Registration No. 333-00057
1940 Act No. 811-05903
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES
OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
A. Exact name of trust:
The First Trust Special Situations Trust, Series 138
B. Name of depositor:
NIKE SECURITIES L.P.
C. Complete address of depositor's principal executive offices:
NIKE SECURITIES L.P.
1001 Warrenville Road
Lisle, Illinois 60532
D. Name and complete address of agent for service:
Copy to:
JAMES A. BOWEN ERIC F. FESS
c/o Nike Securities L.P. c/o Chapman and Cutler
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
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 Aggregate 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 public:
|XXX|Check box if it is proposed that this filing will become
effective on January 25, 1996 at 2:00 p.m. pursuant to Rule
487.
*Previously paid
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 ITEM NUMBER FORM S-6 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 depositor Information as to
Sponsor, Trustee and
Evaluator
3. Name and address of trustee Information as to
Sponsor, Trustee and
Evaluator
4. Name and address of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
5. State of organization of trust The First Trust
Special Situations
Trust
6. Execution and termination of Other Information
trust agreement
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 Public Offering
securities
(b) Cumulative or distributive The First Trust
securities Special Situations
Trust
(c) Redemption Rights of Unitholders
(d) Conversion, transfer, etc. Rights of Unitholders
(e) Periodic payment plan *
(f) Voting rights Rights of Unitholders
(g) Notice of certificateholders Other Information
(h) Consents required Rights of Unitholders;
Other Information
(i) Other provisions The First Trust
Special Situations
Trust
11. Types of securities comprising The First Trust
units Special
Situations Trust
Schedule of
Investments
12. Certain information regarding
periodic payment 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 certificates *
(c) Certain percentages Summary of Essential
Information; The
First Trust Special
Situations Trust;
Public Offering
(d) Certain other fees, etc.
payable by holders Rights of Units
Holders
(e) Certain profits receivable
by depositor, principal,
underwriters, trustee or The First Trust
affiliated persons Special
Situations Trust
(f) Ratio of annual charges *
to income
14. Issuance of trust's securities Rights of Unit Holders
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 Rights of Unit Holders
disposition of income
(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 Information as
and successor to Sponsor, Trustee
and Evaluator
(e) and (f) Depositor, removal Information as
and successor to 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 employees of
depositor 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 Public Offering
securities by states
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
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as
underwriters to Sponsor, Trustee
and Evaluator
(b) N.A.S.D. membership of
principal underwriters Information as to
Sponsor, Trustee and
Evaluator
40. Certain fees received by See Items 13(a) and
principal underwriters 13(e)
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 in Public Offering;
underlying securities Rights
of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of Information as
trustee to 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 OF
SECURITIES
51. Insurance of holders of
trust's ecurities *
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust
agreement with respect to Special
selection or elimination of Situations Trust;
underlying securities Rights of Unit Holders
(b) Transactions involving
elimination of underlying *
securities
(c) Policy regarding substitution The First Trust
or elimination of underlying Special
securities Situations Trust;
Rights 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.
56.
57. Certain information regarding
period payment certificates *
58.
59. Financial statements Report of Independent
(Instruction 1(c) to Statement of Net
Assets
Form S-6 Auditors
* Inapplicable, answer negative or not required.
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 companies which may 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 companies which may 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."
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
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.
First Trust (registered trademark)
The date of this Prospectus is January 25, 1996
Page 1
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. 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 February 15, 2009 (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 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
February 1, 1997.
Page 2
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 February 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. 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
Page 3
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 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-January 25, 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 (1) 15,000
Fractional Undivided Interest in the Trust per Unit (1) 1/15,000
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (2) $140,762
Aggregate Offering Price Evaluation of Securities per Unit $ 9.3841
Sales Charge of 4.9% of the Public Offering Price per Unit,
(5.152% of the net amount invested) $ .4835
Public Offering Price per Unit (3) $ 9.8676
Sponsor's Initial Repurchase Price per Unit $ 9.3841
Redemption Price per Unit (based on aggregate underlying value
of Equity Securities) ($.4835 less than Public Offering Price per Unit) (4) $ 9.3841
</TABLE>
CUSIP Number 33718R 328
First Settlement Date January 30, 1996
Mandatory Termination Date February 1, 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 $.0102 per Unit outstanding.
Evaluator's Annual Fee $.0030 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
time) on the New York Stock
Exchange on each day on which it
is open.
Supervisory Fee (5) Maximum of $.0035 per Unit
outstanding annually payable to
an affiliate of the Sponsor.
Estimated Annual Organizational
and Offering Costs (6) $.007 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) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) 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.
(3) 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
time and sold to investors at a Public Offering Price per Unit based
on this valuation.
(4) See "How May Units be Redeemed?"
(5) In addition, the Sponsor will also be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0028 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-January 25, 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 $ 150,000
Initial Number of Units 15,000
Fractional Undivided Interest in the Trust per Unit 1/15,000
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (1) $ 137,734
Aggregate Offering Price Evaluation of Securities per Unit $ 9.1823
Sales Charge of 5.5% of the Public Offering Price per Unit,
(5.820% of the net amount invested) $ .5344
Public Offering Price per Unit (2) $ 9.7167
Sponsor's Initial Repurchase Price per Unit $ 9.1823
Redemption Price per Unit (based on bid price evaluation of underlying
Treasury Obligations and aggregate underlying value of Equity Securities)
($.552 less than Public Offering Price per Unit;
$.0176 less than Sponsor's Initial Repurchase Price per Unit) (3) $ 9.1647
</TABLE>
CUSIP Number 33718R 336
First Settlement Date January 30, 1996
Treasury Obligations Maturity Date February 15, 2009
Mandatory Termination Date February 15, 2009
Trustee's Annual Fee $.0102 per Unit outstanding.
Evaluator's Annual Fee $.0030 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
time) on the New York Stock
Exchange on each day on which it
is open.
Supervisory Fee (4) Maximum of $.0035 per Unit
outstanding annually payable to
an affiliate of the Sponsor.
Estimated Annual Organizational
and Offering Costs (5) $.007 per Unit.
Income Distribution Record Date Fifteenth day of each December,
commencing December 15, 1996.
Income Distribution Date (6) 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
time and sold to investors at a Public Offering Price per Unit based on
this valuation.
(3) See "How May Units be Redeemed?"
(4) In addition, the Sponsor will also be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$.0028 per Unit
(5) 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.
(6) 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
companies which may 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 Internet has only recently
developed into a global form of communication connecting tens of
thousands of computer networks, linking together up to 30 million users.
Originally, the Internet was started in 1969 by the U.S. Government as a
network for academics to share research with the government and with
each other. The government did not open the Internet up for commercial
and public use until 1992. The addition of graphics, audio and video via
the World Wide Web portion of the Internet has made the global computer
network easier to navigate and has expanded its use exponentially. While
electronic mail is still the most common use for the Internet, net
surfers can now communicate online, access information on bulletin
boards, retrieve free software, and buy and sell products on the
Internet. Companies are taking advantage of the Internet's reach by
offering colorful multimedia displays of information and entertainment
via "web sites." As the Internet expands its scope and becomes even
easier to use, electronic commerce and banking are considered the next
areas of growth.
The Sponsor believes that the enormous growth potential of the Internet
offers a compelling investment opportunity. However, since the Internet
is in the early stages of its development and the direction of its
evolution is unpredictable, there exist tremendous risks. It is
important to note that companies engaged in business related to the
Internet are subject to fierce competition and their products and
services may be subject to rapid obsolescence.
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 companies which may 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.
Page 7
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, 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 50.39% Treasury Obligations and approximately 49.61%
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 $4.6272 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 $5.2166 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."
Page 8
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 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. In providing such
supervisory services, the portfolio Supervisor may purchase research
services from a variety of sources which may include underwriters or
dealers of the Trusts.
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.
Page 9
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 charged off over a period not
to exceed five years from the Initial Date of Deposit. 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 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, liquidation, 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 tax basis
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 tax basis for his pro rata portion of each
Page 10
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.
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.
Dividends Received Deduction. A Unit holder will be considered to have
received all of the dividends paid on his pro rata portion of each
Equity Security when such dividends are received by a Trust. Unit
holders will be taxed in this manner regardless of whether distributions
from a Trust are actually received by the Unit holder or are
automatically reinvested.
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.
</R
Page 11
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.
Limitations on Deductibility of Trust Expenses by Unit holders. Each
Unit holder's pro rata share of each expense paid by a Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him, subject to the following limitation. It
should be noted that as a result of the Tax Reform Act of 1986, certain
miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be
deductible by an individual only to the extent they exceed 2% of such
individual's adjusted gross income. Unit holders may be required to
treat some or all of the expenses of a Trust as miscellaneous itemized
deductions subject to this limitation.
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 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. If the Unit holder disposes of a
Unit, he is deemed thereby to have disposed of his entire pro rata
interest in all assets of the Trust involved including his pro rata
portion of all the Securities represented by the Unit.
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 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.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether the Unit holder receives cash in
addition to Equity Securities. A "Security" for this purpose is a
particular class of stock issued by a particular corporation (and does
not include the Treasury Obligations). A Unit holder will not recognize
gain or loss if a Unit holder only receives Equity Securities in
exchange for his or her pro rata portion in the Equity Securities held
by a Trust. However, if a Unit holder also receives cash in exchange for
a fractional share of an Equity Security held by a Trust, such Unit
holder will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unit holder and his tax basis
in such fractional share of an Equity Security held by a Trust.
