File No. 333-26193
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
UNIT INVESTMENT TRUST SERIES 10
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : June 30, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1 - 281,251 Units
PROSPECTUS - Part One
Dated June 28, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied
by Part Two of this Prospectus.
THE TRUST
First Trust Unit Investment Trust, Series 10 (the "Fund") consists of the
underlying unit investment trust set forth above (the "Trust"). The Trust
consists of a fixed portfolio of interest-bearing corporate debt obligations
of domestic companies (the "Corporate Bonds" or "Bonds"). At February 29,
2000, each Unit represented a 1/281,251 undivided interest in the principal
and net income of the Trust (see "The Trust" in Part Two of this Prospectus).
The investment objective of the Trust is to provide a high level of current
income through investment in a fixed portfolio consisting of domestic high-
yield, high-risk corporate debt obligations issued after July 18, 1984. The
objective of the Trust is dependent upon the continuing ability of the
issuers and/or obligors of the Bonds to meet their respective obligations.
All of the aggregate principal amount of Bonds in the Trust are lower rated
bonds, commonly known as "junk bonds", that entail greater risks, including
default risks, than those found in higher rated securities. Investors should
carefully consider these risks before investing. See "The Fund Investment
Objectives and Portfolio Selection" and "Risk Factors" in Part Two of this
Prospectus.
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Distributor in the secondary market or from
the Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Distributor. No proceeds
from the sale of Units will be received by the Trust.
PUBLIC OFFERING PRICE
The Public Offering Price of the Units is equal to the net assets of the
Trust divided by the number of Units outstanding, plus a sales charge of
4.50% of the Public Offering Price (4.712% of the amount invested). At
February 29, 2000 the Public Offering Price per Unit was $9.65 (see "Public
Offering" in Part Two of this Prospectus).
Please retain all parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES, L.P.
SPONSOR
<PAGE>
ESTIMATED CURRENT RETURN AND ESTIMATED LONG-TERM RETURN
Estimated Current Return to Unit holders as of February 29, 2000 was 9.36%
and Estimated Long-Term Return to Unit holders as of February 29, 2000 was
8.54%. Estimated Current Return is calculated by dividing the Estimated Net
Annual Interest Income per Unit by the Public Offering Price. Estimated Long-
Term Return is calculated by using a formula which (1) takes into
consideration and determines and factors in the relative weightings of the
market values, yields (which take into account the amortization of premiums
and the accretion of discounts) and estimated retirements of all of the Bonds
in the Trust and (2) takes into account a compounding factor and the expense
and sales charge associated with each Unit of the Trust. Since the market
values and the estimated retirements of the Bonds and the expenses of the
Trust will change, there is no assurance that the present Estimated Current
Return and Estimated Long-Term Return indicated above will be realized in the
future. Estimated Current Return and Estimated Long-Term Return are expected
to differ because the calculation of the Estimated Long-Term Return reflects
the estimated date and amount of principal returned while the Estimated
Current Return calculations include only Net Annual Interest Income and
Public Offering Price. The above figures are based on estimated per Unit
cash flows. Estimated cash flows will vary with changes in fees and
expenses, with changes in current interest rates, and with the principal
prepayment, redemption, maturity, call, exchange or sale of the underlying
Bonds. See "Estimated Current Return and Estimated Long-Term Return" in Part
Two of this Prospectus.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Summary of Essential Information As of February 29, 2000
Sponsor: Nike Securities, L.P.
Evaluator: Muller Data Corporation
Trustee: The Chase Manhattan Bank
<TABLE>
<S> <C>
Principal Amount (Par Value) of Bonds (1) $2,680,000
Number of Units 281,251
Fractional Undivided Interest in the Trust per Unit 1/281,251
Principal Amount (Par Value) of Bonds per Unit $9.529
Public Offering Price:
Net Assets $2,593,285
Net Asset Value per Unit $9.22
Sales Charge 4.50% (4.712% of the Net Asset Value)
per Unit (2) $.43
Public Offering Price per Unit (2)(3) $9.65
Redemption Price per Unit (3)(4) $9.22
Excess of Public Offering Price per Unit Over Redemption
Price per Unit $.43
Minimum Value of the Trust under which Trust Agreement
may be terminated $770,000
Minimum Principal Distribution $0.01 per Unit
Date of Deposit May 22, 1997
Mandatory Termination Date December 31, 2009
Calculation of Estimated Net Annual Unit Income:
Estimated Annual Interest Income per Unit $.92307
Less: Estimated Annual Expense per Unit $.01987
_________
Estimated Net Annual Interest Income per Unit $.90320
Estimated Normal Monthly Distribution per Unit (5) $.07527
Estimated Daily Rate of Net Interest Accrual per Unit $.00251
Estimated Current Return Based on Public Offering
Price (2)(5)(6) 9.36%
Estimated Long-Term Return (2)(5)(6) 8.54%
Trustee's Initial Annual Fee per $1,000 principal
amount of Bonds $1.26
Evaluator's Fee per Evaluation $8.00
Sponsor's Annual Fee per Unit $.00300
Record Dates: First day of each month
Distribution Dates: Fifteenth day of each month
</TABLE>
<PAGE>
Evaluations for purpose of sale, purchase or redemption of Units are made as
of the close of trading of the New York Stock Exchange (normally 4:00 P.M.
