of original issue discount under the stripped bond rules.
For Federal income tax purposes, a Unit holder's pro rata portion
of dividends, as defined by Section 316 of the Code, paid by a
corporation with respect to an Equity Security held by a Trust
are taxable as ordinary income to the extent of such corporation's
current and accumulated "earnings and profits." A Unit holder's
pro rata portion of dividends paid on such Equity Security which
exceed such current and accumulated earnings and profits will
first reduce a Unit holder's tax basis in such Equity Security,
and to the extent that such dividends exceed a Unit holder's tax
basis in such Equity Security shall generally be treated as capital
gain. In general, any such capital gain will be short-term unless
a Unit holder has held his Units for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by a
Trust will generally be considered a capital gain except in the
case of a dealer or a financial institution and, in general, will
be long-term if the Unit holder has held his Units for more than
one year (the date on which the Units are acquired (i.e., the
trade date) is excluded for purposes of determining whether the
Units have been held for more than one year). A Unit holder's
portion of loss, if any, upon the sale or redemption of Units
or the disposition of Securities held by a Trust will generally
be considered a capital loss except in the case of a dealer or
a financial institution and will be long-term if the Unit holder
has held his Units for more than one year (the date on which Units
are acquired (i.e., the trade date) is excluded for purposes of
determining whether the Units have been held for more than one
year). Unit holders should consult their tax advisers regarding
the recognition of such capital gains and losses for Federal income
tax purposes.
4. The Code provides that "miscellaneous itemized deductions"
are allowable only to the extent that they exceed two percent
of an individual taxpayer's adjusted gross income. Miscellaneous
itemized deductions subject to this limitation under present law
include a Unit holder's pro rata share of expenses paid by a Trust,
including fees of the Trustee and the Evaluator.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with
respect to such Unit holder's pro rata portion of dividends received
by a Trust (to the extent such dividends are taxable as ordinary
income, as discussed above) in the same manner as if such corporation
directly owned the Equity Securities paying such dividends (other
than corporate shareholders, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics
and other than for purposes of special taxes such as the accumulated
earnings tax and the personal holding corporation tax). However,
a corporation owning Units should be aware that Sections 246 and
246A of the Code impose additional limitations on the eligibility
of dividends for the 70% dividends received deduction. These limitations
include a requirement that stock (and therefore Units) must generally
be held at least 46 days (as determined under Section 246(c) of
the Code). Final regulations have been recently issued which address
special rules that must be considered in determining whether the
46-day holding requirement is met. Moreover, the allowable percentage
of the deduction will be reduced from 70% if a corporate Unit
holder owns certain stock (or Units) the financing of which is
directly attributable to indebtedness incurred by such corporation.
It should be noted that various legislative proposals that would
affect the dividends received deduction have been introduced.
Unit holders should consult with their tax advisers with respect
to the limitations on and possible modifications to the dividends
received deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities
by a Trust or Disposition of Units. As discussed above, a Unit
holder may recognize taxable gain (or loss) when an Equity Security
is disposed of by a Trust or if the Unit holder disposes of a
Unit. For taxpayers other than corporations, net capital gains
are subject to a maximum marginal tax rate of 28%. However, 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.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised
tax rates on ordinary income while capital gains remain subject
to a 28% maximum stated rate for taxpayers other than corporations.
Because some or
Page 11
all capital gains are taxed at a comparatively lower rate under
the Tax Act, the Tax Act includes a provision that recharacterizes
capital gains as ordinary income in the case of certain financial
transactions that are "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.
Special Tax Consequences of In-Kind Distributions Upon Redemption
of Units (for the Growth Trust) or Termination of a Trust. As
discussed in "Rights of Unit Holders-How are Income and Capital
Distributed?", under certain circumstances a Unit holder who owns
at least 2,500 Units Units of a Trust may request an In-Kind Distribution
upon the redemption of Units or the termination of a Growth Trust
and only upon the termination of the Growth & Treasury Trust.
The Unit holder requesting an In-Kind Distribution will be liable
for expenses related thereto (the "Distribution Expenses") and
the amount of such In-Kind Distribution will be reduced by the
amount of the Distribution Expenses. See "Rights of Unit Holders-How
are Income and Capital Distributed?" Treasury Obligations held
by the Growth & Treasury Trust will not be distributed to a Unit
holder as part of an In-Kind Distribution. The tax consequences
relating to the sale of Treasury Obligations are discussed above.
As previously discussed, prior to the redemption of Units or the
termination of a Trust, a Unit holder is considered as owning
a pro rata portion of each of the Trust assets for Federal income
tax purposes. The receipt of an In-Kind Distribution upon the
redemption of Units (for the Growth Trust) or the termination
of a Trust would be deemed an exchange of such Unit holder's pro
rata portion of each of the shares of stock and other assets held
by such Trust in exchange for an undivided interest in whole shares
of stock plus, possibly, cash.
There are generally three different potential tax consequences
which may occur under an In-Kind Distribution with respect to
each Security owned by a Trust. A "Security" for this purpose
is a particular class of stock issued by a particular corporation
(and does not include Treasury Obligations in the Growth & Treasury
Trust). If the Unit holder receives only whole shares of a Security
in exchange for his or her pro rata portion in each share of such
Security held by a Trust, there is no taxable gain or loss recognized
upon such deemed exchange pursuant to Section 1036 of the Code.
If the Unit holder receives whole shares of a particular Security
plus cash in lieu of a fractional share of such Security, and
if the fair market value of the Unit holder's pro rata portion
of the shares of such Security exceeds his tax basis in his pro
rata portion of such Security, taxable gain would be recognized
in an amount not to exceed the amount of such cash received, pursuant
to Section 1031(b) of the Code. No taxable loss would be recognized
upon such an exchange pursuant to Section 1031(c) of the Code,
whether or not cash is received in lieu of a fractional share.
Under either of these circumstances, special rules will be applied
under Section 1031(d) of the Code to determine the Unit holder's
tax basis in the shares of such particular Security which he receives
as part of the In-Kind Distribution. Finally, if a Unit holder's
pro rata interest in a Security does not equal a whole share,
he may receive entirely cash in exchange for his pro rata portion
of a particular Security. In such case, taxable gain or loss is
measured by comparing the amount of cash received by the Unit
holder with his tax basis in such Security.
Because each Trust will own many Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Security owned by such Trust.
In analyzing the tax consequences with respect to each Security,
such Unit holder must allocate the Distribution Expenses among
the Securities (the "Allocable Expenses"). The Allocable Expenses
will reduce the amount realized with respect to each Security
so that the fair market value of the shares of such Security received
(if any) and cash received in lieu thereof (as a result of any
fractional shares) by such Unit holder should equal the amount
realized for purposes of determining the applicable tax consequences
in connection with an In-Kind Distribution. A Unit holder's tax
basis in shares of such Security received will be increased by
the Allocable Expenses relating to such Security. The amount of
taxable gain (or loss) recognized upon such exchange will generally
equal the sum of the gain (or loss) recognized under the rules
described above by such Unit holder with respect to each Security
owned by a Trust. Unit holders who request an In-Kind Distribution
are advised to consult their tax advisers in this regard.
Page 12
General. Each Unit holder will be requested to provide the Unit
holder's taxpayer identification number to the Trustee and to
certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification
are not provided when requested, distributions by a Trust to such
Unit holder (including amounts received upon the redemption of
Units) will be subject to back-up withholding. Distributions by
a Trust will generally be subject to United States income taxation
and withholding in the case of Units held by non-resident alien
individuals, foreign corporations or other non-United States persons
(accrual of original issue discount on the Treasury Obligations
in the Growth & Treasury Trust may not be subject to taxation
or withholding provided certain requirements are met). Such persons
should consult their tax advisers.
Unit holders will be notified annually of the amounts of original
issue discount (in the case of the Growth & Treasury Trust) and
income dividends includable in the Unit holder's gross income
and amounts of Trust expenses which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original
issue discount (in the case of the Growth & Treasury Trust) may
also be subject to state and local taxes. Investors should consult
their tax advisers for specific information on the tax consequences
of particular types of distributions.
Unit holders desiring to purchase Units for tax-deferred plans
and IRAs should consult their broker for details on establishing
such accounts. Units may also be purchased by persons who already
have self-directed plans established. See "Why are Investments
in the Trusts Suitable for Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to
the Trusts for New York tax matters, under the existing income
tax laws of the State of New York, each Trust is not an association
taxable as a corporation and the income of such Trust will be
treated as the income of the Unit holders thereof.
Why are Investments in the Trusts Suitable for Retirement Plans?
Units of the Trusts may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to
capital gains and income received in each of the foregoing plans
is deferred until distributions are received. Distributions from
such plans are generally treated as ordinary income but may, in
some cases, be eligible for special averaging or tax-deferred
rollover treatment. Investors considering participation in any
such plan should review specific tax laws related thereto and
should consult their attorneys or tax advisers with respect to
the establishment and maintenance of any such plan. Such plans
are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
PORTFOLIOS
What are Treasury Obligations?