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. 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
Computation of the Unit holder's Tax Basis. Initially, a Unit holder's
tax basis in his Units will generally equal the price paid by such Unit
holder for his Units. The cost of the Units is allocated among the
Equity Securities held in a Trust in accordance with the proportion of
the fair market values of such Equity Securities on the date the Units
are purchased in order to determine such Unit holder's tax basis for his
pro rata portion of each Equity Security.
</R
A Unit holder's tax basis in his Units and his pro rata portion of an
Equity Security held by a Trust will be reduced to the extent dividends
paid with respect to such Equity Security are received by a Trust which
are not taxable as ordinary income as described above.
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 by the Internal Revenue Service 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.
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?"
The foregoing discussion relates only to United States federal income
taxes. Unit holders may be subject to state and local taxation in other
jurisdictions. Unit holders should consult their tax advisors regarding
potential state or local taxation with respect to the Units.
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
Page 13
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.
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
companies which may 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.
Technology companies generally include companies involved in the
development, design, manufacture and sale of computers, computer-related
equipment, computer networks, communications systems, telecommunications
products, electronic products and other related products, systems and
services. The market for these products, especially those specifically
related to the Internet, 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 or 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 at 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
Page 14
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 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. In addition, due to the increasing
public use of the Internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of Internet products and services. For
example, recent proposals would prohibit the distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of
any such laws could have a material adverse impact on the securities in
the Trust.
</R
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
Page 15
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 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.
First Data Corporation, headquartered in Hackensack, New Jersey,
provides high-volume information processing and related services. The
company is a third-party processor of MasterCard and VISA in the United
States and the United Kingdom. The company offers computer-based
information processing services, provides mutual fund shareholder
recordkeeping services and offers accounts receivable services. First
Data is an affiliate of American Express.
</R
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.
WorldCom, Inc., headquartered in Jackson, Mississippi, provides
intrastate, interstate and international long distance
telecommunications services to commercial and residential customers. The
company's subsidiaries include Transcall America, Inc., Biz-Tel
Corporation, Com Systems, Inc., DialNet, Inc. and Touch 1 Long Distance,
Inc.
Page 16
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, Inc., 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.
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.
Hewlett-Packard Company, headquartered in Palo Alto, California,
designs, manufactures and services electronic measurement, analysis and
computation instruments. The company produces computers, calculators,
workstations, video displays, printers, disc and tape drives, medical
diagnostic and monitoring devices and mass spectrometers. Hewlett-
Packard Company sells its products in the United States and other
countries.
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.
Page 17
Peripherals
Motorola, Inc. manufactures and sells a diverse line of electronic
equipment and components including communications systems,
semiconductors, information systems, electronic engine controls and
computer systems. Motorola is headquartered in Schaumburg, Illinois.
</R
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.
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
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
Page 18
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 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.
Page 19
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 February 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
February 1, 1997, divided by the number of outstanding Units of such
Trust.
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):
<TABLE>
<CAPTION>
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
____________________________ _________ __________
<S> <C> <C>
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%
</TABLE>
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):
<TABLE>
<CAPTION>
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
______________________________ _________ __________
<S> <C> <C>
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%
</TABLE>
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,
Page 20
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, 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.
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.
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.
Page 21
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 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 February 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 February 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, $250,000 on any other day thereafter or $100,000 of the First
Trust of Insured Municipal Bonds, Series 236. Volume concessions or
agency commissions of an additional 0.45% and 0.55% of the Public
Offering Price will be given to any broker/dealer or bank, who purchases
from the Sponsor at least $500,000 and $1,000,000, respectively, of the
Growth Trust on any day. Volume concessions or agency commissions of an
additional 0.60% of the Public Offering Price will be given to any
broker/dealer or bank who purchases from the Sponsor at least $1,000,000
of the Growth & Treasury Trust on any day. The Sponsor reserves the
right to change the amount of the concession or agency commission from
time to time. Effective on each February 1, commencing February 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,
Page 22
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,
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 February 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.
Page 23
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 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
Page 24
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
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 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 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.
Page 25
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
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 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
Page 26
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 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 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.
Page 27
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 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
Page 28
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."
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 1991 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,
Page 29
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.
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 the 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 the 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 the 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 the 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
Page 30
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 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 January 25, 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
January 25, 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 January 25, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 25, 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
January 25, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase contracts (1) (2) $140,762
Organizational and offering costs (3) (35,000)
________
175,762
Less accrued organizational and offering costs (3) 35,000
________
Net assets $140,762
========
Units outstanding 15,000
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (4) $148,015
Less sales charge (4) (7,253)
________
Net assets $140,762
========
</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 $200,000 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 1,000,000 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
January 25, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase contracts (1) (2) $137,734
Organizational and offering costs (3) 35,000
________
172,734
Less accrued organizational and offering costs (3) (35,000)
________
Net assets $137,734
========
Units outstanding 15,000
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NET ASSETS
<S> <C>
Cost to investors (4) $145,750
Less sales charge (4) (8,016)
________
Net assets $137,734
========
</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 $200,000 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 1,000,000 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
January 25, 1996
<TABLE>
<CAPTION>
Cost of
Percentage of Market Equity
Number Ticker Symbol and Aggregate Value Securities
of Shares Name of Issuer of Security (1) Offering Price per Share to Trust (2)
_________ ______________________________ ______________ _________ ____________
<C> <S> <C> <C> <C>
Access Providers
73 AMER America Online, Inc. 1.98% $ 38.250 $ 2,792
102 FDC First Data Corporation 4.87% 67.125 6,847
246 MCIC MCI Communications Corporation 4.87% 27.875 6,857
195 WCOM WorldCom, Inc. 4.85% 35.000 6,825
Computer Networking
152 COMS 3Com Corporation 4.83% 44.750 6,802
67 ASND Ascend Communications, Inc. 2.13% 44.750 2,998
161 BNET Bay Networks, Inc. 4.95% 43.250 6,963
93 CS Cabletron Systems, Inc. 4.92% 74.500 6,929
86 CSCO Cisco Systems, Inc. 4.93% 80.750 6,945
38 STRM Stratacom, Inc. 1.99% 73.750 2,803
Desktop Computers & File Servers
143 CPQ Compaq Computer Corporation 4.85% 47.750 6,828
264 DELL Dell Computer Corporation 4.83% 25.750 6,798
83 HWP Hewlett-Packard Company 4.95% 84.000 6,972
251 SGI Silicon Graphics, Inc. 4.86% 27.250 6,840
154 SUNW Sun Microsystems, Inc. 4.76% 43.500 6,699
Peripherals
130 MOT Motorola, Inc. 4.97% 53.750 6,987
72 USRX U.S. Robotics Corporation 4.92% 96.250 6,930
Software
173 ADBE Adobe Systems, Inc. 4.99% 40.625 7,028
105 CA Computer Associates International, Inc. 4.76% 63.750 6,694
48 INTU Intuit, Inc. 1.97% 57.750 2,772
75 MSFT Microsoft Corporation 4.86% 91.250 6,844
18 NSCP Netscape Communications Corporation 2.02% 158.250 2,848
143 ORCL Oracle Systems Corporation 4.99% 49.125 7,025
64 SPYG Spyglass, Inc. 1.95% 42.750 2,736
______ _________
Total Investments 100% $140,762
====== =========
</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 January 24, 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
$140,762. Cost and loss to Sponsor relating to the Equity Securities
sold to the Trust were $140,873 and $111, respectively.
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
January 25, 1996
<TABLE>
<CAPTION>
Market
Value Cost of
Percentage of per Share Equity
Number Aggregate of Equity Securities
of Shares Name of Issuer and Title of Security (1) Offering Price Securities to Trust (2)
_________ _______________________________________ ______________ __________ ____________
<C> <S> <C> <C> <C>
$150,000 Zero coupon U.S. Treasury bonds 50.39% $ 69,408
maturing February 15, 2009
Number Ticker Symbol and
of Shares Name of Issuer of Equity Securities (1)
_________ _______________________________________
Access Providers
36 AMER America Online, Inc. 1.00% $ 38.250 1,377
50 FDC First Data Corporation 2.44% 67.125 3,356
120 MCIC MCI Communications Corporation 2.43% 27.875 3,345
95 WCOM WorldCom, Inc. 2.41% 35.000 3,325
Computer Networking
74 COMS 3Com Corporation 2.41% 44.750 3,312
32 ASND Ascend Communications, Inc. 1.04% 44.750 1,432
78 BNET Bay Networks, Inc. 2.45% 43.250 3,373
45 CS Cabletron Systems, Inc. 2.44% 74.500 3,353
42 CSCO Cisco Systems, Inc. 2.46% 80.750 3,391
18 STRM Stratacom, Inc. 0.96% 73.750 1,328
Desktop Computers & File Servers
69 CPQ Compaq Computer Corporation 2.39% 47.750 3,295
129 DELL Dell Computer Corporation 2.41% 25.750 3,322
40 HWP Hewlett-Packard Company 2.44% 84.000 3,360
122 SGI Silicon Graphics, Inc. 2.41% 27.250 3,325
75 SUNW Sun Microsystems, Inc. 2.37% 43.500 3,262
Peripherals
63 MOT Motorola, Inc. 2.46% 53.750 3,386
35 USRX U.S. Robotics Corporation 2.45% 96.250 3,369
Software
84 ADBE Adobe Systems, Inc. 2.48% 40.625 3,412
51 CA Computer Associates International, Inc 2.36% 63.750 3,251
23 INTU Intuit, Inc. 0.96% 57.750 1,328
36 MSFT Microsoft Corporation 2.39% 91.250 3,285
9 NSCP Netscape Communications Corporation 1.03% 158.250 1,424
69 ORCL Oracle Systems Corporation 2.46% 49.125 3,390
31 SPYG Spyglass, Inc. 0.96% 42.750 1,325
_______ ________
Total Equity Securities 49.61% 68,326
======= ========
Total Investments 100% $137,734
======= ========
</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
Page 36
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 January 24, 1996.