Eastern Standard Time) on days of trading next following receipt of an order
for a sale or purchase of Units or receipt by the Trustee of Units tendered
for redemption.
(1) Because certain of the Securities in the Trust may from time to time
under certain circumstances be sold or redeemed or will be called or
matured in accordance with their terms, there is no guarantee that the
value of each Unit at the respective Trust's termination will be equal
to the Principal Amount (Par Value) of Securities per Unit stated
above.
(2) The sales charge is decreased and the Estimated Current Return and
Estimated Long-Term Return are increased for transactions entitled to a
reduced sales charge. See "Public Offering-General" in Part Two of
this Prospectus.
(3) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. After the
initial offering period, the Sponsor's Repurchase Price per Unit will
be determined as described under the caption "Public Offering-Public
Market" in Part Two of this Prospectus.
(4) See "Rights of Unitholders-Redemption of Units" in Part Two of this
Prospectus.
(5) These figures are based on estimated per Unit cash flows. Estimated
cash flows will vary with changes in fees and expenses, with changes in
current interest rates and with the principal prepayment, redemption,
maturity, call, exchange or sale of the underlying Bonds. The
estimated cash flows for each Trust are available upon request at no
charge from the Sponsor.
(6) The Estimated Current Return is calculated by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price. The
Estimated Net Annual Interest Income per Unit will vary with changes in
fees and expense of the Trustee, the Sponsor and the Evaluator and with
the principal prepayment, redemption, maturity, exchange or sale of
Bonds while the Public Offering Price will vary with the changes in the
offering price of the underlying Bonds; therefore, there is no
assurance that the present Estimated Current Return indicated above
will be realized in the future. The Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and
determines and factors in the relative weighting of, the market values,
yields (which takes into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the Bonds
in a Trust and (2) takes into account a compounding factor and the
expenses and sales charge associated with each Trust Unit. Since the
market values and estimated retirements of the Bonds and the expenses
of a Trust will change, there is no assurance that the present
Estimated Long-Term Return as indicated above will be realized in the
future. The Estimated Current Return and Estimated Long-Term Return
are expected to differ because the calculation of the Estimated Long-
Term Return reflects the estimated date and amount of principal
returned while the Estimated Current Return calculation includes only
Net Annual Interest Income and Public Offering Price.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
Report of Independent Auditors
To the Unitholders of The First Trust
of Unit Investment Trust, Series 10
We have audited the accompanying statements of assets and liabilities,
including the schedule of investments, of First Trust Unit Investment Trust,
Series 10 (the "Fund") (comprised of Corporate High Yield Series 1) as of
February 29, 2000, and the related statements of operations and changes in
net assets for each of the two years in the period then ended and for the
period May 22, 1997 (Initial Date of Deposit) to February 28, 1998. These
financial statements are the responsibility of the Fund's Sponsor. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities
owned as of February 29, 2000, by correspondence with the Trustee. An audit
also includes assessing the accounting principles used and significant
estimates made by the Sponsor, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Corporate High Yield Series
1 of First Trust Unit Investment Trust, Series 10 at February 29, 2000, and
the results of its operations and changes in its net assets for each of the
two years in the period then ended and for the period May 22, 1997 (Initial
Date of Deposit) to February 28, 1998, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
June 9, 2000
<PAGE>
CORPORATE HIGH YIELD SERIES 1
Schedule of Investments
February 29, 2000
<TABLE>
<CAPTION>
Aggregate
Principal Coupon Rate Redemption Market
Ratings (1) Amount Security Description and Maturity Features (2) Value
(Percentage of each investment category relates to investments)
<C> <C> <S> <C> <C> <C>
CORPORATE BONDS (100.0%)
Banking, Finance & Insurance (12.9%)
Ba3/B+ $325,000 Muzak Limited Partnership, Muzak Capital
Corporation, Unsecured Senior Notes 10.00% @ 2003 2000 @ 105 $343,687
__________
Cable, Media & Publishing (35.5%)
B1/BB- 325,000 Cablevision Systems Corporation,
Unsecured Senior Subordinated Notes 9.875% @ 2006 2001 @ 104.94 337,594
B1/BB- 275,000 Hollinger International Publishing Inc.,
Unsecured Senior Subordinated Notes 9.25% @ 2006 2001 @ 104.625 259,875