The Treasury Obligations deposited in the Growth & Treasury Trust
consist of U.S. Treasury bonds which have been stripped of their
unmatured interest coupons. The Treasury Obligations evidence
the right to receive a fixed payment at a future date from the
U.S. Government, and are backed by the full faith and credit of
the U.S. Government. Treasury Obligations are purchased at a deep
discount because the buyer obtains only the right to a fixed payment
at a fixed date in the future and does not receive any periodic
interest payments. The effect of owning deep discount bonds which
do not make current interest payments (such as the Treasury Obligations)
is that a fixed yield is earned not only on the original investment,
but also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income
on such obligations at a rate as high as the implicit yield on
the discount obligation, but at the same time eliminates the holder's
ability to reinvest at higher rates in the future. For this reason,
the Treasury Obligations are subject to substantially greater
price fluctuations during periods of changing interest rates than
are securities of comparable quality which make regular interest
payments. The effect of being able to acquire the Treasury Obligations
at a lower price is to permit more of the Growth & Treasury Trust's
portfolio to be invested in Equity Securities.
Page 13
What are Equity Securities?
The Trusts consist of different issues of Equity Securities, all
of which are listed on a national securities exchange, the NASDAQ
National Market System or are traded in the over-the-counter market.
The Equity Securities of the Internet Growth Trust, Series 1 and
Internet Growth & Treasury Securities Trust, Series 2 consist
of common stocks issued by companies that are currently involved
with providing digital interactive services, developing and marketing
digital interactive software or manufacturing digital interactive
hardware and will benefit from the rapid growth of the digital
interactive web, commonly referred to as the Internet.
See "What are the Equity Securities Selected for Internet Growth
Trust, Series 1 and Internet Growth & Treasury Securities Trust,
Series 2?" for a general description of the companies.
Risk Factors. An investment in Units of the Trusts should be made
with an understanding of the risks such an investment may entail.
The Internet Growth Trust, Series 1 and the Internet Growth &
Treasury Securities Trust, Series 2 concentrate their Equity Securities
in the technology industry and, as a result, the value of the
Units of each Trust may be susceptible to factors affecting the
technology industry.
The market for high-technology products is characterized by rapidly
changing technology, rapid product obsolescence, cyclical market
patterns, evolving industry standards and frequent new product
introductions. The success of the issuers of the Equity Securities
depends in substantial part on the timely and successful introduction
of new products. An unexpected change in one of more of the technologies
affecting an issuer's products or in the market for products based
on a particular technology could have a material adverse affect
on an issuer's operating results. Furthermore, there can be no
assurance that the issuers of the Equity Securities will be able
to respond timely to compete in the rapidly developing marketplace.
Based on trading history of common stock, factors such as announcements
of new products or development of new technologies and general
conditions of the industry have caused and are likely to cause
the market price of high-technology common stocks to fluctuate
substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated
to the operating performance of such companies. This market volatility
may adversely affect the market price of the Equity Securities
and therefore the ability of a Unit holder to redeem Units a price
equal to or greater than the original price paid for such Units.
Some key components of certain products of technology issuers
are currently available only from single sources. There can be
no assurance that in the future suppliers will be able to meet
the demand for components in a timely and cost effective manner.
Accordingly, an issuer's operating results and customer relationships
could be adversely affected by either an increase in price for,
or an interruption or reduction in supply of, any key components.
Additionally, many technology issuers are characterized by a highly
concentrated customer base consisting of a limited number of large
customers who may require product vendors to comply with rigorous
industry standards. Any failure to comply with such standards
may result in a significant loss or reduction of sales. Because
many products and technologies of technology companies are incorporated
into other related products, such companies are often highly dependent
on the performance of the personal computer, electronics and telecommunications
industries. There can be no assurance that these customers will
place additional orders, or that an issuer of Equity Securities
will obtain orders of similar magnitude as past orders from other
customers. Similarly, the success of certain technology companies
is tied to a relatively small concentration of products or technologies.
Accordingly, a decline in demand of such products, technologies
or from such customers could have a material adverse impact on
issuers of the Equity Securities.
Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their
proprietary rights in their products and technologies. There can
be no assurance that the steps taken by the issuers of the Equity
Securities to protect their proprietary rights will be
Page 14
adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are
substantially equivalent or superior to such issuers' technology.
Each Trust consists of such Securities listed under "Schedule
of Investments" for each Trust as may continue to be held from
time to time in such Trust and any additional Securities acquired
and held by the Trusts pursuant to the provisions of the Trust
Agreements together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way
for any failure in any of the Securities. However, should any
contract for the purchase of any of the Securities initially deposited
hereunder fail, the Sponsor will, unless substantially all of
the moneys held in a Trust to cover such purchase are reinvested
in substitute Securities in accordance with the Trust Agreement,
refund the cash and sales charge attributable to such failed contract
to all Unit holders on the next distribution date.
Because certain of the Equity Securities from time to time may
be sold under certain circumstances described herein, 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.
Although each Portfolio is not managed, the Sponsor may instruct
the Trustee to sell Equity Securities under certain limited circumstances.
Pursuant to the Indenture and with limited exceptions, the Trustee
may sell any securities or other property acquired in exchange
for Equity Securities such as those acquired in connection with
a merger or other transaction. If offered such new or exchanged
securities or property, the Trustee shall reject the offer. However,
in the event such securities or property are nonetheless acquired
by a Trust, they may be accepted for deposit in such Trust and
either sold by the Trustee or held in such Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). See "How May Securities be Removed from a Trust?"
Equity Securities, however, will not be sold by a Trust to take
advantage of market fluctuations or changes in anticipated rates
of appreciation or depreciation.
An investment in Units should be made with an understanding of
the risks which an investment in common stocks entails, including
the risk that the financial condition of the issuers of the Equity
Securities or the general condition of the common stock market
may worsen and the value of the Equity Securities and therefore
the value of the Units may decline. Common stocks are especially
susceptible to general stock market movements and to volatile
increases and decreases of value as market confidence in and perceptions
of the issuers change. These perceptions are based on unpredictable
factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic
or banking crises. Shareholders of common stocks have rights to
receive payments from the issuers of those common stocks that
are generally subordinate to those of creditors of, or holders
of debt obligations or preferred stocks of, such issuers. Shareholders
of common stocks of the type held by each Trust have a right to
receive dividends only when and if, and in the amounts, declared
by the issuer's board of directors and have a right to participate
in amounts available for distribution by the issuer only after
all other claims on the issuer have been paid or provided for.
Common stocks do not represent an obligation of the issuer and,
therefore, do not offer any assurance of income or provide the
same degree of protection of capital as do debt securities. The
issuance of additional debt securities or preferred stock will
create prior claims for payment of principal, interest and dividends
which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the
rights of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. The value of common stocks
is subject to market fluctuations for as long as the common stocks
remain outstanding, and thus the value of the Equity Securities
in each Portfolio may be expected to fluctuate over the life of
such Trust to values higher or lower than those prevailing on
the Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners
of the entity, have generally inferior rights to receive payments
from the issuer in comparison with the rights of creditors of,
or holders of debt obligations or preferred stocks issued by,
the issuer. Cumulative preferred stock dividends must be paid
before common stock dividends
Page 15
and any cumulative preferred stock dividend omitted is added to
future dividends payable to the holders of cumulative preferred
stock. Preferred stockholders are also generally entitled to rights
on liquidation which are senior to those of common stockholders.
Whether or not the Equity Securities are listed on a national
securities exchange, the principal trading market for the Equity
Securities may be in the over-the-counter market. As a result,
the existence of a liquid trading market for the Equity Securities
may depend on whether dealers will make a market in the Equity
Securities. There can be no assurance that a market will be made
for any of the Equity Securities, that any market for the Equity
Securities will be maintained or of the liquidity of the Equity
Securities in any markets made. In addition, a Trust may be restricted
under the Investment Company Act of 1940 from selling Equity Securities
to the Sponsor. The price at which the Equity Securities may be
sold to meet redemptions, and the value of each Trust, will be
adversely affected if trading markets for the Equity Securities
are limited or absent.
Unit holders will be unable to dispose of any of the Equity Securities
in each Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee
will have the right to vote all of the voting stocks in the Trusts
and will vote such stocks in accordance with the instructions
of the Sponsor.
What are the Equity Securities Selected for Internet Growth Trust,
Series 1 and Internet Growth & Treasury Securities Trust, Series 2?
Access Providers
America Online, Inc., headquartered in Vienna, Virginia, provides
a wide variety of online services to consumers in the United States.
The company's services include conferencing, computing support,
software, stock quotes, electronic mail, electronic magazines
and newspapers and online classes. America Online markets its
services to consumers through direct mail, magazine advertising
and by establishing alliances with media companies.
MCI Communications Corporation provides a wide spectrum of domestic
and international voice and data communications services to individuals,
businesses and government agencies. Based in Washington, D.C.,
the company offers long-distance services throughout the United
States as well as internationally. In addition, MCI Communications
Corporation offers domestic and international time-sensitive electronic
mailing, 800 Service, 900 Service, operator assistance and fax services.
Computer Networking
3Com Corporation is headquartered in Santa Clara, California,
where it designs, produces and markets a broad range of ISO 9000-compliant
global data networking solutions. 3Com Corporation's products
include routers, hubs, switches and adapters for Ethernet, Token
Ring, FDDI and ATM networks.
Ascend Communications, Inc., headquartered in Alameda, California,
develops, manufactures, sells and supports a broad range of high-speed
digital wide area network access products. These products use
bandwidth on demand to enhance and extend existing corporate networks
for applications such as videoconferencing, Internet access, remote
LAN access, bulk file transfer, data and video access and imaging
and integrated voice.
Bay Networks, headquartered in Santa Clara, California, develops,
manufactures, markets and supports a comprehensive line of networking
products and services. The company's products include wide area
network access devices, high-speed routers, intelligent hubs,
local area network switches, management software and design and
configuration services.