(2) The cost of the Securities to the Trust represents 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 $137,471. Cost and profit
to the Sponsor relating to the Treasury Obligations sold to the Trust
were $69,233 and $175, respectively. Cost and loss to Sponsor relating
to the Equity Securities sold to the Trust were $68,381 and $55,
respectively.
Page 37
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Page 38
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Page 39
<TABLE>
<CAPTION>
CONTENTS:
<S> <C>
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? 9
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? 22
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? 24
How are Income and Capital Distributed? 24
What Reports will Unit Holders Receive? 25
How May Units be Redeemed? 26
How May Units be Purchased by the Sponsor? 27
How May Securities be Removed from a Trust? 28
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 28
Who is the Trustee? 29
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 31
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
</TABLE>
___________________
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
January 25, 1996
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
CONTENTS OF REGISTRATION STATEMENT
A. BONDING ARRANGEMENTS OF DEPOSITOR:
Nike Securities L.P. is covered by a Brokers' Fidelity Bond,
in the total amount of $1,000,000, the insurer being
National Union Fire Insurance Company of Pittsburgh.
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
The Registrant, The First Trust Special Situations Trust,
Series 138, hereby identifies The First Trust Special Situations
Trust, Series 4 Great Lakes Growth and Treasury Trust, Series 1,
The First Trust Special Situations Trust, Series 18 Wisconsin
Growth and Treasury Securities Trust, Series 1 and The First
Trust Combined Series 248, for purposes of the representations
required by Rule 487 and represents the following:
(1) that the portfolio securities deposited in the series
as to the securities of which this Registration Statement is
being filed do not differ materially in type or quality from
those deposited in such previous series;
(2) that, except to the extent necessary to identify the
specific portfolio securities deposited in, and to provide
essential financial information for, the series with respect to
the securities of which this Registration Statement is being
filed, this Registration Statement does not contain disclosures
that differ in any material respect from those contained in the
registration statements for such previous series as to which the
effective date was determined by the Commission or the staff; and
(3) that it has complied with Rule 460 under the Securities
Act of 1933.
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
138, has duly caused this Amendment to 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 25, 1996.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 138
By NIKE SECURITIES L.P.
Depositor
By Carlos E. Nardo
Senior Vice President
S-2
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director )
of Nike Securities )
Corporation, the ) January 25, 1996
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.,
Depositor.
** An executed copy of the related power of attorney was
filed with the Securities and Exchange Commission in
connection with the Amendment No. 1 to Form S-6 of The
First Trust Special Situations Trust, Series 18 (File No.
33-42683) and the same is hereby incorporated herein by
this reference.
S-3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated January 25, 1996 in
Amendment No. 1 to the Registration Statement (Form S-6) (File
No. 333-00057) and related Prospectus of The First Trust Special
Situations Trust, Series 138.
ERNST & YOUNG LLP
Chicago, Illinois
January 25, 1996
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 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
will be filed as Exhibit 4.1 to the Registration Statement.
S-4
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, First Trust Advisors
L.P., as Evaluator, and First Trust Advisors L.P., as
Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership
Agreement of Nike Securities L.P. (incorporated by
reference to Amendment No. 1 to Form S-6 [File No. 33-
42683] filed on behalf of The First Trust Special
Situations Trust, Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, 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 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).
S-5
1.6 Underwriter Agreement (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42755] filed on
behalf of The First Trust Special Situations Trust,
Series 19).
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 First Trust Advisors 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).
S-6
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 138
TRUST AGREEMENT
Dated: January 25, 1996
This Trust Agreement among Nike Securities L.P., as
Depositor, The Chase Manhattan Bank (National Association),
as Trustee, and First Trust Advisors L.P., as Evaluator and
Portfolio Supervisor, sets forth certain provisions in full
and incorporates other provisions by reference to the
document entitled "Standard Terms and Conditions of Trust
for The First Trust Special Situations Trust, Series 18 and
subsequent Series, Effective October 15, 1991" for the
document entitled Internet Growth & Treasury Securities
Trust, Series 2 and "Standard Terms and Conditions of Trust
for The First Trust Special Situations Trust, Series 22 and
subsequent Series, Effective November 20, 1991" for Internet
Growth Trust, Series 1 (herein collectively called the
"Standard Terms and Conditions of Trust"), and such
provisions as are incorporated by reference constitute a
single instrument. All references herein to Articles and
Sections are to Articles and Sections of the Standard Terms
and Conditions of Trust.
WITNESSETH THAT:
In consideration of the premises and of the mutual
agreements herein contained, the Depositor, the Trustee, the
Evaluator and the Portfolio Supervisor agree as follows:
PART I
STANDARD TERMS AND CONDITIONS OF TRUST
Subject to the provisions of Part II and Part III hereof,
all the provisions contained in the Standard Terms and
Conditions of Trust are herein incorporated by reference in
their entirety and shall be deemed to be a part of this
instrument as fully and to the same extent as tough said
provisions had been set forth in full in this instrument.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST FOR
INTERNET GROWTH & TREASURY SECURITIES TRUST, SERIES 2
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and
Conditions of Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit is 15,000 Units.
(2) The initial fractional undivided interest in and
ownership of the Trust represented by each Unit thereof
shall be 1/15,000.
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant
to Section 2.03 of the Standard Terms and Conditions of
Trust.
C. The Percentage Ratio is as follows on the Initial Date
of Deposit:
1.00% America Online, Inc., 2.44% First Data Corporation,
2.43% MCI Communications Corporation, 2.41% WorldCom, Inc.,
2.41% 3Com Corporation, 1.04% Ascend Communications, Inc.,
2.45% Bay Networks, 2.44% Cabletron Systems, Inc.,
2.46% Cisco Systems, Inc., 0.96% Stratacom, Inc.,
2.39% Compaq Computer Corporation, 2.41% Dell Computer
Corporation, 2.44% Hewlett-Packard Company, 2.41% Silicon
Graphics, Inc., 2.37% Sun Microsystems, Inc.,
2.46% Motorola, Inc., 2.45% U.S. Robotics Corporation,
2.48% Adobe Systems, Inc., 2.36% Computer Associates
International, Inc., 0.96% Intuit, Inc.,
2.39% Microsoft Corporation, 1.03% Netscape
Communications Corporation, 2.46% Oracle Systems
Corporation, 0.96% Spyglass, Inc.
D. The Record Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
E. The Distribution Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
February 15, 2009.
G. The Treasury Obligations Maturity Date for the Trust
shall be February 15, 2009.
H. The Evaluator's compensation as referred to in Section
4.03 of the Standard Terms and Conditions of Trust shall be
an annual fee of $.0030 per Unit calculated on the largest
number of Units outstanding during each period in respect of
which a payment is made pursuant to Section 3.05, payable on
a Distribution Date.
I. The Trustee's Compensation Rate pursuant to Section
6.04 of the Standard Terms and Conditions of Trust shall be
an annual fee of $.0102 per Unit, calculated on the largest
number of Units outstanding during each period in respect of
which a payment is made pursuant to Section 3.05. However,
in no event, except as may be otherwise be provided in the
Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less
than $2,000 for such annual compensation.
J. The Initial Date of Deposit for the Trust is January
25, 1996.
K. The minimum amount of Equity Securities to be sold by
the Trustee pursuant to Section 5.02 of the Indenture for
the redemption of Units shall be 100 shares.
PART II
SPECIAL TERMS AND CONDITIONS OF TRUST FOR
INTERNET GROWTH TRUST, SERIES 1
The following special terms and conditions are hereby agreed
to:
A. The Securities initially deposited in the Trust
pursuant to Section 2.01 of the Standard Terms and
Conditions of Trust are set forth in the Schedules hereto.
B. (1) The aggregate number of Units outstanding for the
Trust on the Initial Date of Deposit is 15,000 Units.
(2) The initial fractional undivided interest in and
ownership of the Trust represented by each Unit thereof
shall be 1/15,000.
Documents representing this number of Units for the Trust
are being delivered by the Trustee to the Depositor pursuant
to Section 2.03 of the Standard Terms and Conditions of
Trust.
C. The Percentage Ratio is as follows on the Initial Date
of Deposit:
1.98% America Online, Inc., 4.87% First Data Corporation
4.87% MCI Communications Corporation, 4.85% WorldCom, Inc.