NR/NR 325,000 Universal Outdoor Inc., Senior
Subordinated Notes 9.75% @ 2006 2001 @ 104.875 351,000
__________
948,469
__________
Food, Beverage & Tobacco (11.8%)
B2/B+ 325,000 Delta Beverage Group Inc., Senior Notes 9.75% @ 2003 2000 @ 104.875 316,875
__________
Industrial Machinery (17.3%)
B1/BB- 325,000 American Safety Razor Co., Senior Notes,
Series B 9.875% @ 2005 2000 @ 104.39 316,062
NR/NR 150,000 Westinghouse Air Brake Company, Senior
Notes 9.375% @ 2005 2000 @ 104.69 147,000
__________
463,062
__________
Leisure, Lodging & Entertainment (8.4%)
B2/B 115,000 AMC Entertainment Inc., 144A, Senior
Subordinated Notes 9.50% @ 2009 2002 @ 104.75 87,975
B2/B 160,000 Cinemark USA Inc., Senior Subordinated
Notes, Series B 9.625% @ 2008 2001 @ 104.81 134,600
__________
225,575
__________
Telecommunications (14.1%)
A2/BB+ 355,000 Comcast Cellular Holdings Inc., 144A,
Senior Notes 9.50% @ 2007 2002 @ 104.75 375,905
__________ __________
$2,680,000 $2,670,573
========== ==========
</TABLE>
See Notes to Schedule of Investments and Financial Statements.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Notes to Schedule of Investments
February 29, 2000
(1) All ratings (unaudited) are Standard & Poor's Corporation and/ or
Moody's Investors Service.
(2) Unless otherwise indicated, there is shown under this heading the year
in which each issue of bonds is initially redeemable and the redemption
price for that year; each such issue continues to be redeemable at
declining prices thereafter, but not below par. In addition, certain
bonds in the portfolio may be redeemed in whole or in part other than by
operation of the stated redemption provisions under certain unusual or
extraordinary circumstances specified in the instruments setting forth
the terms and provisions of such bonds A callable bond is one in which
is subject to redemption prior to maturity at the option of the issuer.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Statement of Assets and Liabilities
February 29, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities, at market (cost $2,751,585) $2,670,573
Interest receivable 66,980
__________
Total assets 2,737,553
__________
Liabilities:
Accrued expenses 3,315
Distributions payable 20,652
Cash overdraft 64,796
Unit redemptions payable 55,505
__________
Total liabilities 144,268
__________
Net assets $2,593,285
===========
Net assets (281,251 units of fractional undivided
interest outstanding):
Cost to investors 2,751,585
Less offering expenses (16,305)
Net unrealized appreciation (depreciation)
of investments (Note 2) (81,012)
Distributable funds (deficit) (60,983)
__________
Net assets $2,593,285
===========
Net asset value per unit $9.22
===========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Statements of Operations
<TABLE>
<CAPTION>
Period from
May 22,
Year ended Year ended 1997* to
February 29, February 28, February 28,
2000 1999 1998
<S> <C> <C> <C>
Investment income, interest $288,745 $363,212 $279,612
Expenses:
Trustee fees and expenses 3,196 3,757 3,957
Evaluator fees 2,040 2,050 1,263
Sponsor fees 1,226 1,226 941
Audit fees 1,000 1,000 1,000
________ ________ ________
Total expenses 7,462 8,033 7,161
________ ________ ________
Investment income, net 281,283 355,179 272,451
________ ________ ________
Net gain (loss) on investments:
Net realized gain (loss) 3,552 1,601 -
Net change in unrealized
appreciation (203,238) (47,394) 169,620
________ ________ ________
Net gain (loss) on investments (199,686) (45,793) 169,620
________ ________ ________
Net increase in net assets
resulting from operations $81,597 $309,386 $442,071
======== ======== ========
</TABLE>
*Commencement of operations
See accompanying Notes to Financial Statements.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period from
May 22,
Year ended Year ended 1997* to
February 29, February 28, February 28,
2000 1999 1998
<S> <C> <C> <C>
Operations:
Net investment income $281,283 $355,179 $272,451
Net realized gain (loss) 3,552 1,601 -
Net change in unrealized
appreciation (203,238) (47,394) 169,620
__________ __________ __________
Net increase in net assets
resulting from
operations 81,597 309,386 442,071
__________ __________ __________
Distributions to unitholders
from (Note 4):
Investment income, net (277,535) (356,275) (272,451)
__________ __________ __________
Total distributions (277,535) (356,275) (272,451)
__________ __________ __________
Unit redemptions (102,995 and
24,498 units in 2000 and
1999, respectively):
Principal portion (1,005,036) (241,122) -
Net interest accrued (4,477) (729) -
__________ __________ __________
(1,009,513) (241,851) -
Less: Offering expenses (Note 1): - - (16,305)
__________ __________ __________
Total increase (decrease) in
net assets (1,205,451) (288,740) 153,315
Net assets:
Beginning of period 3,798,736 4,087,476 3,934,161
__________ __________ __________
End of period $2,593,285 $3,798,736 $4,087,476
========== ========== ==========
</TABLE>
* Commencement of operations
See accompanying Notes to Financial Statements.