Cabletron Systems, Inc., based in Rochester, New Hampshire, develops
and manufactures a range of local area network (LAN) and wide
area network (WAN) connectivity hardware and software. Major products
include Multi Media Access Centers (MMACs), repeaters, bridges,
cable assemblies and test equipment. MMACs, also called smart
hubs, are used to simplify network installations, resolve problems
and facilitate modifications.
Page 16
Cisco Systems, Inc. is engaged in the development, manufacturing,
marketing and support of multi-protocol inter-networking systems
that enable the construction of large-scale computer networks.
The company's main products are routers with concurrent bridging
and terminal services. Cisco Systems, Inc., with its headquarters
in San Jose, California, sells its products internationally to
system integrators. The products are then resold, mainly to government
customers.
Stratacom, Inc., headquartered in San Jose, California, develops,
manufactures and supports "FastPacket" networking systems based
on frame relay and Asynchronous Transfer Mode (ATM) technologies
for both private wide area networks and public carrier service
offerings. The company's products are used to integrate a variety
of corporate information, including data, video, voice, LANs and
multimedia traffic.
Desktop Computers & File Servers
Compaq Computer Corporation is headquartered in Houston, Texas.
Compaq Computer Corporation designs, develops, manufactures and
markets personal computers for business and professional users.
Company products include portable and desktop personal computers
that are IBM compatible and run virtually all standardized software
applications.
Dell Computer Corporation, headquartered in Austin, Texas, designs
and manufactures personal computers compatible with IBM computers.
The company sells its products to businesses, individuals, government
agencies and academic institutions. The company markets its products
internationally.
Silicon Graphics, Inc., headquartered in Mountain View, California,
designs, manufactures, markets and services a family of visual
processing computer systems that are used mainly by engineers,
scientists and other related professionals. The computer systems
are used to develop, analyze and simulate complex 3-D objects
and phenomena. MIPS Technologies, Inc., the company's subsidiary,
designs and licenses RISC processor technology for computer systems.
Sun Microsystems, Inc. is a supplier of client/server computing
solutions, which feature networked workstations and servers that
store, process and distribute information. The workstations are
primarily designed for the engineering, scientific, commercial
and technical markets. The company, headquartered in Mountain
View, California, conducts business worldwide.
Peripherals
U.S. Robotics Corporation, headquartered in Skokie, Illinois,
designs, manufactures, markets and supports high-performance data
communications products and systems targeted to business and professional
users worldwide. The company sells a broad product line of network
management systems, data communications software and dial-up modems.
Software
Adobe Systems, Inc., headquartered in Mountain View, California,
is a leading developer and marketer of computer software used
to create, display, print and communicate electronic documents.
Significant products include Acrobat, software that allows users
to view documents across different applications and operating
systems and Postscript, an industry standard computer language
used to transmit pages of varying complexity to printers.
Computer Associates International, Inc., headquartered in Islandia,
New York, designs, develops and markets standardized computer
software products for use with a broad range of mainframe, mid-range,
and desktop computers. The software is produced for integrated
systems, business applications, database management and application
development solutions. The company has worldwide subsidiaries.
FTP Software, Inc., headquartered in North Andover, Maine, develops,
produces and sells internetworking software products which allow
computers to access a wide variety of resources, from local to
global networks. The company's customers include mid- to large-sized
corporations in the data processing, automotive, energy and aerospace
industries as well as federal, state and local government and
universities.
Intuit, Inc., headquartered in Menlo Park, California, develops
and markets software products and related services for sale in
the United States and Canada. These products and services enable
households and
Page 17
small businesses to automate financial tasks, including accounting
and personal finances. Intuit, Inc. also offers supplies, checks,
invoices and financial services.
Microsoft Corporation, based out of Redmond, Washington, is the
world's leading developer of personal computer software. System
software and language products include "MS-DOS," "Windows," "XENIX"
and "Lan Manager."
Netscape Communications Corporation, headquartered in Mountain
View, California, provides software for the exchange of information
and commerce over the Internet or private Internet Protocol networks.
The company designs its products for high performance, ease of
use and security, and sells its products worldwide.
Oracle Systems Corporation designs, develops, markets and supports
software products with a variety of uses, including database management,
applications development, decision support, end-user applications
and office automation. Oracle Systems Corporation's primary product,
the Oracle Relational Database Management System, runs on a broad
range of mainframes, minicomputers, microcomputers and personal
computers. The company is based in Redwood City, California.
Spyglass, Inc., headquartered in Naperville, Illinois, provides
World Wide Web technologies that enable corporations to offer
products and services for electronic publishing, commerce, and
collaboration on the Internet. The company's principal product,
"Enhanced Mosaic," is an Internet browser which provides graphical
point-and-click access to the Web. A similar software system,
the "Spyglass Server," also accesses the Web using Windows/NT
and UNIX platforms.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before
making a decision to invest in the Trusts.
The value of the Equity Securities, like the value of the Treasury
Obligations, will fluctuate over the life of a Trust and may be
more or less than the price at which they were deposited in such
Trust. The Equity Securities may appreciate or depreciate in value
(or pay dividends) depending on the full range of economic and
market influences affecting these securities. However, the Sponsor
believes that, upon termination of the Growth & Treasury Trust,
even if the Equity Securities deposited in the Growth & Treasury
Trust are worthless, an event which the Sponsor considers highly
unlikely, the Treasury Obligations will provide sufficient principal
to at least equal $10.00 per Unit (which is equal to the per Unit
value upon maturity of the Treasury Obligations). This feature
of the Growth & Treasury Trust provides Unit holders with principal
protection, although they might forego any earnings on the amount
invested. To the extent that Units are purchased at a price less
than $10.00 per Unit, this feature may also provide a potential
for capital appreciation.
Unless a Unit holder purchases Units of the Growth & Treasury
Trust on the Initial Date of Deposit (or another date when the
value of the Units is $10.00 or less), total distributions, including
distributions made upon termination of the Growth & Treasury Trust,
may be less than the amount paid for a Unit.
The Sponsor and the Trustee shall not be liable in any way for
any default, failure or defect in any Security. In the event of
a notice that any Treasury Obligations or Equity Securities will
not be delivered ("Failed Contract Obligations") to a Trust, the
Sponsor is authorized under the Indenture to direct the Trustee
to acquire other Treasury Obligations (in the case of the Growth
& Treasury Trust) or Equity Securities ("Replacement Securities").
Any Replacement Security deposited in a Trust will, in the case
of Treasury Obligations in the Growth & Treasury Trust, have the
same maturity value and, as closely as can be reasonably acquired
by the Sponsor, the same maturity date or, in the case of Equity
Securities, be identical to those which were the subject of the
failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract
and the purchase price may not exceed the amount of funds reserved
for the purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraph is not utilized to acquire Replacement Securities in
the event of a failed contract, the Sponsor will refund the sales
charge attributable to such Failed Contract Obligations to all
Unit holders of a Trust and the Trustee will distribute the principal
attributable to such Failed Contract Obligations not more than
120 days after the date on which the Trustee received
Page 18
a notice from the Sponsor that a Replacement Security would not
be deposited in such Trust. In addition, Unit holders should be
aware that, at the time of receipt of such principal, they may
not be able to reinvest such proceeds in other securities at a
yield equal to or in excess of the yield which such proceeds would
have earned for Unit holders of such Trust.
The Indenture also authorizes the Sponsor to increase the size
of each Trust and the number of Units thereof by the deposit of
additional Securities in such Trust and the issuance of a corresponding
number of additional Units.
Each Trust consists of the Securities listed under "Schedule of
Investments" for each Trust (or contracts to purchase such Securities)
as may continue to be held from time to time in such Trust and
any additional Securities acquired and held by such Trust pursuant
to the provisions of the Indenture (including provisions with
respect to deposits into such Trust of Securities in connection
with the issuance of additional Units).
Once all of the Securities in each Trust are acquired, the Trustee
will have no power to vary the investments of the Trust, i.e.,
the Trustee will have no managerial power to take advantage of
market variations to improve a Unit holder's investment, and may
dispose of Securities only under limited circumstances. See "How
May Securities be Removed from a Trust?"
To the best of the Sponsor's knowledge, there is no litigation
pending as of the Initial Date of Deposit in respect of any Security
which might reasonably be expected to have a material adverse
effect on a Trust. At any time after the Initial Date of Deposit,
litigation may be instituted on a variety of grounds with respect
to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether
such litigation might have a material adverse effect on the Trusts.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, with respect to the Growth Trust, the Public
Offering Price is based on the aggregate underlying value of the
Equity Securities in the Trust, plus or minus cash, if any, in
the Income and Capital Accounts of the Trust, plus a sales charge
of 4.9% (equivalent to 5.152% of the net amount invested) divided
by the number of Units of the Trust outstanding.
During the initial offering period, with respect to the Growth
& Treasury Trust, the Public Offering Price is based on the aggregate
of the offering side evaluation of the Treasury Obligations in
the Trust and the aggregate underlying value of the Equity Securities
in the Trust, plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a sales charge of 5.5% (equivalent
to 5.820% of the net amount invested) divided by the number of
Units of the Trust outstanding.
During the initial offering period, with respect to the Growth
Trust, the Sponsor's Repurchase Price is based on the aggregate
underlying value of the Equity Securities in the Trust, plus or
minus cash, if any, in the Income and Capital Accounts of the
Trust divided by the number of Units of the Trust outstanding.