4.83% 3Com Corporation, 2.13% Ascend Communications, Inc.,
4.95% Bay Networks, 4.92% Cabletron Systems, Inc.,
4.93% Cisco Systems, Inc., 1.99% Stratacom,Inc.,
4.85% Compaq Computer Corporation, 4.83% Dell Computer
Corporation, 4.95% Hewlett-Packard Company
4.86% Silicon Graphics, Inc., 4.76% Sun Microsystems, Inc.,
4.97% Motorola, Inc. 4.92% U.S. Robotics Corporation,
4.99% Adobe Systems, Inc., 4.76% Computer Associates
International,Inc., 1.97% Intuit, Inc., 4.86% Microsoft
Corporation, 2.02% Netscape Communications Corporation,
4.99% Oracle Systems Corporation, 1.95% Spyglass, Inc.
D. The Record Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
E. The Distribution Dates shall be as set forth in the
Prospectus under "Summary of Essential Information."
F. The Mandatory Termination Date for the Trust shall be
February 1, 2003.
.
H. The Evaluator's compensation as referred to in Section
4.03 of the Standard Terms and Conditions of Trust shall be
an annual fee of $.0030 per Unit calculated on the largest
number of Units outstanding during each period in respect of
which a payment is made pursuant to Section 3.05, payable on
a Distribution Date.
I. The Trustee's Compensation Rate pursuant to Section
6.04 of the Standard Terms and Conditions of Trust shall be
an annual fee of $.0102 per Unit, calculated on the largest
number of Units outstanding during each period in respect of
which a payment is made pursuant to Section 3.05. However,
in no event, except as may be otherwise be provided in the
Standard Terms and Conditions of Trust, shall the Trustee
receive compensation in any one year from any Trust of less
than $2,000 for such annual compensation.
J. The Initial Date of Deposit for the Trust is January
25, 1996.
K. The minimum amount of Equity Securities to be sold by
the Trustee pursuant to Section 5.02 of the Indenture for
the redemption of Units shall be 100 shares.
PART III FOR INTERNET GROWTH & TREASURY
SECURITIES TRUST, SERIES 2
A. Section 1.01(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank (National
Association), or any successor trustee appointed as
hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended
to refer to The Chase Manhattan Bank (National Association).
B. The term "Capital Account" as set forth in the
Prospectus shall be deemed to refer to the "Principal
Account."
C. Paragraph (b) of Section 2.01 of the Standard Terms and
Conditions of Trust is amended by substituting the following
sentences for the third and fourth sentences of such
paragraph:
"The Trustee shall not accept any deposit pursuant to this
Section 2.01(b) unless the Depositor and Trustee have each
determined that the maturity value of the Zero Coupon
Obligations included in the deposit, divided by the number
of Units created by reason of the deposit, shall equal
$1.00; written certifications of such determinations shall
be executed by the Depositor and Trustee and preserved in
the Trust records with a copy of each such written
certification to Standard & Poor's Corporation so long as
Units of the Trust are rated by them. The Depositor shall,
at its expense, cause independent public accountants to
review the Trust's holdings (i) at such time as the
Depositor determines no further deposits shall be made
pursuant to this paragraph and (ii), if earlier, as of the
90th day following the initial deposit, for the purpose of
certifying whether the face value of the Zero Coupon
Obligations then held by the Trust divided by the Units then
outstanding equals $1.00. A copy of each written report
from the independent public accountants based on their
review will be provided to Standard & Poor's Corporation so
long as Units of the Trust are rated by them."
D. The last sentence of the first paragraph of Section
5.02 of the Standard Terms and Conditions of Trust is
amended by substituting "4:00 p.m. Eastern time" for "12:00
p.m in the City of New York."
E. The second paragraph of Section 5.02 of the Standard
Terms and Conditions of Trust is amended by substituting the
following sentence for the third sentence of the second
paragraph of such Section:
"If such available funds shall be insufficient, the Trustee
shall sell such Securities as have been designated on the
current list for such purpose by the Portfolio Supervisor,
as hereinafter in this Section 5.02 provided, in amounts as
the Trustee in its discretion shall deem advisable or
necessary in order to fund the Principal Account for
purposes of such redemption, provided however, that Zero
Coupon Obligations may not be sold unless the Depositor and
Trustee, which may rely on the advice of the Portfolio
Supervisor, have determined that the face value of the Zero
Coupon Obligations remaining after such proposed sale,
divided by the number of Units outstanding after the
tendered Units are redeemed, shall equal or exceed $1.00; a
written certification as to such determination shall be
executed by the Depositor and Trustee and preserved in the
Trust records with a copy of each such written certification
to Standard & Poor's Corporation so long as Units of the
Trust are rated by them. Within 90 days of the fiscal year
end of the Trust, the Depositor shall obtain, at its
expense, an annual written certification from the
independent public accountants as to such determination
which will also be provided to Standard & Poor's Corporation
so long as Units of the Trust are rated by them."
F. The third sentence of the seventh paragraph of Section
5.02 of the Standard Terms and Conditions of Trust is
amended by deleting "a certification from the independent
public accountants to the effect described in the second
paragraph of this Section 5.02" and in its place inserting
"a certification from the Depositor and Trustee to the
effect described in the second paragraph of this Section
5.02."
G. Paragraph (a) of subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to
substitute the following sentence for the first sentence of
such paragraph:
"On each Distribution Date, the Trustee shall distribute to
each Unit holder of record at the close of business on the
Record Date immediately preceding such Distribution Date an
amount per Unit equal to such Unit holder's Income
Distribution (as defined below), plus such Unit holder's pro
rata share of the balance of the Principal Account (except
for monies on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I, provided, however, that with respect to
distributions other than the distribution occurring in the
month of December of each year, the Trustee shall not be
required to make a distribution from the Principal Account
unless the amount available for distribution shall equal
$1.00 per 1000 Units in the case of Units initially offered
at approximately $1.00 per Unit, or, $1.00 per 100 Units in
the case of Units initially offered at approximately $10.00
per Unit."
H. For purposes of this Trust, all references in the
Standard Terms and Conditions of Trust including provisions
thereof amended hereby to "1.00 per Unit" shall be amended
to read "10.00 per Unit" and all references to "per 1,000
Units" shall be amended to read "per 100 Units."
I. Section 3.12 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with
the following language:
"Section 3.12. Notice to Depositor. In the event that the
Trustee shall have been notified at any time of any action
to be taken or proposed to be taken by at least a legally
required number of holders of any Zero Coupon Obligation, if
any, (including but not limited to the making of any demand,
direction, request, giving of any notice, consent or waiver
or the voting with respect to any amendment or supplement to
any indenture, resolution, agreement or other instrument
under or pursuant to which the Zero Coupon Obligations, if
any, have been issued) the Trustee shall promptly notify the
Depositor and shall thereupon take such action or refrain
from taking any action as the Depositor shall in writing
direct; provided, however, that if the Depositor shall not
within five Business Days of the giving of such notice to
the Depositor direct the Trustee to take or refrain from
taking any action, the Trustee shall take such action as it,
in its sole discretion, shall deem advisable.
In the event that the Trustee shall have been notified at
any time of any action to be taken or proposed to be taken
by at least a legally required number of holders of any
Equity Securities deposited in a Trust, the Trustee shall
take such action or omit from taking any action, as
appropriate, so as to insure that the Equity Securities are
voted as closely as possible in the same manner and the same
general proportion as are the Equity Securities held by
owners other than the Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
exchange or substitution be effected notwithstanding such
rejection or without an initial offer, any Securities, cash
and/or property received in exchange shall be deposited
hereunder and shall be promptly sold, if securities or
property, by the Trustee pursuant to the Depositor's
direction, unless the Depositor advises the Trustee to keep
such securities or property. The Depositor may rely on the
Portfolio Supervisor in so advising the Trustee. The cash
received in such exchange and cash proceeds of any such
sales shall be distributed to Unit holders on the next
distribution date in the manner set forth in Section 3.05
regarding distributions from the Principal Account. The
Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any such sale.
Neither the Depositor nor the Trustee shall be liable to any
person for any action or failure to take action pursuant to
the terms of this Section 3.12 other than failure to notify
the Depositor.
Whenever new securities or property is received and retained
by the Trust pursuant to this Section 3.12, the Trustee
shall, within 5 days thereafter, mail to all Unit holders of
the Trust notices of such acquisition unless legal counsel
for the Trust determines that such notice is not required by
The Investment Company Act of 1940, as amended."
J. Section 1.01(4) shall be amended to read as follows:
"(4)"Portfolio Supervisor" shall mean First Trust Advisors
L.P. and its successors in interest, or any successor
portfolio supervisor appointed as hereinafter provided."
K. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following
paragraphs which shall be entitled Section 3.16.:
"Section 3.16. Bookkeeping and Administrative Expenses. As
compensation for providing bookkeeping and other
administrative services of a character described in Section
26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount which shall not exceed that dollar amount set
forth in the Prospectus times the number of Units
outstanding as of January 1 of such year except for a year
or years in which an initial offering period as determined
by Section 4.01 of this Indenture occurs, in which case the
fee for a month is based on the number of Units outstanding
at the end of such month (such annual fee to be pro rated
for any calendar year in which the Depositor provides
service during less than the whole of such year), but in no
event shall such compensation when combined with all
compensation received from other unit investment trusts for
which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
providing services to such unit investment trusts. Such
compensation may, from time to time, be adjusted provided
that the total adjustment upward does not, at the time of
such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Income and Principal Accounts on or
before the Distribution Date following the Monthly Record
Date on which such period terminates. The Trustee shall
have no liability to any Certificateholder or other person
for any payment made in good faith pursuant to this Section.