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Notes to Financial Statements
February 29, 2000
First Trust Unit Investment Trust, Series 10 (the "Fund") (formerly Delaware
Investment Unit Investment Trust, Series 10) consists of Corporate High Yield
Series 1 ("Corporate High Yield"). The Fund was organized on May 22, 1997 and
is registered under the Investment Company Act of 1940.
1. Significant Accounting Policies
Security Valuation
The market value of securities is determined by the Evaluator (a) on the basis
of current bid prices for the bonds; (b) if bid prices are not available, on
the basis of current bid prices for comparable bonds; (c) by causing the value
of the bonds to be determined by others engaged in the practice of evaluating,
quoting, or appraising comparable bonds; or (d) by any combination of the
above.
Federal Income Taxes
No provisions for income taxes has been made because the Trust is not an
association taxable as a corporation for federal income tax purposes. Each
unitholder will be treated as the owner of a pro rata portion of the Trust and
will be taxed on his or her pro rata share of net investment income and
securities gains or losses, if any.
Other
The financial statements of the Fund are prepared on the accrual basis of
accounting. Security transactions are accounted for on the date the securities
are purchased or sold. For financial reporting purposes, cost of the bonds
reflects no amortization or accretion of bond premium or discount.
Organization and Offering Costs
Organization and offering costs, including the cost of preparing the initial
registration statement, registering units with the Securities and Exchange
Commission and states, the initial audit of the Trust portfolio and the
initial fees and expenses of the Trustees were charged against principal at
the end of the Trust's initial offering period.
2. Investments
At February 29, 2000 the unrealized market appreciation (depreciation) was as
follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $44,243
Gross unrealized depreciation (125,255)
_________
Net unrealized appreciation $(81,012)
========
</TABLE>
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Corporate High Yield Series 1
Notes to Financial Statements (continued)
3. Trust Expenses
The Trust pays trustee fees, evaluator fees, sponsor fees and various out-of-
pocket expenses.
The Chase Manhattan Bank serves as Trustee and receives a monthly fee based on
$1.26 per $1,000 principal amount of bonds outstanding as of the first day of
such month plus out-of-pocket expenses.
Muller Data Corporation serves as Evaluator and receives an $8.00 fee per
evaluation for the Trust.
The Sponsor receives a monthly fee (based on the number of units outstanding
as of the first day of such month) not to exceed $.003 per Unit on an annual
basis for the Trust.
Effective December 8, 1998, Nike Securities, L.P. ("Nike") succeeded Delaware
Capital Management, Inc. as Sponsor of the Trust and First Trust Advisors,
L.P. ("First Trust"), an affiliate of Nike, provides portfolio supervision
services to the Trust. The sponsor fees were unchanged.
4. Selected Data
Selected data for a unit of the Trust outstanding throughout the period
follows:
<TABLE>
<CAPTION>
Period from
May 22,
Year ended Year ended 1997* to
February 29, February 28, February 28,
2000 1999 1998
<S> <C> <C> <C>
Interest income $.90 $.90 $.69
Expenses (.02) (.02) (.02)
______ ______ _______
Net investment income .88 .88 .67
Income distributions (.89) (.88) (.67)
______ ______ _______
(.01) - -
______ ______ _______
Offering expenses - - (.04)
Net gain (loss) on investments (.66) (.11) .42
______ ______ _______
Increase (decrease) in net
asset value (.67) (.11) .38
Net asset value, beginning
of period 9.89 10.00 9.62
______ ______ _______
Net asset value, end of period $9.22 $9.89 $10.00
====== ====== =======
</TABLE>
* Commencement of operations
<PAGE>
FIRST TRUST UNIT INVESTMENT TRUST, SERIES 10
Part One
Must Be Accompanied By Part Two of this Prospectus
___________________
PROSPECTUS
___________________
Sponsor: Nike Securities, L.P.