For secondary market sales after the completion of the initial
offering period, the Public Offering Price is also based on the
aggregate underlying value of the Equity Securities in the Trust,
plus or minus cash, if any, in the Income and Capital Accounts
of the Trust, plus a maximum sales charge of 4.9% of the Public
Offering Price (equivalent to 5.152% of the net amount invested),
subject to reduction beginning 1, 1997, divided
by the number of outstanding Units of the Trust.
During the initial offering period, with respect to the Growth
& Treasury Trust, the Sponsor's Repurchase Price is based on the
aggregate of the offering side evaluation of the Treasury Obligations
in the Trust and the aggregate underlying value of the Equity
Securities in the Trust, plus or minus cash, if any, in the Income
and Capital Accounts of the Trust divided by the number of Units
of the Trust outstanding. For secondary market sales after the
completion of the initial offering period, the Public Offering
Price is based on the aggregate bid side evaluation of the Treasury
Obligations in the Trust and the aggregate underlying value of
the Equity Securities in each Trust, plus or minus cash, if any,
in the Income and Capital Accounts of the Trust, plus a maximum
sales charge of 5.5% of the Public Offering Price (equivalent
to 5.820% of the net amount invested), subject to reduction beginning
1, 1997, divided by the number of outstanding
Units of such Trust.
Page 19
The minimum purchase of the Growth Trust is $1,000 ($250 for Individual
Retirement Accounts or other retirement plans). The applicable
sales charge is reduced by a discount as indicated below for volume
purchases with respect to the Growth Trust (except for sales made
pursuant to a "wrap fee account" or similar arrangements as set
forth below):
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ _________ __________
5,000 but less than 10,000 0.25% 0.2506%
10,000 but less than 25,000 0.50% 0.5025%
25,000 but less than 50,000 1.00% 1.0101%
50,000 or more 2.00% 2.0408%
The minimum purchase of the Growth & Treasury Trust is $1,000
($250 for Individual Retirement Accounts or other retirement plans).
The applicable sales charge is reduced by a discount as indicated
below for volume purchases with respect to the Growth & Treasury
Trust (except for sales made pursuant to a "wrap fee account"
or similar arrangements as set forth below):
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ _________ __________
10,000 but less than 50,000 0.60% 0.6036%
50,000 but less than 100,000 1.30% 1.3171%
100,000 or more 2.10% 2.1450%
Any such reduced sales charge shall be the responsibility of the
selling broker/dealer, bank or other selling agent. An investor
may aggregate purchases of Units of the Growth Trust and the Growth
& Treasury Trust for purposes of qualifying for volume purchase
discounts listed above. The aggregate amount of Units of each
Trust purchased will be used to determine the applicable sales
charge to be imposed on the purchase of Units of each Trust. The
reduced sales charge structure will apply on all purchases of
Units in a Trust by the same person on any one day from any one
broker/dealer, bank or other selling agent. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name
of a child of such purchaser under 21 years of age will be deemed,
for the purposes 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.
The purchaser must inform the broker/dealer, bank or other selling
agent of any such combined purchase prior to the sale in order
to obtain the indicated discount. In addition, with respect to
the employees, officers and directors (including their immediate
family members, defined as spouses, children, grandchildren, parents,
grandparents, mothers-in-law, fathers-in-law, sons-in-law and
daughters-in-law, and trustees, custodians or fiduciaries for
the benefit of such persons) of the Sponsor, broker/dealers, banks
or other selling agents and their affiliates, the sales charge
is reduced by 2.0% of the Public Offering Price for purchases
of Units during the primary and secondary public offering periods.
Units may be purchased in the primary or secondary market at the
Public Offering Price less the concession the Sponsor typically
allows to dealers and other selling agents for purchases (see
"Public Offering-How are Units Distributed?") by investors who
purchase Units through registered investment advisers, certified
financial planners or registered broker-dealers who in each case
either charge periodic fees for financial planning, investment
advisory or asset management services, or provide such services
in connection with the establishment of an investment account
for which a comprehensive "wrap fee" charge is imposed.
Page 20
Had the Units of the Trusts been available for sale on the business
day prior to the Initial Date of Deposit, the Public Offering
Price for each Trust would have been as indicated in "Summary
of Essential Information." The Public Offering Price of Units
on the date of the prospectus or during the initial offering period
may vary from the amount stated under "Summary of Essential Information"
in accordance with fluctuations in the prices of the underlying
Securities. During the initial offering period, the aggregate
value of the Units of each Trust shall be determined (a) on the
basis of the offering prices of the Treasury Obligations (if any)
and the aggregate underlying value of the Equity Securities therein
plus or minus cash, if any, in the Income and Capital Accounts
of such Trust, (b) if offering prices are not available for the
Treasury Obligations (if any), on the basis of offering prices
for comparable securities, (c) by determining the value of the
Treasury Obligations (if any) on the offer side of the market
by appraisal, or (d) by any combination of the above. The aggregate
underlying value of the Equity Securities will be determined in
the following manner: If the Equity Securities are listed on a
national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing ask prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than
on the exchange, the evaluation shall generally be based on the
current ask price on the over-the-counter market (unless it is
determined that these prices are inappropriate as a basis for
evaluation). If current ask prices are unavailable, the evaluation
is generally determined (a) on the basis of current ask prices
for comparable securities, (b) by appraising the value of the
Equity Securities on the ask side of the market or (c) by any
combination of the above.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the bid price per
Unit of the Treasury Obligations in each Trust (if any) and the
aggregate underlying value of the Equity Securities therein, plus
or minus cash, if any, in the Income and Capital Accounts of each
Trust plus the applicable sales charge. The offering price of
the Treasury Obligations in the Growth & Treasury Trust may be
expected to be greater than the bid price of the Treasury Obligations
by less than 2%.
Although payment is normally made three business days following
the order for purchase (the date of settlement), payment may be
made prior thereto. A person will become owner of the Units on
the date of settlement provided payment has been received. Cash,
if any, made available to the Sponsor prior to the date of settlement
for the purchase of Units may be used in the Sponsor's business
and may be deemed to be a benefit to the Sponsor, subject to the
limitations of the Securities Exchange Act of 1934. Delivery of
Certificates representing Units so ordered will be made three
business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the
Initial Date of Deposit and (ii) for additional Units issued after
such date as additional Securities are deposited by the Sponsor,
Units will be distributed to the public at the then current Public
Offering Price. The initial offering period may be up to approximately
360 days. During such period, the Sponsor may deposit additional
Securities in a Trust and create additional Units. Units reacquired
by the Sponsor during the initial offering period (at prices based
upon aggregate offering price of the Treasury Obligations (if
any) and the aggregate underlying value of the Equity Securities
in a Trust plus or minus a pro rata share of cash, if any, in
the Income and Capital Accounts of such Trust) may be resold at
the then current Public Offering Price. Upon the termination of
the initial offering period, unsold Units created or reacquired
during the initial offering period will be sold or resold at the
then current Public Offering Price.
Upon completion of the initial offering, Units repurchased in
the secondary market (see "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 each Trust
for sale in a number of states. With respect to the Growth Trust,
sales initially will be made to dealers and others at prices which
represent a concession or
Page 21
agency commission of 3.2% of the Public Offering Price, and, for
secondary market sales, 3.2% of the Public Offering Price (or
65% of the then current maximum sales charge after 1,
1997). With respect to the Growth & Treasury Trust, sales
initially will be made to dealers and others at prices which
represent a concession or agency commission of 3.6% of the Public
Offering Price, and, for secondary market sales, 3.6% of the Public
Offering Price (or 65% of the then current maximum sales charge
after 1, 1997). Volume concessions or agency
commissions of an additional 0.40% of the Public Offering Price
will be given to any broker/dealer or bank, who purchases from
the Sponsor at least $100,000 of a Trust on the Initial Date of
Deposit or $250,000 on any other day thereafter. Volume concessions
or agency commissions of an additional 0.55% of the Public Offering
Price for the Growth Trust and 0.60% of the Public Offering Price
for the Growth & Treasury Trust will be given to any broker/dealer
or bank, who purchases from the Sponsor at least $1,000,000 of
a Growth Trust or the Growth & Treasury Trust on the Initial Date
of Deposit. The Sponsor reserves the right to change the amount
of the concession or agency commission from time to time. Effective
on each 1, commencing 1, 1997, the
sales charge of the Growth Trust and the Growth & Treasury Trust
will be reduced by 1/2 of 1% to a minimum sales charge of 3.0%
and 3.5%, respectively. However, resales of Units of the Trusts
by such broker/dealers, banks and other selling agents to the
public will be made at the Public Offering Price described in
the prospectus. The Sponsor reserves the right to change the amount
of the concession or agency commission from time to time. Certain
commercial banks may be making Units of a Trust 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 second preceding sentence. Under
the Glass-Steagall Act, banks are prohibited from underwriting
Units of the Trusts; 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.
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents of a Trust 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 a broker/dealer,
bank or other selling agent may be eligible to win other nominal
awards for certain sales efforts, or under which the Sponsor will
reallow to any such broker/dealer, bank or other selling agent
that sponsors sales contests or recognition programs conforming
to criteria established by the Sponsor, or participates in sales
programs sponsored by the Sponsor, an amount not exceeding the
total applicable sales charges on the sales generated by such
person at the public offering price during such programs. Also,
the Sponsor in its discretion may from time to time pursuant to
objective criteria established by the Sponsor pay fees to qualifying
broker/dealers, banks or other selling agents for certain services
or activities which are primarily intended to result in sales
of Units of a Trust. Such payments are made by the Sponsor out
of its own assets, and not out of the assets of a Trust. These
programs will not change the price Unit holders pay for their
Units or the amount that a Trust will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales
materials compare the then current estimated returns on a Trust
and returns over specified periods on other similar Trusts sponsored
by Nike Securities L.P. with returns on other 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 each
Trust are described more fully elsewhere in this Prospectus.