If the cash balance in the Income and Principal Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.16, the Trustee shall have the
power to sell (i) Securities from the current list of
Securities designated to be sold pursuant to Section 5.02
hereof, or (ii) if no such Securities have been so
designated, such Securities as the Trustee may see fit to
sell in its own discretion, and to apply the proceeds of any
such sale in payment of the amounts payable pursuant to this
Section 3.16, provided, however, that Zero Coupon
Obligations may not be sold to pay for amounts payable
pursuant to this Section 3.16.
Any moneys payable to the Depositor pursuant to this Section
3.16 shall be secured by a prior lien on the Trust Fund
except that no such lien shall be prior to any lien in favor
of the Trustee under the provisions of Section 6.04 herein.
L. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P. and
its successors in interest, or any successor evaluator
appointed as hereinafter provided."
M. The first sentence of Section 3.14. shall be amended to
read as follows:
"Subject to Section 3.15 hereof, as compensation for
providing supervisory portfolio services under this
Indenture, the Portfolio Supervisor shall receive, in
arrears, against a statement or statements therefor
submitted to the Trustee monthly or annually an aggregate
annual fee in an amount which shall not exceed the amount
set forth under "Summary of Essential Information-
Supervisory Fee" in the Prospectus times the number of Units
outstanding as of January 1 of such year except for a Trust
during the year or years in which an initial offering period
as determined in Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Portfolio
Supervisor provides services during less than the whole of
such year), but in no event shall such compensation when
combined with all compensation received from other series of
the Trust for providing such supervisory services in any
calendar year exceed the aggregate cost to the Portfolio
Supervisor for providing such services.
N. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. The expenses incurred in
establishing a Trust, including the cost of the preparation
and typesetting of the registration statement, prospectuses
(including preliminary prospectuses), the indenture and
other documents relating to the Trust, printing of
Certificates, Securities and Exchange Commission and state
blue sky registration fees, the costs of the initial
valuation of the portfolio and audit of the Trust, the
initial fees and expenses of the Trustee, and legal and
other out-of-pocket expenses related thereto, but not
including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses, to the
extent not borne by the Depositor, shall be borne by the
Trust. To the extent the funds in the Income and Principal
Accounts of the Trust shall be insufficient to pay the
expenses borne by the Trust specified in this Section 3.01,
the Trustee shall advance out of its own funds and cause to
be deposited and credited to the Income Account such amount
as may be required to permit payment of such expenses. The
Trustee shall be reimbursed for such advance on each Record
Date from funds on hand in the Income Account or, to the
extent funds are not available in such Account, from the
Principal Account, in the amount deemed to have accrued as
of such Record Date as provided in the following sentence
(less prior payments on account of such advances, if any),
and the provisions of Section 6.04 with respect to the
reimbursement of disbursements for Trust expenses,
including, without limitation, the lien in favor of the
Trustee therefor and the authority to sell Securities as
needed to fund such reimbursement, shall apply to the
payment of expenses and the amounts advanced pursuant to
this Section. For the purposes of the preceding sentence
and the addition provided in clause (4) of the first
sentence of Section 5.01, the expenses borne by the Trust
pursuant to this Section shall be deemed to have been paid
on the date of the Trust Agreement and to accrue at a daily
rate over the time period specified for their amortization
provided in the Prospectus; provided, however, that nothing
herein shall be deemed to prevent, and the Trustee shall be
entitled to, full reimbursement for any advances made
pursuant to this Section no later than the termination of
the Trust. For purposes of calculating the accrual of
organizational expenses under this Section 3.01, the Trustee
shall rely on the written estimates of such expenses
provided by the Depositor pursuant to Section 5.01."
O. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of Section
5.01 shall be amended by adding the following at the
conclusion thereof: ", plus (4) amounts representing
organizational expenses paid from the Trust less amounts
representing accrued organizational expenses of the Trust,
plus (5) all other assets of the Trust"
(ii) The following shall be added at the end of the first
paragraph of Section 5.01:
Until the Depositor has informed the Trustee that there will
be no further deposits of Additional Securities pursuant to
section 2.01(b), the Depositor shall provide the Trustee
with written estimates of (i) the total organizational
expenses to be borne by the Trust pursuant to Section 3.01
and (ii) the total number of Units to be issued in
connection with the initial deposit and all anticipated
deposits of additional Securities. For purposes of
calculating the Trust Fund Evaluation and Unit Value, the
Trustee shall treat all such anticipated expenses as having
been paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in each case
on the date of the Trust Agreement, and, in connection with
each such calculation, shall take into account a pro rata
portion of such expense and liability based on the actual
number of Units issued as of the date of such calculation.
In the event the Trustee is informed by the Depositor of a
revision in its estimate of total expenses or total Units
and upon the conclusion of the deposit of additional
Securities, the Trustee shall base calculations made
thereafter on such revised estimates or actual expenses,
respectively, but such adjustment shall not affect
calculations made prior thereto and no adjustment shall be
made in respect thereof.
P. For purposes of this Trust, Units of the Trust will not
be rated by Standard & Poor's Ratings Services and any
reference to such rating or any requirement that information
be forwarded to Standard & Poor's Ratings Services in the
Standard Terms and Conditions of Trust shall be
inapplicable.
Q. For purposes of this Trust, any reference in the
Standard Terms and Conditions of Trust to "140%" shall be
replaced with "110%" in relation to the amount of cash or a
Letter of Credit needed to acquire Treasury Obligations.
R. The second paragraph of Section 3.02 of the Standard
Terms and Conditions of Trust is hereby deleted and replaced
with the following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by the Trust) received by the Trust
shall be dealt with in the manner described at Section 3.12,
herein, and shall by retained or disposed of by the Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of the
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
S. The title of Section 3.15 of the Standard Terms and
Conditions of Trust shall be replaced with "Abatement of
Compensation of the Trustee, Evaluator, Portfolio Supervisor
and Sponsor," and sub-section (v) of the first sentence of
such Section 3.15 shall be amended by inserting the
following immediately after the phrase "Portfolio
Supervisor":
", the Sponsor for Bookkeeping and Administrative Expenses"
T. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence
after the first sentence of such section:
"The number of Units may be increased through a split of the
Units or decreased through a reverse split thereof, as
directed in writing by the Depositor, at any time when the
Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
PART III FOR INTERNET GROWTH TRUST, SERIES 1
A. Section 1.01(2) shall be amended to read as follows:
"(2) "Trustee" shall mean The Chase Manhattan Bank (National
Association), or any successor trustee appointed as
hereinafter provided."
All references to United States Trust Company of New York in
the Standard Terms and Conditions of Trust shall be amended
to refer to The Chase Manhattan Bank (National Association).
B. The term "Capital Account" as set forth in the
Prospectus shall be deemed to refer to the "Principal
Account."
C. Paragraph (g) of Section 6.01 of the Standard Terms and
Conditions of Trust is hereby amended by inserting the
following after the first word thereof:
"(i) the value of any Trust as shown by an evaluation by
the Trustee pursuant to Section 5.01 hereof shall be less
than the lower of $2,000,000 or 20% of the total principal
amount of Securities deposited in such Trust, or (ii)"
D. Paragraph (c) of Subsection II of Section 3.05 of the
Standard Terms and Conditions of Trust is hereby amended to
read as follows:
"On each Distribution Date the Trustee shall distribute to
each Unit holder of record at the close of business on the
Record Date immediately preceding such Distribution Date an
amount per Unit equal to such Unit holder's pro rata share
of the balance of the Principal Account (except for monies
on deposit therein required to purchase Contract
Obligations) computed as of the close of business on such
Record Date after deduction of any amounts provided in
Subsection I, provided, however, that with respect to
distributions other than the distribution occurring in the
month of December of each year, the Trustee shall not be
required to make a distribution from the Principal Account
unless the amount available for distribution shall equal
$1.00 per 1000 Units in the case of Units initially offered
at approximately $1.00 per Unit, or, $1.00 per 100 Units in
the case of Units initially offered at approximately $10.00
per Unit."
E. For purposes of this Trust, all references in the
Standard Terms and Conditions of Trust including provisions
thereof amended hereby to "$1.00 per Unit" shall be amended
to read "$10.00 per Unit" and all references to "per 1,000
Units" shall be amended to read "per 100 Units."
F. Section 5.02 of the Standard Terms and Conditions of
Trust is amended by adding the following new paragraph after
the second paragraph of such section:
"In lieu of a cash redemption, Unit holders tendering 2,500
Units or more for redemption may request from the Trustee by
written notice submitted at the time of tender an in kind
distribution of shares of Securities, to the extent of whole
shares. To the extent possible, in kind distributions of
Securities shall be made by the Trustee through the
distribution of each of the 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 all expenses in connection with customary
transfer and registration charges. The tendering Unit
holder will receive his pro rata number of whole shares of
each of the Securities comprising the portfolio and cash
from the Principal Account equal to the fractional shares to
which the tendering Unit holder is entitled. The Trustee
may, but shall not be required to, adjust the number of
shares of any issue of 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 Securities on the date of tender. If funds in
the Principal Account are insufficient to cover the required
cash distribution to the tendering Unit holder, the Trustee
may sell Securities in the manner described in this Section
5.02."