1001 Warrenville Road
Lisle, IL 60532
Trustee: The Chase Manhattan Bank
4 New York Plaza
New York, New York 10004-2413
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.
The Prospectus does not contain all the information set forth in the
registration statement 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 UNIT INVESTMENT TRUSTS
CORPORATE HIGH YIELD SERIES
PROSPECTUS Part Two of this Prospectus
Part Two May Not Be Distributed
June 30, 2000 without Part One
The Fund. First Trust Unit Investment Trusts, Corporate High Yield
Series (the "Fund") consists of the underlying separate unit investment
trusts set forth in Part One of this Prospectus. The various trusts are
collectively referred to herein as the "Trusts." Each Trust consists of
a portfolio of interest-bearing corporate debt obligations of domestic
companies (the "Corporate Bonds," or "Bonds").
Investment Objective of the Fund. The investment objective of each Trust
is to provide a high level of current income through investment in a
fixed portfolio consisting of domestic high-yield, high-risk corporate
debt obligations issued after July 18, 1984. All of the Bonds in the
Trusts are lower rated bonds, commonly known as "junk bonds," that
entail greater risks, including default risks, than those found in
higher rated securities. Investors should carefully consider these risks
before investing. See "The Fund-Investment Objectives and Portfolio
Selection" and "Risk Factors." The objective of each Trust is dependent
upon the continuing ability of the issuers and/or obligors of the Bonds
to meet their respective obligations. There is, of course, no guarantee
that the objective of the Trusts will be achieved.
For foreign investors who are not United States citizens or residents,
interest income from the Trusts may not be subject to federal
withholding taxes if certain conditions are met. See "Tax Status."
UNITS OF THE TRUSTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED OR OTHERWISE
PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING
LOSS OF PRINCIPAL.
Public Offering Price. The Public Offering Price of the Units of each
Trust is equal to the aggregate bid price of the Bonds in each Trust's
portfolio and cash, if any, in the Principal Account held or owned by
such Trust divided by the number of Units outstanding, plus the
applicable sales charge and accrued interest, if any. If the Bonds in a
Trust were available for direct purchase by investors, the purchase
price of the Bonds would not include the sales charge included in the
Public Offering Price of the Units. See "Public Offering."
Estimated Current Return And Estimated Long-Term Return. The Estimated
Current Return and Estimated Long-Term Return to Unitholders are as set
forth under "Summary of Essential Financial Information" in Part One of
this Prospectus. The methods of calculating Estimated Current Return and
Estimated Long-Term Return are set forth under "Estimated Current Return
and Estimated Long-Term Return."
Distributions. Unitholders will receive distributions on a monthly
basis. See "Rights of Unitholders-Distributions of Interest and
Principal." Record dates will be the first day of each month.
Distributions will be made on the fifteenth day of the month subsequent
to the respective record dates.
Market For Units. Although not obligated to do so, the Sponsor, Nike
Securities L.P. (the "Sponsor"), intends to maintain a secondary market
for the Units at prices based upon the aggregate bid price of the Bonds
in the portfolio of a Trust. If such a market is not maintained and no
other over-the-counter market is available, a Unitholder will be able to
dispose of his Units through redemption at prices based upon the bid
prices of the underlying Bonds (see "Rights of Unitholders-Redemption of
Units").
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Reinvestment Option. Unitholders have the opportunity to have their
distributions reinvested into open-end management investment companies
as described herein. See "Rights of Unitholders-Reinvestment Option."
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the loss of principal and/or interest due to changes in
economic conditions, volatile interest rates, early call provisions,
lack of liquidity and changing perceptions regarding junk bonds. In
addition, as each Trust contains a limited number of Bonds, a default by
one issuer will negatively impact the amount of interest received by
that Trust. See "Risk Factors."
The investor is advised to read and retain both Part One and Part Two of
this Prospectus for future reference.
Page 2
The Fund
General. The Fund was created under the laws of the State of New York
pursuant to a Trust Agreement (the "Trust Agreement"), dated each
Trust's Initial Date of Deposit, as defined in "Summary of Essential
Financial Information" in Part One of this Prospectus, among Nike
Securities L.P. as Sponsor, Muller Data Corporation, as Evaluator, and
The Chase Manhattan Bank, as Trustee.