Each Trust's performance may be compared to performance on a total
return basis of the Dow Jones Industrial Average, the S&P 500
Composite Price Stock Index, or performance data from Lipper Analytical
Services,
Page 22
Inc. and Morningstar Publications, Inc. or from publications
such as Money, The New York Times, U.S. News and World Report,
Business Week, Forbes or Fortune. As with other performance data,
performance comparisons should not be considered representative
of each Trust's relative performance for any future period.
What are the Sponsor's Profits?
With respect to the Growth Trust, the Sponsor of the Trust will
receive a gross sales commission equal to 4.9% of the Public Offering
Price of the Units (equivalent to 5.152% 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?"
With respect to the Growth and Treasury Trust, the Sponsor of
the Trust will receive a gross sales commission equal to 5.5%
of the Public Offering Price of the Units (equivalent to 5.820%
of the net amount invested), less any reduced sales charge for
quantity purchases as described under "Public Offering-How is
the Public Offering Price Determined?" See "Public Offering-How
are Units Distributed?" for information regarding the receipt
of additional concessions available to broker/dealers, banks and
other selling agents. In addition, the Sponsor may be considered
to have realized a profit or to have sustained a loss, as the
case may be, in the amount of any difference between the cost
of the Securities to a Trust (which is based on the Evaluator's
determination of the aggregate offering price of the underlying
Securities of a Trust on the Initial Date of Deposit as well as
on subsequent deposits) and the cost of such Securities to the
Sponsor. See Note (2) of "Schedule of Investments" for each Trust.
During the initial offering period, the broker/dealers, banks
and other selling agents also may realize profits or sustain losses
as a result of fluctuations after the Initial Date of Deposit
in the Public Offering Price received by such dealers and others
upon the sale of Units.
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 and the price at which
Units are resold (which price includes a sales charge of 4.9%
and 5.5% with respect to the Growth Trust and the Growth & Treasury
Trust, respectively, subject to reduction beginning 1,
1997) or redeemed. The secondary market public offering price of
Units may be greater or less than the cost of such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated
to do so, the Sponsor intends to maintain a market for the Units
and continuously offer to purchase Units at prices, subject to
change at any time, based upon the aggregate bid price of the
Treasury Obligations (if any) in a Trust and the aggregate underlying
value of the Equity Securities in a Trust plus or minus cash,
if any, in the Income and Capital Accounts of such Trust. All
expenses incurred in maintaining a secondary 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.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership 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 may be 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
Page 23
such as, but not limited to, trust instruments, certificates of
death, appointments as executor or administrator or certificates
of corporate authority. Record ownership may occur before settlement.
Certificates will be issued in fully registered form, transferable
only on the books of the Trustee in denominations of one Unit
or any multiple thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form.
The Trustee will maintain an account for each such Unit holder
and will credit each such account with the number of Units purchased
by that Unit holder. Within two business days of the issuance
or transfer of Units held in uncertificated form, the Trustee
will send to the registered owner of Units a written initial transaction
statement containing a description of a Trust; the number of Units
issued or transferred; the name, address and taxpayer identification
number, if any, of the new registered owner; a notation of any
liens and restrictions of the issuer and any adverse claims to
which such Units are or may be subject or a statement that there
are no such liens, restrictions or adverse claims; and the date
the transfer was registered. Uncertificated Units are transferable
through the same procedures applicable to Units evidenced by certificates
(described above), except that no certificate need be presented
to the Trustee and no certificate will be issued upon the transfer
unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
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 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 Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted
interest on the Treasury Obligations in the case of the Growth
& Treasury Trust) received with respect to any of the Securities
in a Trust on or about the Income Distribution Dates to Unit holders
of record on the preceding Income Record Date. See "Summary of
Essential Information." Because dividends are not received by
a Trust at a constant rate throughout the year, such distributions
to Unit holders may be more or less than the amount credited to
the Income Account as of the Record Date. Notification to the
Trustee of the transfer of Units is the responsibility of the
purchaser, but in the normal course of business such notice is
provided by the selling broker-dealer. The pro rata share of cash
in the Capital Account of each Trust will be computed as of the
fifteenth day of each month. Proceeds received on the sale of
any Securities in a Trust, to the extent not used to meet redemptions
of Units or pay expenses, will, however, be distributed on the
last day of each month to Unit holders of record on the fifteenth
day of each month if the amount available for distribution equals
at least $0.01 per Unit. The Trustee is not required to pay interest
on funds held in the Capital Account of a Trust (but may itself
earn interest thereon and therefore benefit from the use of such
funds). Notwithstanding, distributions of funds in the Capital
Account, if any, will be made on the last day of each December
to Unit holders of record as of December 15. Income with respect
to the original issue discount on the Treasury Obligations in
a Trust (if any) will not be distributed currently, although Unit
holders will be subject to Federal income tax as if a distribution
had occurred. See "What is the Federal Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of any
distribution made by a Trust if the Trustee has not been furnished
the Unit holder's tax identification number in the manner required
by such regulations. Any amount so withheld is transmitted to
the Internal Revenue Service and may be recovered by the Unit
holder only when filing a tax return. Under normal circumstances
the Trustee obtains the Unit holder's tax identification number
from the selling broker. However, a Unit holder should examine
his or her statements from the Trustee to make sure that the Trustee
has been provided a certified tax identification number in order
to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should
be provided as soon as possible.
Within a reasonable time after each Trust is terminated, each
Unit holder of a Trust will, upon surrender of his Units for redemption,
receive: (i) the pro rata share of the amounts realized upon the
disposition of Equity Securities, unless he elects an In-Kind
Distribution as described below, (ii) a pro rata share of the amounts
Page 24
realized upon the disposition of the Treasury Obligations (if
any) and (iii) a pro rata share of any other assets of a Trust,
less expenses of such Trust, subject to the limitation that Treasury
Obligations in a Growth & Treasury Trust may not be sold to pay
for Trust expenses. Not less than 60 days prior to the Mandatory
Termination Date for the Growth Trust and not less than 60 days
prior to the Treasury Obligations Maturity Date for the Growth
& Treasury Trust, the Trustee will provide written notice thereof
to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (an "In-Kind Distribution"), if such Unit holder owns
at least 2,500 Units Units of a Trust, rather than to receive
payment in cash for such Unit holder's pro rata share of the amounts
realized upon the disposition by the Trustee of Equity Securities.
An In-Kind Distribution will be reduced by customary transfer
and registration charges. To be effective, the election form,
together with surrendered certificates and other documentation
required by the Trustee, must be returned to the Trustee at least
five business days prior to the Mandatory Termination Date for
the Growth Trust and at least five business days prior to the
Treasury Obligations Maturity Date for the Growth & Treasury Trust.
Not less than 60 days prior to the termination of a Trust, those
Unit holders owning at least 2,500 Units Units will be offered
the option of having the proceeds from the Equity Securities distributed
"In-Kind," or they will be paid in cash, as indicated above. A
Unit holder may, of course, at any time after the Equity Securities
are distributed, sell all or a portion of the shares.
The Trustee will credit to the Income Account of each Trust any
dividends received on the Equity Securities therein. All other
receipts (e.g., return of capital, etc.) are credited to the Capital
Account of each Trust.
The Trustee may establish reserves (the "Reserve Account") within
each Trust for state and local taxes, if any, and any governmental
charges payable out of each Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, 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
period of time after the end of each calendar year, the Trustee
shall furnish to each person who at any time during the calendar
year was a Unit holder of a Trust the following information in
reasonable detail: (1) a summary of transactions in such Trust
for such year; (2) any Securities sold during the year and the
Securities held at the end of such year by such Trust; (3) the
redemption price per Unit based upon a computation thereof on
the 31st day of December of such year (or the last business day
prior thereto); and (4) amounts of income and capital distributed
during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in a Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender
to the Trustee at its corporate trust office in the City of New
York of the certificates representing the Units to be redeemed,
or in the case of uncertificated Units, delivery of a request
for redemption, duly endorsed or accompanied by proper instruments
of transfer with the 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
business day following such tender, the Unit holder will be entitled
to receive in cash an amount for each Unit equal to the Redemption
Price per Unit next computed after receipt by the Trustee of such
tender of Units. The "date of tender" is deemed to be the date
on which Units are received by the Trustee, except that as regards
Units received after 4:00 p.m. eastern standard time, the date
of tender is the next day on which the New York Stock 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.
With respect to the Growth Trust, any Unit holder tendering 2,500
Units of a Trust or more for redemption may request by written
notice submitted at the time of tender from the Trustee in lieu
of a cash redemption a distribution of shares of Equity Securities
in an amount and value of Equity Securities per Unit equal to
the Redemption Price Per Unit as determined as of the evaluation
next following tender. To the extent possible, In-Kind
Page 25
distributions ("In-Kind Distributions") shall be made by the Trustee
through the distribution of each of the Equity Securities in book-entry
form to the account of the Unit holder's bank or broker-dealer
at the Depository Trust Company. An In-Kind Distribution will
be reduced by customary transfer and registration charges. The
tendering Unit holder will receive his pro rata number of whole
shares of each of the Equity Securities comprising the portfolio
and cash from the Capital Account equal to the fractional shares
to which the tendering Unit holder is entitled. The Trustee may
adjust the number of shares of any issue of Equity Securities
included in a Unit holder's In-Kind Distribution to facilitate
the distribution of whole shares, such adjustment to be made on
the basis of the value of Equity Securities on the date of tender.