G. Section 8.02 of the Standard Terms and Conditions of
Trust shall be amended to delete the reference to "100,000
Units" and substitute "2,500 Units" in the third sentence of
the second paragraph thereof.
H. The first paragraph of Section 3.05.II(a) of the
Standard Terms and Conditions of Trust is hereby amended to
read in its entirety as follows:
"II. (a) On each Distribution Date, the Trustee shall
distribute to each Unit holder of record at the close of
business on the Record Date immediately preceding such
Distribution Date an amount per Unit equal to such Unit
holder's Income Distribution (as defined below), plus such
Unit holder's pro rata share of the balance of the Principal
Account (except for monies on deposit therein required to
purchase Contract Obligations) computed as of the close of
business on such Record Date after deduction of any amounts
provided in Subsection I, provided, however, that with
respect to distributions other than the distribution
occurring in the month of December of each year, the Trustee
shall not be required to make a distribution from the
Principal Account unless the amount available for
distribution shall equal $1.00 per 100 Units."
I. Section 3.05.II(b) of the Standard Terms and Conditions
of Trust is hereby amended to read in its entirety as
follows:
"(b) For purposes of this Section 3.05, the Unit holder's
Income Distribution shall be equal to such Unit holder's pro
rata share of the cash balance in the Income Account
computed as of the close of business on the Record Date
immediately preceding such Income Distribution after
deduction of (i) the fees and expenses then deductible
pursuant to Section 3.05.I. and (ii) the Trustee's estimate
of other expenses properly chargeable to the Income Account
pursuant to the Indenture which have accrued, as of such
Record Date, or are otherwise properly attributable to the
period to which such Income Distribution relates."
J. Section 3.11 of the Standard Terms and Conditions of
Trust is hereby deleted in its entirety and replaced with
the following language:
"Section 3.11 Notice to Depositor. In the event that the
Trustee shall have been notified at any time of any action
to be taken or proposed to be taken by at least a legally
required number of holders of the equity securities (the
"Equity Securities") (including but not limited to the
making of any demand, direction, request, giving of any
notice, consent or waiver or the voting with respect to any
amendment or supplement to any indenture, resolution,
agreement or other instrument under or pursuant to which the
Contract Obligations, if any, have been issued) the Trustee
shall promptly notify the Depositor and shall thereupon take
such action or refrain from taking any action as the
Depositor shall in writing direct; provided, however, that
if the Depositor shall not within five Business Days of the
giving of such notice to the Depositor direct the Trustee to
take or refrain from taking any action, the Trustee shall
take such action as it, in its sole discretion, shall deem
advisable.
In the event that the Trustee shall have been notified at
any time of any action to be taken or proposed to be taken
by at least a legally required number of holders of any
Equity Securities deposited in a Trust, the Trustee shall
take such action or omit from taking any action, as
appropriate, so as to insure that the Equity Securities are
voted as closely as possible in the same manner and the same
general proportion as are the Equity Securities held by
owners other than the Trust.
In the event that an offer by the issuer of any of the
Securities or any other party shall be made to issue new
securities, or to exchange securities, for Trust Securities,
the Trustee shall reject such offer. However, should any
exchange or substitution be effected notwithstanding such
rejection or without an initial offer, any Securities, cash
and/or property received in exchange shall be deposited
hereunder and shall be promptly sold, if securities or
property, by the Trustee pursuant to the Depositor's
direction, unless the Depositor advises the Trustee to keep
such securities or property. The Depositor may rely on the
Portfolio Supervisor in so advising the Trustee. The cash
received in such exchange and cash proceeds of any such
sales shall be distributed to Unit holders on the next
distribution date in the manner set forth in Section 3.05
regarding distributions from the Principal Account. The
Trustee shall not be liable or responsible in any way for
depreciation or loss incurred by reason of any such sale.
Neither the Depositor nor the Trustee shall be liable to any
person for any action or failure to take action pursuant to
the terms of this Section 3.11 other than failure to notify
the Depositor.
Whenever new securities or property is received and retained
by the Trust pursuant to this Section 3.11, the Trustee
shall, within 5 days thereafter, mail to all Unit holders of
the Trust notices of such acquisition unless legal counsel
for the Trust determines that such notice is not required by
The Investment Company Act of 1940, as amended."
K. Section 1.01(4) shall be amended to read as follows:
"(4) "Portfolio Supervisor" shall mean First Trust Advisors
L.P. and its successors in interest, or any successor
portfolio supervisor appointed as hereinafter provided."
L. Section 1.01(3) shall be amended to read as follows:
"(3) "Evaluator" shall mean First Trust Advisors L.P. and
its successors in interest, or any successor evaluator
appointed as hereinafter provided."
M. Article III of the Standard Terms and Conditions of
Trust is hereby amended by inserting the following
paragraphs which shall be entitled Section 3.14.:
"Section 3.14. Bookkeeping and Administrative Expenses. As
compensation for providing bookkeeping and other
administrative services of a character described in
Section 26(a)(2)(C) of the Investment Company Act of 1940 to the
extent such services are in addition to, and do not
duplicate, the services to be provided hereunder by the
Trustee or the Portfolio Supervisor, the Depositor shall
receive against a statement or statements therefor submitted
to the Trustee monthly or annually an aggregate annual fee
in an amount which shall not exceed that dollar amount set
forth in the Prospectus times the number of Units
outstanding as of January 1 of such year except for a year
or years in which an initial offering period as determined
by Section 4.01 of this Indenture occurs, in which case the
fee for a month is based on the number of Units outstanding
at the end of such month (such annual fee to be pro rated
for any calendar year in which the Depositor provides
service during less than the whole of such year), but in no
event shall such compensation when combined with all
compensation received from other unit investment trusts for
which the Depositor hereunder is acting as Depositor for
providing such bookkeeping and administrative services in
any calendar year exceed the aggregate cost to the Depositor
providing services to such unit investment trusts. Such
compensation may, from time to time, be adjusted provided
that the total adjustment upward does not, at the time of
such adjustment, exceed the percentage of the total
increase, after the date hereof, in consumer prices for
services as measured by the United States Department of
Labor Consumer Price Index entitled "All Services Less Rent
of Shelter" or similar index, if such index should no longer
be published. The consent or concurrence of any Unit holder
hereunder shall not be required for any such adjustment or
increase. Such compensation shall be paid by the Trustee,
upon receipt of invoice therefor from the Depositor, upon
which, as to the cost incurred by the Depositor of providing
services hereunder the Trustee may rely, and shall be
charged against the Income and Principal Accounts on or
before the Distribution Date following the Monthly Record
Date on which such period terminates. The Trustee shall
have no liability to any Certificateholder or other person
for any payment made in good faith pursuant to this Section.
If the cash balance in the Income and Principal Accounts
shall be insufficient to provide for amounts payable
pursuant to this Section 3.14, the Trustee shall have the
power to sell (i) Bonds from the current list of Securities
designated to be sold pursuant to Section 5.02 hereof, or
(ii) if no such Securities have been so designated, such
Securities as the Trustee may see fit to sell in its own
discretion, and to apply the proceeds of any such sale in
payment of the amounts payable pursuant to this Section
3.14.
Any moneys payable to the Depositor pursuant to this Section
3.14 shall be secured by a prior lien on the Trust Fund
except that no such lien shall be prior to any lien in favor
of the Trustee under the provisions of Section 6.04 herein.
N. The first sentence of Section 3.13. shall be amended to
read as follows:
"As compensation for providing supervisory portfolio
services under this Indenture, the Portfolio Supervisor
shall receive, in arrears, against a statement or statements
therefor submitted to the Trustee monthly or annually an
aggregate annual fee in an amount which shall not exceed the
amount set forth under "Summary of Essential Information-
Supervisory Fee" in the Prospectus times the number of Units
outstanding as of January 1 of such year except for a Trust
during the year or years in which an initial offering period
as determined in Section 4.01 of this Indenture occurs, in
which case the fee for a month is based on the number of
Units outstanding at the end of such month (such annual fee
to be pro rated for any calendar year in which the Portfolio
Supervisor provides services during less than the whole of
such year), but in no event shall such compensation when
combined with all compensation received from other series of
the Trust for providing such supervisory services in any
calendar year exceed the aggregate cost to the Portfolio
Supervisor for providing such services.