The Fund consists of separate unit investment trusts, each having a
portfolio of interest bearing corporate debt obligations of domestic
companies.
Each Unit offered represents the fractional undivided interest in a
Trust as indicated under "Summary of Essential Financial Information" in
Part One of this Prospectus. To the extent that any Units are redeemed
by the Trustee, the fractional undivided interest in a Trust represented
by each unredeemed Unit will increase, although the actual interest in
such Trust represented by such fraction will remain unchanged. Units
will remain outstanding until redeemed upon tender to the Trustee by
Unitholders, which may include the Sponsor, or until the termination of
the Trust Agreement.
Because certain of the Bonds in a Trust may from time to time under
certain circumstances be sold or redeemed or will mature in accordance
with their terms and because the proceeds from such events will be
distributed to Unitholders and will not be reinvested, no assurance can
be given that a Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
In the event a Bond is sold or redeemed from a Trust or matures in
accordance with its terms, the estimated net annual interest income per
Unit for such Trust would be reduced and the Estimated Current Return
and the Estimated Long-Term Return thereon might be lowered. In
addition, Unitholders should be aware that they may not be able at the
time of receipt of such principal to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds were earning to Unitholders in such Trust.
Investment Objectives and Portfolio Selection. The objective of the Fund
is to provide a high level of current income through an investment in a
fixed portfolio consisting of high-yield, high-risk corporate debt
obligations issued after July 18, 1984. The bonds included in the Trusts
are commonly known as "junk bonds" and are subject to greater market
fluctuations and potential risk of loss of income and principal than are
investments in lower-yielding, higher-rated fixed-income securities.
Historically, high-yield bonds have provided greater returns than
conventional debt securities, but have also been subject to greater
volatility. The Bonds included in each Trust should be viewed as
speculative and an investor should review his or her ability to assume
the risks associated with an investment in speculative corporate bonds.
The payment of income is dependent upon the continuing ability of the
issuers and/or obligors of the Bonds to meet their respective
obligations. There is, of course, no guarantee that a Trust's objective
will be achieved.
The Sponsor of the Fund selected the Bonds for each Trust's portfolio
after considering the Fund's investment objective as well as the credit
quality of the individual Bonds selected for each Trust. The following
facts, among others, were also considered: (a) the price of the Bonds
relative to other issues of similar quality and maturity; (b) the
present rating and credit quality of the issuers of the Bonds and the
potential improvement in the credit quality of such issuers; (c) the
diversification of the Bonds as to location of issuer; (d) the income to
the Unitholders of the Trust; (e) whether the Bonds were issued after
July 18, 1984; and (f) the stated maturity of the Bonds.
As of the Initial Date of Deposit, all of the Bonds in the Trusts were
rated "B" or better by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") or Fitch Investors Service, L.P.
("Fitch"). See "Description of Bond Ratings." Subsequent to each Trust's
Initial Date of Deposit, a Bond may cease to be so rated or its rating
may be reduced below the applicable Moody's, Standard & Poor's or Fitch
ratings set forth above or both. Neither event requires elimination of
such Bonds from the portfolio of a Trust but may be considered in the
Sponsor's determination as to whether or not to direct the Trustee to
dispose of such Bond. See "Trust Administration-Portfolio
Administration."
Page 3
Risk Factors
General. An investment in Units of the Trusts should be made with an
understanding of the risks that an investment in "high-yield, high-
risk," fixed rate, domestic corporate debt obligations or "junk bonds"
may entail, including increased credit risks and the risk that the value
of the Units will decline, and may decline precipitously, with increases
in interest rates. In recent years there have been wide fluctuations in
interest rates and thus in the value of fixed-rate, debt obligations
generally. Bonds such as those included in the Trusts are, under most
circumstances, subject to greater market fluctuations and risk of loss
of income and principal than are investments in lower-yielding, higher-
rated securities, and their value may decline precipitously because of
increases in interest rates, not only because the increases in rates
generally decreases values, but also because increased rates may
indicate a slowdown in the economy and a decrease in the value of assets
generally that may adversely affect the credit of issuers of high-yield,
high- risk securities resulting in a higher incidence of defaults among
high-yield, high-risk securities. A slowdown in the economy, or a
development adversely affecting an issuer's creditworthiness, may result
in the issuer being unable to maintain earnings or sell assets at the
rate and at the prices, respectively, that are required to produce
sufficient cash flow to meet its interest and principal requirements.