If funds in the Capital Account are insufficient to cover the
required cash distribution to the tendering Unit holder, the Trustee
may sell Equity Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the
Trustee is required to withhold a specified percentage of the
principal amount of a Unit redemption if the Trustee has not been
furnished the redeeming Unit holder's tax identification number
in the manner required by such regulations. Any amount so withheld
is transmitted to the Internal Revenue Service and may be recovered
by the Unit holder only when filing a tax return. Under normal
circumstances, the Trustee obtains the Unit holder's tax identification
number from the selling broker. However, any time a Unit holder
elects to tender Units for redemption, such Unit holder should
make sure that the Trustee has been provided a certified tax identification
number in order to avoid this possible "back-up withholding."
In the event the Trustee has not been previously provided such
number, one must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of each Trust to the extent that funds
are available for such purpose, or from the Capital Account. All
other amounts paid on redemption shall be withdrawn from the Capital
Account of each Trust.
The Trustee is empowered to sell Securities of each Trust in order
to make funds available for redemption. To the extent that Equity
Securities are sold, the size and diversity of each Trust will
be reduced. Such sales may be required at a time when Equity Securities
would not otherwise be sold and might result in lower prices than
might otherwise be realized. With respect to the Growth & Treasury
Trust, Equity Securities will be sold to meet redemptions of Units
before Treasury Obligations, although Treasury Obligations may
be sold if the Growth & Treasury Trust is assured of retaining
a sufficient principal amount of Treasury Obligations to provide
funds upon maturity of such Trust at least equal to $10.00 per Unit.
The Redemption Price per Unit (as well as the secondary market
Public Offering Price) will be determined on the basis of the
bid price of the Treasury Obligations (if any) and the aggregate
underlying value of the Equity Securities in each Trust plus or
minus cash, if any, in the Income and Capital Accounts of such
Trust, while the Public Offering Price per Unit during the initial
offering period will be determined on the basis of the offering
price of such Treasury Obligations (if any), as of the close of
trading on the New York Stock Exchange on the date any such determination
is made and the aggregate underlying value of the Equity Securities
in each Trust, plus or minus cash, if any, in the Income and Capital
Accounts of each Trust. On the Initial Date of Deposit the Public
Offering Price per Unit (which is based on the OFFERING prices
of the Treasury Obligations (if any) and the aggregate underlying
value of the Equity Securities in each Trust and includes the
sales charge) exceeded the Unit value at which Units could have
been redeemed (based upon the current BID prices of the Treasury
Obligations (if any) and the aggregate underlying value of the
Equity Securities in each Trust) by the amount shown under "Summary
of Essential Information." The Redemption Price per Unit of each
Trust is the pro rata share of each Unit determined by the Trustee
by adding: (1) the cash on hand in the Trust other than cash deposited
in the Trust to purchase Securities not applied to the purchase
of such Securities; (2) the aggregate value of the Securities
(including "when issued" contracts, if any) held in the Trust,
as determined by the Evaluator on the basis of bid prices of the
Treasury Obligations (if any) and the aggregate underlying value
of the Equity Securities in each Trust next computed; and (3)
dividends receivable on the Equity Securities trading ex-dividend
as of the date of computation; and deducting therefrom: (1) amounts
representing any applicable taxes or governmental charges payable
out of the Trust; (2) an amount representing estimated accrued
expenses of the Trust, including but not limited to fees and expenses
of the Trustee (including legal and auditing fees), the Evaluator
and supervisory fees, if
Page 26
any; (3) cash held for distribution to Unit holders of record
of the Trust as of the business day prior to the evaluation being
made; and (4) other liabilities incurred by the Trust; and finally
dividing the results of such computation by the number of Units
of the Trust outstanding as of the date thereof.
The aggregate value of the Equity Securities will be determined
in the following manner: if the Equity Securities are listed on
a national securities exchange or the NASDAQ National Market System,
this evaluation is generally based on the closing sale prices
on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if
there is no closing sale price on that exchange or system, at
the closing bid prices. If the Equity Securities are not so listed
or, if so listed and the principal market therefor is other than
on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these
prices are inappropriate as a basis for evaluation). If current
bid prices are unavailable, the evaluation is generally determined
(a) on the basis of current bid prices for comparable securities,
(b) by appraising the value of the Equity Securities on the bid
side of the market or (c) by any combination of the above.
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 the New York Stock Exchange is restricted or any emergency
exists, as a result of which disposal or evaluation of the Securities
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.
The Trustee is not liable to any person in any way for any loss
or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that
time equals or exceeds the Redemption Price per Unit, it may purchase
such Units by notifying the Trustee before 1:00 p.m. eastern standard
time on the same 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. In the event the Sponsor does not purchase Units, the Trustee
may sell Units tendered for redemption in the over-the-counter
market, if any, as long as the amount to be received by the Unit
holder is equal to the amount he would have received on redemption
of the Units.
The offering price of any Units acquired by the Sponsor will be
in accord with the Public Offering Price described in the then
effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong
to the Sponsor.
How May Securities be Removed from a Trust?
The Portfolio of each Trust is not "managed" by the Sponsor or
the Trustee; their activities described herein are governed solely
by the provisions of the Indenture. The Indenture provides that
the Sponsor may (but need not) direct the Trustee to dispose of
an Equity Security in the event that an issuer defaults in the
payment of a dividend that has been declared, that any action
or proceeding has been instituted restraining the payment of dividends
or there exists any legal question or impediment affecting such
Equity Security, that the issuer of the Equity Security has breached
a covenant which would affect the payments of dividends, the credit
standing of the issuer or otherwise impair the sound investment
character of the Equity Security, that the issuer has defaulted
on the payment on any other of its outstanding obligations, that
the price of the Equity Security has declined to such an extent
or other such credit factors exist so that in the opinion of the
Sponsor, the retention of such Equity Securities would be detrimental
to a Trust. Treasury Obligations in the Growth & Treasury Trust
may be sold by the Trustee only pursuant to the liquidation of
such Trust or to meet redemption requests. Except as stated under
"Portfolio-What are Some Additional Considerations for Investors?"
for Failed Contract Obligations, the acquisition by a Trust of
any securities other
Page 27
than the Securities is prohibited. Pursuant to the Indenture and
with limited exceptions, the Trustee may sell any securities or
other property acquired in exchange for Equity Securities such
as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However, in the event such securities
or property are nonetheless acquired by a Trust, they may be accepted
for deposit in the Trust and either sold by the Trustee or held
in the Trust pursuant to the direction of the Sponsor (who may
rely on the advice of the Portfolio Supervisor). Proceeds from
the sale of Securities by the Trustee are credited to the Capital
Account of a Trust for distribution to Unit holders or to meet
redemptions.
The Trustee may also sell Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose
of redeeming Units of a Trust tendered for redemption and the
payment of expenses; provided, however, for the Growth & Treasury
Trust, that in the case of Securities sold to meet redemption
requests, Treasury Obligations may only be sold if the Growth
& Treasury Trust is assured of retaining a sufficient principal
amount of Treasury Obligations to provide funds upon maturity
of the Trust at least equal to $10.00 per Unit. Treasury Obligations
may not be sold by the Trustee to meet Growth & Treasury Trust expenses.
The Sponsor, in designating Equity Securities to be sold by the
Trustee, will generally make selections in order to maintain,
to the extent practicable, the proportionate relationship among
the number of shares of individual issues of Equity Securities.
To the extent this is not practicable, the composition and diversity
of the Equity Securities may be altered. In order to obtain the
best price for a Trust, it may be necessary for the Sponsor to
specify minimum amounts (generally 100 shares) in which blocks
of Equity Securities are to be sold.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in
1991, acts as Sponsor for successive series of The First Trust
Combined Series, The First Trust Special Situations Trust, The
First Trust Insured Corporate Trust, The First Trust of Insured
Municipal Bonds, The First Trust GNMA, Templeton Growth and Treasury
Trust, Templeton Foreign Fund & U.S. Treasury Securities Trust
and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974
and to date more than $9 billion in First Trust unit investment
trusts have been deposited. The Sponsor's employees include a
team of professionals with many years of experience in the unit
investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (708) 241-4141.
As of December 31, 1994 the total partners' capital of Nike Securities
L.P. was $10,863,058 (audited). (This paragraph relates only to
the Sponsor and not to the Trusts or to any series thereof or
to any other Underwriter. The information is included herein only
for the purpose of informing investors as to the financial responsibility
of the Sponsor and its ability to carry out its contractual obligations.
More detailed financial information will be made available by
the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank (National Association),
a national banking association with its principal executive office
located at 1 Chase Manhattan Plaza, New York, New York 10081 and
its unit investment trust office at 770 Broadway, New York, New
York 10003. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The
Trustee is subject to supervision by the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the Board of Governors
of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not participated
in the selection of the Securities. For information relating to
the responsibilities of the Trustee under the Indenture, reference
is made to the material set forth under "Rights of Unit Holders."