O. Section 3.01 of the Standard Terms and Conditions of
Trust shall be replaced in its entirety with the following:
"Section 3.01. Initial Cost. The expenses incurred in
establishing a Trust, including the cost of the preparation
and typesetting of the registration statement, prospectuses
(including preliminary prospectuses), the indenture and
other documents relating to the Trust, printing of
Certificates, Securities and Exchange Commission and state
blue sky registration fees, the costs of the initial
valuation of the portfolio and audit of the Trust, the
initial fees and expenses of the Trustee, and legal and
other out-of-pocket expenses related thereto, but not
including the expenses incurred in the printing of
preliminary prospectuses and prospectuses, expenses incurred
in the preparation and printing of brochures and other
advertising materials and any other selling expenses, to the
extent not borne by the Depositor, shall be borne by the
Trust. To the extent the funds in the Income and Principal
Accounts of the Trust shall be insufficient to pay the
expenses borne by the Trust specified in this Section 3.01,
the Trustee shall advance out of its own funds and cause to
be deposited and credited to the Income Account such amount
as may be required to permit payment of such expenses. The
Trustee shall be reimbursed for such advance on each Record
Date from funds on hand in the Income Account or, to the
extent funds are not available in such Account, from the
Principal Account, in the amount deemed to have accrued as
of such Record Date as provided in the following sentence
(less prior payments on account of such advances, if any),
and the provisions of Section 6.04 with respect to the
reimbursement of disbursements for Trust expenses,
including, without limitation, the lien in favor of the
Trustee therefor and the authority to sell Securities as
needed to fund such reimbursement, shall apply to the
payment of expenses and the amounts advanced pursuant to
this Section. For the purposes of the preceding sentence
and the addition provided in clause (4) of the first
sentence of Section 5.01, the expenses borne by the Trust
pursuant to this Section shall be deemed to have been paid
on the date of the Trust Agreement and to accrue at a daily
rate over the time period specified for their amortization
provided in the Prospectus; provided, however, that nothing
herein shall be deemed to prevent, and the Trustee shall be
entitled to, full reimbursement for any advances made
pursuant to this Section no later than the termination of
the Trust. For purposes of calculating the accrual of
organizational expenses under this Section 3.01, the Trustee
shall rely on the written estimates of such expenses
provided by the Depositor pursuant to Section 5.01."
P. Section 5.01 of the Standard Terms and Conditions of
Trust shall be amended as follows:
(i) The second sentence of the first paragraph of Section
5.01 shall be amended by adding the following at the
conclusion thereof: ", plus (4) amounts representing
organizational expenses paid from the Trust less amounts
representing accrued organizational expenses of the Trust,
plus (5) all other assets of the Trust"
(ii) The following shall be added at the end of the first
paragraph of Section 5.01:
Until the Depositor has informed the Trustee that there will
be no further deposits of Additional Securities pursuant to
section 2.01(b), the Depositor shall provide the Trustee
with written estimates of (i) the total organizational
expenses to be borne by the Trust pursuant to Section 3.01
and (ii) the total number of Units to be issued in
connection with the initial deposit and all anticipated
deposits of additional Securities. For purposes of
calculating the Trust Fund Evaluation and Unit Value, the
Trustee shall treat all such anticipated expenses as having
been paid and all liabilities therefor as having been
incurred, and all Units as having been issued, in each case
on the date of the Trust Agreement, and, in connection with
each such calculation, shall take into account a pro rata
portion of such expense and liability based on the actual
number of Units issued as of the date of such calculation.
In the event the Trustee is informed by the Depositor of a
revision in its estimate of total expenses or total Units
and upon the conclusion of the deposit of additional
Securities, the Trustee shall base calculations made
thereafter on such revised estimates or actual expenses,
respectively, but such adjustment shall not affect
calculations made prior thereto and no adjustment shall be
made in respect thereof.
Q. The second paragraph of Section 3.02 of the Standard
Terms and Conditions of Trust is hereby deleted and replaced
with the following sentence:
"Any non-cash distributions (other than a non-taxable
distribution of the shares of the distributing corporation
which shall be retained by the Trust) received by the Trust
shall be dealt with in the manner described at Section 3.11,
herein, and shall by retained or disposed of by the Trust
according to those provisions. The proceeds of any
disposition shall be credited to the Income Account of the
Trust. Neither the Trustee nor the Depositor shall be
liable or responsible in any way for depreciation or loss
incurred by reason of any such sale."
R. The title of Section 3.15 of the Standard Terms and
Conditions of Trust shall be replaced with "Abatement of
Compensation of the Trustee, Evaluator, Portfolio Supervisor
and Sponsor," and sub-section (v) of the first sentence of
such Section 3.15 shall be amended by inserting the
following immediately after the phrase "Portfolio
Supervisor":
", the Sponsor for Bookkeeping and Administrative Expenses"
R. Section 2.03(a) of the Standard Terms and Conditions of
Trust shall be amended by adding the following sentence
after the first sentence of such section:
"The number of Units may be increased through a split of the
Units or decreased through a reverse split thereof, as
directed in writing by the Depositor, at any time when the
Depositor is the only beneficial holder of Units, which
revised number of Units shall be recorded by the Trustee on
its books. The Trustee shall be entitled to rely on the
Depositor's direction as certification that no person other
than the Depositor has a beneficial interest in the Units
and the Trustee shall have no liability to any person for
action taken pursuant to such direction."
IN WITNESS WHEREOF, Nike Securities L.P., The Chase
Manhattan Bank (National Association), and First Trust
Advisors L.P. have each caused this Trust Agreement to be
executed and the respective corporate seal to be hereto
affixed and attested (if applicable) by authorized officers;
all as of the day, month and year first above written.
NIKE SECURITIES L.P., Depositor
By Carlos E. Nardo
Senior Vice President
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
Trustee
(SEAL) By Thomas Porrazzo
Vice President
Attest:
Rosalia A. Raviele
Second Vice President
FIRST TRUST ADVISORS L.P., Evaluator
By Carlos E. Nardo
Senior Vice President
FIRST TRUST ADVISORS L.P.,
Portfolio Supervisor
By Carlos E. Nardo
Senior Vice President
SCHEDULE A TO TRUST AGREEMENT
Securities Initially Deposited
The First Trust Special Situations Trust, Series 138
(Note: Incorporated herein and made a part hereof for the
Trust is the "Schedule of Investments" for the Trust as set
forth in the Prospectus.)
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 25, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
Re: The First Trust Special Situations Trust, Series 138
Gentlemen:
We have served as counsel for Nike Securities L.P., as
Sponsor and Depositor of The First Trust Special Situations
Trust, Series 138 in connection with the preparation, execution
and delivery of a Trust Agreement dated January 25, 1996 among
Nike Securities L.P., as Depositor, The Chase Manhattan Bank
(National Association), as Trustee and First Trust Advisors L.P.,
as Evaluator and Portfolio Supervisor, pursuant to which the
Depositor has delivered to and deposited the Securities listed in
Schedule A to the Trust Agreement with the Trustee and pursuant
to which the Trustee has issued to or on the order of the
Depositor a certificate or certificates representing units of
fractional undivided interest in and ownership of the Fund
created under said Trust Agreement.
In connection therewith, we have examined such pertinent
records and documents and matters of law as we have deemed
necessary in order to enable us to express the opinions
hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
1. the execution and delivery of the Trust Agreement and
the execution and issuance of certificates evidencing the Units
in the Fund have been duly authorized; and
2. the certificates evidencing the Units in the Fund when
duly executed and delivered by the Depositor and the Trustee in
accordance with the aforementioned Trust Agreement, will
constitute valid and binding obligations of the Fund and the
Depositor in accordance with the terms thereof.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-00057)
relating to the Units referred to above, to the use of our name
and to the reference to our firm in said Registration Statement
and in the related Prospectus.
Respectfully submitted,
CHAPMAN AND CUTLER
EFF:jln
CHAPMAN AND CUTLER
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
January 25, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
The Chase Manhattan Bank
(National Association)
770 Broadway
New York, New York 10003
Re: The First Trust Special Situations Trust, Series 138
Gentlemen:
We have acted as counsel for Nike Securities L.P., Depositor
of The First Trust Special Situations Trust, Series 138 (the
"Fund"), in connection with the issuance of units of fractional
undivided interests in the Trust of said Fund (the "Trust"),
under a Trust Agreement, dated January 25, 1996 (the
"Indenture"), between Nike Securities L.P., as Depositor, The
Chase Manhattan Bank (National Association), as Trustee and First
Trust Advisors L.P., as Evaluator and Portfolio Supervisor.
In this connection, we have examined the Registration
Statement, the form of Prospectus proposed to be filed with the
Securities and Exchange Commission, the Indenture and such other
instruments and documents we have deemed pertinent. The opinions
expressed herein assume that the Trust will be administered, and
investments by the Trust from proceeds of subsequent deposits, if
any, will be made, in accordance with the terms of the Indenture.
The Trust holds both Treasury Obligations and Equity Securities
(collectively, the "Securities") as such terms are defined in the
Prospectus.
Based upon the foregoing and upon an investigation of such
matters of law as we consider to be applicable, we are of the
opinion that, under existing federal income tax law:
I. 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 Internal Revenue Code of
1986 (the "Code"); the income of a Trust will be treated as
income of the Unit holders thereof under the Code; and an
item of income each Trust will have the same character in
the hands of a Unit holder as it would have in the hands of
each Trustee. 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 the Trust.
II. Each Unit holder will have a taxable event when a
Trust disposes of a Security (whether by sale, exchange,
redemption, or payment at maturity) or upon the sale or
liquidation, redemption of Units by such Unit holder. The
price a Unit holder pays for his Units 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
tax basis for his pro rata portion of each Security held by
a Trust. The Treasury Obligations are treated as bonds that
were originally issued at an original issue discount.