For an issuer that has outstanding both senior commercial bank debt and
subordinated high-yield, high-risk securities, an increase in interest
rates will increase that issuer's interest expense insofar as the
interest rate on the bank debt is fluctuating. However, many leveraged
issuers enter into interest rate protection agreements to fix or cap the
interest rate on a large portion of their bank debt. The Sponsor cannot
predict future economic policies or their consequences or, therefore,
the course or extent of any similar market fluctuations in the future.
"High-yield" or "junk" bonds, the generic names for corporate bonds
rated below "BBB" by Standard & Poor's or Fitch, or below "Baa" by
Moody's, are frequently issued by corporations in the growth stage of
their development, by established companies whose operations or
industries are depressed, or by highly leveraged companies purchased in
leveraged buyout transactions. Obligations that are rated lower than BBB
by Standard & Poor's or Fitch or Baa by Moody's should be considered
speculative, as such ratings indicate a quality of less than investment
grade. Investors should carefully review the objective of a Trust and
consider their ability to assume the risks involved before making an
investment in a Trust. See "Description of Bond Ratings" for a
description of speculative ratings issued by Standard & Poor's, Moody's
and Fitch. The market for high-yield bonds is very specialized and
investors in it have been predominantly financial institutions. High-
yield, high-risk bonds are generally not listed on a national securities
exchange. Trading of high-yield, high-risk bonds, therefore, takes place
primarily in over-the-counter markets which consist of groups of dealer
firms that are typically major securities firms. Because the high- yield
bond market is a dealer market, rather than an auction market, no single
obtainable price for a given bond prevails at any given time. Prices are
determined by negotiation between traders. The existence of a liquid
trading market for the Bonds may depend on whether dealers will make a
market in the Bonds. There can be no assurance that a market will be
made for any of the Bonds, that any market for the Bonds will be
maintained or of the liquidity of the Bonds in any markets made. Not all
dealers maintain markets in all high-yield, high-risk bonds. Therefore,
since there are fewer traders in these bonds than there are in
"investment grade" bonds, the bid-offer spread is usually greater for
high-yield, high-risk bonds than it is for investment grade bonds. The
price at which the Bonds may be sold to meet redemptions and the value
of a Trust will be adversely affected if trading markets for the Bonds
are limited or absent. If the rate of redemptions is great, the value of
a Trust may decline to a level that requires liquidation. See "Trust
Administration-Amendment or Termination."
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the
issuers of lower-rated securities may not be as strong as that of other
issuers. Moreover, if a Bond is recharacterized as equity by the
Internal Revenue Service for federal income tax purposes, the issuer's
interest deduction with respect to the Bond will be disallowed and this
disallowance may adversely affect the issuer's credit rating. Because
investors generally perceive that there are greater risks associated
with the lower-rated securities in the Trusts, the yields and prices of
these securities tend to fluctuate more than higher-rated securities
with changes in the perceived quality of the credit of their issuers. In
addition, the market value of high-yield, high-risk, fixed-income
securities may fluctuate more than the market value of higher-rated
securities since high-yield, high-risk, fixed-income securities tend to
Page 4
reflect short-term credit developments to a greater extent than higher-
rated securities. Lower-rated securities generally involve greater risks
of loss of income and principal than higher-rated securities. Issuers of
lower-rated securities may possess fewer creditworthiness
characteristics than issuers of higher-rated securities and, especially
in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders,
owners of property leased to the issuer or others which, if sustained,
would make it more difficult for the issuers to meet their payment
obligations. High-yield, high-risk bonds are also affected by variables
such as interest rates, inflation rates and the real growth in the
economy. Therefore, investors should consider carefully the relative
risks associated with investment in securities which carry lower ratings.
The value of the Units reflects the value of the portfolio securities,
including the value (if any) of securities in default. Should the issuer
of any Bond default in the payment of principal or interest, a Trust may
incur additional expenses seeking payment on the defaulted Bond. Because
amounts (if any) recovered by a Trust in payment under the defaulted
Bond may not be reflected in the value of the Units until actually
received by such Trust, and depending upon when a Unitholder purchases
or sells his or her Units, it is possible that a Unitholder would bear a
portion of the cost of recovery without receiving any portion of the
payment recovered.
High-yield, high-risk bonds are generally subordinated obligations. The
payment of principal (and premium, if any), interest and sinking fund
requirements with respect to subordinated obligations of an issuer is
subordinated in right of payment to the payment of senior obligations of
the issuer. Senior obligations generally include most, if not all,
significant debt obligations of an issuer, whether existing at the time
of issuance of subordinated debt or created thereafter. Upon any
distribution of the assets of an issuer with subordinated obligations
upon dissolution, total or partial liquidation or reorganization of or
similar proceeding relating to the issuer, the holders of senior
indebtedness will be entitled to receive payment in full before holders
of subordinated indebtedness will be entitled to receive any payment.