Page 28
The Trustee and any successor trustee may resign by executing
an instrument in writing and filing the same with the Sponsor
and mailing a copy of a notice of resignation to all Unit holders.
Upon receipt of such notice, the Sponsor is obligated to appoint
a successor trustee promptly. If the Trustee becomes incapable
of acting or becomes bankrupt or its affairs are taken over by
public authorities, the Sponsor may remove the Trustee and appoint
a successor as provided in the Indenture. If upon resignation
of a trustee no successor has accepted the appointment within
30 days after notification, the retiring trustee may apply to
a court of competent jurisdiction for the appointment of a successor.
The resignation or removal of a trustee becomes effective only
when the successor trustee accepts its appointment as such or
when a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which
it may be consolidated, or any corporation resulting from any
merger or consolidation to which a Trustee shall be a party, shall
be the successor Trustee. The Trustee must be a banking corporation
organized under the laws of the United States or any State and
having at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit
holders for taking any action or for refraining from taking any
action in good faith pursuant to the Indenture, or for errors
in judgment, but shall be liable only for their own willful misfeasance,
bad faith, gross negligence (ordinary negligence in the case of
the Trustee) or reckless disregard of their obligations and duties.
The Trustee shall not be liable for depreciation or loss incurred
by reason of the sale by the Trustee of any of the Securities.
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 Securities or upon the
interest thereon or upon it as Trustee under the Indenture or
upon or in respect of a Trust 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 becomes incapable of acting or becomes 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 First Trust Advisors L.P., an Illinois limited
partnership formed in 1994 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois
60532. 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
30 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.
Page 29
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).
The Indenture for the Growth Trust provides that it shall terminate
upon the Mandatory Termination Date indicated herein under "Summary
of Essential Information." The Indenture provides that the Growth
& Treasury Trust shall terminate upon the maturity, redemption
or other disposition of the last of the Treasury Obligations held
in such Trust, but in no event beyond the Mandatory Termination
Date indicated herein under "Summary of Essential Information."
A Trust may be liquidated at any time by consent of 100% of the
Unit holders of the Trust or, in the case of a Growth Trust, by
the Trustee when the value of the Equity Securities owned by the
Trust as shown by any evaluation, is less than the lower of $2,000,000
or 20% of the total value of Equity Securities deposited in such
Trust during the primary offering period, or by the Trustee in
the event that Units of a Trust not yet sold aggregating more
than 60% of the Units of the Trust are tendered for redemption
by the Underwriter, including the Sponsor. If a Trust is liquidated
because of the redemption of unsold Units of the Trust by the
Underwriter, the Sponsor will refund to each purchaser of Units
of the Trust the entire sales charge paid by such purchaser. In
the event of termination, written notice thereof will be sent
by the Trustee to all Unit holders of a Trust. Within a reasonable
period after termination, the Trustee will follow the procedures
set forth under "How are Income and Capital Distributed?"
Commencing on the Mandatory Termination Date for the Growth Trust
and on the Treasury Obligations Maturity Date for the Growth &
Treasury Trust, Equity Securities will begin to be sold in connection
with the termination of each Trust. The Sponsor will determine
the manner, timing and execution of the sale of the Equity Securities.
Written notice of any termination of a Trust specifying the time
or times at which Unit holders may surrender their certificates
for cancellation shall be given by the Trustee to each Unit holder
at his address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Mandatory
Termination Date for the Growth Trust and 60 days prior to the
Treasury Obligations Maturity Date for the Growth & Treasury Trust,
the Trustee will provide written notice thereof to all Unit holders
and will include with such notice a form to enable Unit holders
to elect a distribution of shares of Equity Securities (reduced
by customary transfer and registration charges), if such Unit
holder owns at least 2,500 Units of a Trust, rather than to receive
payment in cash for such Unit holder's pro rata share of the amounts
realized upon the disposition by the Trustee of Equity Securities.
All Unit holders of the Growth & Treasury Trust will receive their
pro rata portion of the Treasury Obligations in cash upon the
termination of the Growth & Treasury Trust. To be effective, the
election form, together with surrendered certificates and other
documentation required by the Trustee, must be returned to the
Trustee at least five business days prior to the Mandatory Termination
Date for the Growth Trust and at least five business days prior
to the Treasury Obligations Maturity Date for the Growth & Treasury
Trust. Unit holders not electing a distribution of shares of Equity
Securities will receive a cash distribution from the sale of the
remaining Securities within a reasonable time after the Trusts
are terminated. Regardless of the distribution involved, the Trustee
will deduct from the funds of each Trust any accrued costs, expenses,
advances or indemnities provided by the Trust Agreement, including
estimated compensation of the Trustee and costs of liquidation
and any amounts required as a reserve to provide for payment of
any applicable taxes or other governmental charges. Any sale of
Securities in a Trust upon termination may result in a lower amount
than might otherwise be realized if such sale were not required
at such time. The Trustee will then distribute to each Unit holder
his pro rata share of the balance of the Income and Capital Accounts.
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
Page 30
the Sponsor. Carter, Ledyard & Milburn, will act as counsel for the
Trustee and as special New York tax counsel for the Trusts.
Experts
The statements of net assets, including the schedules of investments,
of the Trusts at the opening of business on the Initial Date of
Deposit appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon appearing elsewhere herein
and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts
in accounting and auditing.
Page 31
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 138
We have audited the accompanying statements of net assets, including
the schedules of investments, of The First Trust Special Situations
Trust, Series 138, comprised of Internet Growth Trust, Series
1 and Internet Growth & Treasury Securities Trust, Series 2 as
of the opening of business on , 1996. These
statements of net assets are the responsibility of the Trusts'
Sponsor. Our responsibility is to express an opinion on these
statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statements
of net assets are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statements of net assets. Our procedures included
confirmation of the letters of credit held by the Trustee and
deposited in the Trusts on , 1996. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall
presentation of the statements of net assets. We believe that
our audit of the statements of net assets provides a reasonable
basis for our opinion.
In our opinion, the statements of net assets referred to above
present fairly, in all material respects, the financial position
of The First Trust Special Situations Trust, Series 138, comprised
of Internet Growth Trust, Series 1 and Internet Growth & Treasury
Securities Trust, Series 2 at the opening of business on
, 1996 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
, 1996
Page 32
Statement of Net Assets
Internet Growth Trust, Series 1
The First Trust Special Situations Trust, Series 138
At the Opening of Business on the Initial Date of Deposit
, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by
purchase contracts (1) (2) $
Organizational and offering costs (3)
________
Less accrued organizational and offering costs (3)
________
Net assets $
========
Units outstanding
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (4) $
Less sales charge (4) ( )
________
Net assets $
========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule
of Investments" for Internet Growth Trust, Series 1 is based on
the aggregate underlying value of the Equity Securities.
(2) An irrevocable letter of credit totaling $ issued
by Bankers Trust Company has been deposited with the Trustee as
collateral covering the monies necessary for the purchase of the
Equity Securities in the Internet Growth Trust, Series 1 pursuant
to contracts for the purchase of such Equity Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over
a period not to exceed five years from the Initial Date of Deposit.
The estimated organizational and offering costs are based on
Units of the Trust expected to be issued. To the
extent the number of Units issued is larger or smaller, the estimate
will vary.
(4) The aggregate cost to investors includes a sales charge computed
at the rate of 4.9% of the Public Offering Price (equivalent to
5.152% of the net amount invested), assuming no reduction of sales
charge for quantity purchases.
Page 33
Statement of Net Assets
Internet Growth & Treasury Securities Trust, Series 2
The First Trust Special Situations Trust, Series 138
At the Opening of Business on the Initial Date of Deposit
, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by
purchase contracts (1) (2) $
Organizational and offering costs (3)
________
Less accrued organizational and offering costs (3)
________
Net assets $
========
Units outstanding
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (4) $
Less sales charge (4) ( )
________
Net assets $
========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for Internet Growth & Treasury Securities Trust,
Series 2 is based on the offering side evaluations of the Treasury
Obligations and the aggregate underlying value of the Equity Securities.
(2) An irrevocable letter of credit totaling $ issued
by Bankers Trust Company has been deposited with the Trustee as
collateral covering the monies necessary for the purchase of the
Securities in the Internet Growth & Treasury Securities Trust,
Series 2 pursuant to contracts for the purchase of such Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over
a period not to exceed five years from the Initial Date of Deposit.
The estimated organizational and offering costs are based on
Units of the Trust expected to be issued. To the
extent the number of Units issued is larger or smaller, the estimate
will vary.
(4) The aggregate cost to investors includes a sales charge computed
at the rate of 5.5% of the Public Offering Price (equivalent to
5.820% of the net amount invested), assuming no reduction of sales
charge for quantity purchases.