Because the Treasury Obligations represent interest 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 and Treasury Trust (determined at the time he
acquires his Units, in the manner described above) shall be
treated as its "purchase price" by the Unit holder. Under
the special rules relating to stripped bonds, 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 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 Growth and Treasury 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 greater than or
equal to a "de minimis" amount determined under a Treasury
Regulation (the "Regulation") issued on December 28, 1992 as
described below. 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 each year.
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 exceeds such current and
accumulated earnings and profits will first reduce a Unit
holder's tax basis in such Security and to the extent that
such dividends exceed a Unit holder's tax basis in such
Security shall 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.
III. 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 will be generally long-term if the Unit holder has held
his Units 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 generally long-term if
the Unit holder has held his Units for more than one year.
The Code provides a complex set of rules governing the
accrual of original issue discount, including special rules
relating to "stripped" debt instruments such as the Treasury
Obligations. These rules provide that original issue discount
generally accrues on the basis of a constant compound interest
rate. Special rules apply if the purchase price of a Treasury
Obligation exceeds its original issue price plus the amount of
original issue discount which would have previously accrued,
based upon its issue price (its "adjusted issue price").
Similarly, these special rules would apply to a Unit holder if
the tax basis of his pro rata portion of a Treasury Obligation
issued with original issue discount exceeds his pro rata portion
of its adjusted issue price. The application of these rules will
also vary depending on the value of the Treasury Obligations on
the date a Unit holder acquires his Units, and the price a Unit
holder pays for his Units. In addition, as discussed above, the
Regulation provides that the amount of original issue discount on
a stripped bond is considered zero if the actual amount of
original issue discount on such stripped bond as determined under
Section 1286 of the Code is less than a "de minimis" amount,
which, the Regulation provides, is the product of (i) 0.25
percent of the stated redemption price at maturity and (ii) the
number of full years from the date the stripped bond is purchased
(determined separately for each new purchaser thereof) to the
final maturity date of the bond.
Each Unit holder's pro rata share of each expense paid by a
Trust is deductible by the Unit holder to the same extent as
though the expense had been paid directly by him, subject to the
following limitation. It should be noted that as a result of the
Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation
fees and employee business expenses will be deductible by an
individual only to the extent they exceed 2% of such individual's
adjusted gross income. Unit holders may be required to treat
some or all of the expenses of a Trust as miscellaneous itemized
deductions subject to this limitation.
The scope of this opinion is expressly limited to the
matters set forth herein, and, except as expressly set forth
above, we express no opinion with respect to any other taxes,
including state or local taxes or collateral tax consequences
with respect to the purchase, ownership and disposition of Units.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement (File No. 333-00057)
relating to the Units referred to above and to the use of our
name and to the reference to our firm in said Registration
Statement and in the related Prospectus.
Very truly yours,
CHAPMAN AND CUTLER
EFF/jln
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 25, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Special
Situations Trust, Series 138
Internet Growth Trust, Series 1
Internet Growth
& Treasury Securities Trust,
Series 2
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Special Situations Trust, Series 138
Internet Growth Trust, Series 1
Internet Growth & Treasury Securities Trust, Series 2
Dear Sirs:
We are acting as special counsel with respect to New York
tax matters for The First Trust Special Situations Trust, Series
138,consisting of Internet Growth Trust, Series 1 (the "Growth
Trust"), and Internet Growth & Treasury Securities Trust, Series
2 (collectively, the "Trust"), which will be established under
certain Standard Terms and Conditions of Trust dated November 20,
1991 and October 15, 1991, and a related Trust Agreement dated as
of today (collectively, the "Indenture"), among Nike Securities
L.P., as Depositor (the "Depositor"); First Trust Advisors L.P.,
as Evaluator; First Trust Advisors L.P., as Portfolio Supervisor
and The Chase Manhattan Bank (National Association), as Trustee
(the "Trustee"). Pursuant to the terms of the Indenture, units
of fractional undivided interest in the Trusts (the "Units") will
be issued in the aggregate number set forth in the Indenture.
We have examined and are familiar with originals or certified
copies, or copies otherwise identified to our satisfaction, of
such documents as we have deemed necessary or appropriate for the
purpose of this opinion. In giving this opinion, we have relied
upon the two opinions, each dated today and addressed to the
Trustee, of Chapman and Cutler, counsel for the Depositor, with
respect to the matters of law set forth therein.
Based upon the foregoing, we are of the opinion that:
1. The Trusts will not constitute associations taxable as
corporations under New York law, and accordingly will not be
subject to the New York State franchise tax or the New York City
general corporation tax.
2. Under the income tax laws of the State and City of New York,
the income of the Trusts will be considered the income of the
holders of the Units.
We consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 333-00057) filed with the Securities
and Exchange Commission with respect to the registration of the
sale of the Units and to the references to our name under the
captions "What is the Federal Tax Status of Unit Holders?" and
"Legal Opinions" in such Registration Statement and the
preliminary prospectus included therein.
Very truly yours,
Carter, Ledyard & Milburn
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, NEW YORK 10005
January 25, 1996
The Chase Manhattan Bank
(National Association), as Trustee of
The First Trust Special Situations
Trust, Series 138
Internet Growth
Trust, Series 1
Internet Growth
& Treasury Securities Trust,
Series 2
770 Broadway - 6th Floor
New York, New York 10003
Attention: Mr. Paul J. Holland
Vice President
Re: The First Trust Special Situations Trust, Series 138
Internet Growth Trust, Series 1
Internet Growth & Treasury Securities Trust, Series 2
Dear Sirs:
We are acting as counsel for The Chase Manhattan Bank
(National Association) ("Chase") in connection with the execution
and delivery of a Trust Agreement ("the Trust Agreement") dated
today's date (which Trust Agreement incorporates by reference
certain Standard Terms and Conditions of Trust dated November 20,
1991, and October 15, 1991, and the same are collectively
referred to herein as the "Indenture") among Nike Securities
L.P., as Depositor (the "Depositor"), First Trust Advisors L.P.,
as Evaluator; First Trust Advisors L.P., as Portfolio Supervisor;
and Chase, as Trustee (the "Trustee"), establishing The First
Trust Special Situations Trust, Series 138, consisting of
Internet Growth Trust, Series 1 (the "Growth Trust"), and
Internet Growth & Treasury Securities Trust, Series 2 (the
"Growth & Treasury Trust")(collectively, the "Trust"), and the
execution by Chase, as Trustee under the Indenture, of a
certificate or certificates evidencing ownership of units (such
certificate or certificates and such aggregate units being herein
called "Certificates" and "Units"), each of which represents an
undivided interest in the respective Trust which as to the Growth
Trusts, consists of common stocks and, as to the Growth &
Treasury Trust, consists of "zero coupon" U.S. Treasury Bonds and
common stocks (including, confirmations of contracts for the
purchase of certain stocks and bonds not delivered and cash, cash
equivalents or an irrevocable letter of credit or a combination
thereof, in the amount required for such purchase upon the
receipt of such stocks and bonds), such stocks and bonds being
defined in the Indenture as Securities and listed in the Schedule
to the Indenture.
We have examined the Indenture, the Closing Memorandum dated
today's date, a specimen Certificate, and such other documents as
we have deemed necessary in order to render this opinion. Based
on the foregoing, we are of the opinion that:
1. Chase is a duly organized and existing national banking
association authorized to exercise trust powers.
2. The Trust Agreement has been duly executed and
delivered by Chase and, assuming due execution and delivery by
the other parties thereto, constitutes the valid and legally
binding obligation of Chase.
3. The Certificates are in proper form for execution and
delivery by Chase, as Trustee.
4. Chase, as Trustee, has duly executed and delivered to
or upon the order of the Depositor a Certificate or Certificates
evidencing ownership of the Units, registered in the name of the
Depositor. Upon receipt of confirmation of the effectiveness of
the registration statement for the sale of the Units filed with
the Securities and Exchange Commission under the Securities Act
of 1933, the Trustee may deliver such other Certificates, in such
names and denominations as the Depositor may request, to or upon
the order of the Depositor as provided in the Closing Memorandum.
5. Chase, as Trustee, may lawfully advance to the Trust
amounts as may be necessary to provide periodic interest
distributions of approximately equal amounts, and be reimbursed,
without interest, for any such advances from funds in the
interest account, as provided in the Indenture.
In rendering the foregoing opinion, we have not considered,
among other things, whether the Securities have been duly
authorized and delivered.
Very truly yours,
CARTER, LEDYARD & MILBURN
First Trust Advisors L.P.
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
January 25, 1996
Nike Securities L.P.
1001 Warrenville Road
Lisle, IL 60532
Re: THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 138
Gentlemen:
We have examined the Registration Statement File No.
333-00057 for the above captioned fund. We hereby consent to the
use in the Registration Statement of the references to First
Trust Advisors L.P. as evaluator.
You are hereby authorized to file a copy of this letter with
the Securities and Exchange Commission.
Sincerely,
First Trust Advisors L.P.
Carlos E. Nardo
Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted
from Amendment number 1 to form S-6 and is qualified in its entirety by
reference to such Amendment number 1 to form S-6.
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted
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</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> Internet Growth & Treasury Securities Trust
<MULTIPLIER> 1
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<PERIOD-TYPE> Other
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