Page 34
Schedule of Investments
Internet Growth Trust, Series 1
The First Trust Special Situations Trust, Series 138
At the Opening of Business on the Initial Date of Deposit
, 1996
<TABLE>
<CAPTION>
Approximate Cost of
Percentage of Market Equity
Number Ticker Symbol and Aggregate Value Securities
of Shares Name of Issuer of Security (1) Offering Price (3) per Share to Trust (2)
_________ ______________________________ __________________ _________ ___________
<C> <S> <C> <C> <C>
Access Providers
AMER America Online, Inc. 1-4% $ $
MCIC MCI Communications Corporation 1-4%
Computer Networking
COMS 3Com Corporation 1-4%
ASND Ascend Communications, Inc. 1-4%
BNET Bay Networks 1-4%
CS Cabletron Systems, Inc. 1-4%
CSCO Cisco Systems, Inc. 1-4%
STRM Stratacom, Inc. 1-4%
Desktop Computers & File Servers
CPQ Compaq Computer Corporation 1-4%
DELL Dell Computer Corporation 1-4%
SGI Silicon Graphics, Inc. 1-4%
SUNW Sun Microsystems, Inc. 1-4%
Peripherals
USRX U.S. Robotics Corporation 1-4%
Software
ADBE Adobe Systems, Inc. 1-4%
CA Computer Associates International, Inc. 1-4%
FTPS FTP Software, Inc. 1-4%
INTU Intuit, Inc. 1-4%
MSFT Microsoft Corporation 1-4%
NSCP Netscape Communications Corporation 1-4%
ORCL Oracle Systems Corporation 1-4%
SPYG Spyglass, Inc. 1-4%
________ ____________
Total Investments 100% $
======== ============
</TABLE>
[FN]
______________
(1) All Equity Securities are represented by regular way contracts
to purchase such Equity Securities for the performance of which
an irrevocable letter of credit has been deposited with the Trustee.
The contracts to purchase Equity Securities were entered into
by the Sponsor on , 1996.
(2) The cost of the Equity Securities to the Trust represents
the aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the
listed Equity Securities and the ask prices of the over-the-counter
traded Equity Securities on the business day preceding the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The
aggregate underlying value of the Equity Securities on the Initial
Date of Deposit was $ . Cost and loss to Sponsor relating
to the Equity Securities sold to the Trust were $
and $ , respectively.
(3) The portfolio may contain additional Equity Securities each
of which will not exceed approximately 4% of the Aggregate Offering
Price for Equity Securities. Although it is not the Sponsor's
intention, certain of the Equity Securities listed above may not
be included in the final portfolio. Also, the percentages of the
Aggregate Offering Price for the Equity Securities are approximate
amounts and may vary in the final portfolio.
Page 35
Schedule of Investments
Internet Growth & Treasury Securities Trust, Series 2
The First Trust Special Situations Trust, Series 138
At the Opening of Business on the Initial Date of Deposit
, 1996
<TABLE>
<CAPTION>
Approximate
Percentage of Market Value Cost
Aggregate per Share of
Maturity Offering of Equity Securities
Value Name of Issuer and Title of Security (1) Price (3) Securities to Trust (2)
________ ________________________________________ _____________ ____________ ____________
<C> <S> <C> <C> <C>
$ Zero coupon U.S. Treasury bonds % $
maturing
Number Ticker Symbol and
of Shares Name of Issuer of Equity Securities (1)
_________ _______________________________________
Access Providers
AMER America Online, Inc. 1-4% $
MCIC MCI Communications Corporation 1-4%
Computer Networking
COMS 3Com Corporation 1-4%
ASND Ascend Communications, Inc. 1-4%
BNET Bay Networks 1-4%
CS Cabletron Systems, Inc. 1-4%
CSCO Cisco Systems, Inc. 1-4%
STRM Stratacom, Inc. 1-4%
Desktop Computers & File Servers
CPQ Compaq Computer Corporation 1-4%
DELL Dell Computer Corporation 1-4%
SGI Silicon Graphics, Inc. 1-4%
SUNW Sun Microsystems, Inc. 1-4%
Peripherals
USRX U.S. Robotics Corporation 1-4%
Software
ADBE Adobe Systems, Inc. 1-4%
CA Computer Associates International, Inc. 1-4%
FTPS FTP Software, Inc. 1-4%
INTU Intuit, Inc. 1-4%
MSFT Microsoft Corporation 1-4%
NSCP Netscape Communications Corporation 1-4%
ORCL Oracle Systems Corporation 1-4%
SPYG Spyglass, Inc. 1-4%
________ ____________
Total Equity Securities % $
======== ============
Total Investments 100% $
======== ============
</TABLE>
[FN]
______________
(1) The Treasury Obligations were purchased at a discount from
their par value because there is no stated interest income thereon
(such securities are often referred to as zero coupon U.S. Treasury
bonds). Over the life of the Treasury Obligations the value increases,
so that upon maturity the holders will receive 100% of the principal
amount thereof. All Securities are represented by regular way
contracts to purchase such Securities for the performance of which
an irrevocable letter of credit has been deposited with the Trustee.
The contracts to purchase Securities were entered into by the
Sponsor on , 1996.
Page 36
(2) The cost of the Securities to the Trust represents the the
offering side evaluation as determined by the Evaluator, an affiliate
of the Sponsor, with respect to the Treasury Obligations and the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the
listed Equity Securities and the ask prices of the over-the-counter
traded Equity Securities on the business day preceding the Initial
Date of Deposit). The offering side evaluation of the Treasury
Obligations is greater than the bid side evaluation of such Treasury
Obligations which is the basis on which the Redemption Price per
Unit will be determined after the initial offering period. The
aggregate value, based on the bid side evaluation of the Treasury
Obligations and the aggregate underlying value of the Equity Securities
on the Initial Date of Deposit, was $ . Cost and profit
to the Sponsor relating to the Treasury Obligations sold to the
Trust were $ and $ , respectively. Cost and loss
to Sponsor relating to the Equity Securities sold to the Trust
were $ and $ , respectively.
(3) The portfolio may contain additional Equity Securities each
of which will not exceed approximately 4% of the Aggregate Offering
Price for Equity Securities. Although it is not the Sponsor's
intention, certain of the Equity Securities listed above may not
be included in the final portfolio. Also, the percentages of the
Aggregate Offering Price for the Equity Securities are approximate
amounts and may vary in the final portfolio.
Page 37
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Page 38
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Page 39
CONTENTS:
Summary of Essential Information
Internet Growth Trust, Series 1 5
Internet Growth & Treasury Securities Trust, Series 2 6
The First Trust Special Situations Trust, Series 138:
What is The First Trust Special Situations Trust? 7
What are the Expenses and Charges? 8
What is the Federal Tax Status of Unit Holders? 10
Why are Investments in the Trusts Suitable for
Retirement Plans? 13
Portfolios:
What are Treasury Obligations? 13
What are Equity Securities? 14
Risk Factors 14
What are the Equity Securities Selected for
Internet Growth Trust, Series 1 and
Internet Growth & Treasury Securities Trust, Series 2? 16
What are Some Additional Considerations for
Investors? 18
Public Offering:
How is the Public Offering Price Determined? 19
How are Units Distributed? 21
What are the Sponsor's Profits? 23
Will There be a Secondary Market? 23
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 23
How are Income and Capital Distributed? 24
What Reports will Unit Holders Receive? 25
How May Units be Redeemed? 25
How May Units be Purchased by the Sponsor? 27
How May Securities be Removed from a Trust? 27
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 28
Who is the Trustee? 28
Limitations on Liabilities of Sponsor and Trustee 29
Who is the Evaluator? 29
Other Information:
How May the Indenture be Amended or Terminated? 30
Legal Opinions 30
Experts 31
Report of Independent Auditors 32
Statements of Net Assets:
Internet Growth Trust, Series 1 33
Internet Growth & Treasury Securities Trust, Series 2 34
Schedules of Investments:
Internet Growth Trust, Series 1 35
Internet Growth & Treasury Securities Trust, Series 2 36
________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET
FORTH IN THE REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO,
WHICH THE FUND HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
Internet Growth Trust
Series 1
Internet Growth &
Treasury Securities Trust
Series 2
FIRST TRUST (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-708-241-4141
Trustee:
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
1-800-682-7520
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
, 1996
Page 40
MEMORANDUM
Re: The First Trust Special Situations Trust, Series 138
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between The
First Trust Special Situations Trust, Series 131, which is the
current fund, and The First Trust Special Situations Trust,
Series 138, the filing of which this memorandum accompanies, is
the change in the series number. The list of securities
comprising the Fund, the evaluation, record and distribution
dates and other changes pertaining specifically to the new
series, such as size and number of Units in the Fund and the
statement of condition of the new Fund, will be filed by
amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 131 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the bonds deposited in the Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
138 has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on January 4, 1996.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 138
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Carlos E. Nardo
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director of
Nike Securities January 4, 1996
Corporation, the
General Partner of
Nike Securities L.P. Carlos E. Nardo
Attorney-in-Fact**
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Special
Situations Trust, Series 18 (File No. 33-42683) and the same
is hereby incorporated by this reference.
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CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
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EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 18 and
subsequent Series effective October 15, 1991 among Nike
Securities L.P., as Depositor, United States Trust
Company of New York as Trustee, Securities Evaluation
Service, Inc., as Evaluator, and Nike Financial Advisory
Services L.P. as Portfolio Supervisor (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18) and Form of Standard Terms
and Conditions of Trust for The First Trust Special
Situations Trust, Series 22 and certain subsequent
Series, effective November 20, 1991 among Nike Securities
L.P., as Depositor, United States Trust Company of New
York as Trustee, Securities Evaluation Service, Inc., as
Evaluator, and Nike Financial Advisory Services L.P. as
Portfolio Supervisor (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-43693] filed on
behalf of The First Trust Special Situations Trust,
Series 22).
1.1.1* Form of Trust Agreement for Series 138 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank
(National Association), as Trustee and Evaluator, and
First Trust Advisors L.P., as Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership Agreement
of Nike Securities L.P. (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporaiton, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
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2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of FT Evaluators L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
___________________________________
* To be filed by amendment.
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