Moreover, generally no payment with respect to subordinated indebtedness
may be made while there exists a default with respect to any senior
indebtedness. Thus, in the event of insolvency, holders of senior
indebtedness of an issuer generally will recover more, ratably, than
holders of subordinated indebtedness of that issuer.
Certain of the Bonds in the Trusts may have been acquired at a market
discount from par value. The coupon interest rates on the discount bonds
at the time they were purchased and deposited in the Trusts were lower
than the current market interest rates for newly issued bonds of
comparable rating and type. If such interest rates for newly issued
comparable bonds increase, the market discount of previously issued
bonds will become greater, and if such interest rates for newly issued
comparable bonds decline, the market discount of previously issued bonds
will be reduced, other things being equal. Investors should also note
that the value of bonds purchased at a market discount will increase in
value faster than Bonds purchased at a market premium if interest rates
decrease. Conversely, if interest rates increase, the value of bonds
purchased at a market discount will decrease faster than Bonds purchased
at a market premium. In addition, if interest rates rise, the prepayment
risk of higher yielding, premium bonds and the prepayment benefit for
lower yielding, discount bonds will be reduced. A discount bond held to
maturity will have a larger portion of its total return in the form of
taxable income and capital gain and less in the form of interest income
than a comparable bond newly issued at current market rates. See "Tax
Status." Market discount attributable to interest changes does not
indicate a lack of market confidence in the issue. Neither the Sponsor
nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Bonds.
Certain of the Bonds in the Trusts may be original issue discount bonds.
Under current law, the original issue discount, which is the difference
between the stated redemption price at maturity and the issue price of
the Bonds, is deemed to accrue on a daily basis and the accrued portion
is treated as interest income for Federal income tax purposes. On sale
or redemption, any gain realized that is in excess of the earned portion
of original issue discount will be taxable as capital gain unless the
gain is attributable to market discount in which case the accretion of
market discount is taxable as ordinary income. See "Tax Status." The
current value of an original issue discount bond reflects the present
value of its stated redemption price at maturity. The market value tends
to increase in greater increments as the Bonds approach maturity.
Certain of the original issue discount bonds may be zero coupon bonds
(including bonds known as multiplier bonds, money multiplier bonds,
capital appreciation bonds, capital accumulator bonds, compound interest
Page 5
bonds and money discount maturity payment bonds). Zero coupon bonds do
not provide for the payment of any current interest and generally
provide for payment at maturity at face value unless sooner sold or
redeemed. Zero coupon bonds may be subject to more price volatility than
conventional bonds. While some types of zero coupon bonds, such as
multipliers and capital appreciation bonds, define par as the initial
offering price rather than the maturity value, they share the basic zero
coupon bond features of (i) not paying interest on a semi-annual basis
and (ii) providing for the reinvestment of the bond's semi-annual
earnings at the bond's stated yield to maturity. While zero coupon bonds
are frequently marketed on the basis that their fixed rate of return
minimizes reinvestment risk, this benefit can be negated in large part
by weak call protection, i.e., a bond's provision for redemption at only
a modest premium over the accreted value of the bond.
Certain of the Bonds in the Trusts may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased and deposited in the
Trusts were higher than the current market interest rates for newly
issued bonds of comparable rating and type. If such interest rates for
newly issued and otherwise comparable bonds decrease, the market premium
of previously issued bonds will be increased, and if such interest rates
for newly issued comparable bond increase, the market premium of
previously issued bonds will be reduced, other things being equal. The
current returns of bonds trading at a market premium are initially
higher than the current returns of comparable bonds of a similar type
issued at currently prevailing interest rates because premium bonds tend
to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus
returned not at maturity but through current income payments, early
redemption of a premium bond at par or early prepayments of principal
will result in a reduction in yield. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed Bonds have an offering
side valuation which represents a premium over par or for original issue
discount Bonds a premium over the accreted value. To the extent that the
Bonds were deposited in the Fund at a price higher than the price at
which they are redeemed, this will represent a loss of capital when
compared to the original Public Offering Price of the Units. Because
premium bonds generally pay a higher rate of interest than Bonds priced
at or below par, the effect of the redemption of premium bonds would be
to reduce estimated net annual unit income by a greater percentage than
the par amount of such bonds bears to the total par amount of Bonds in
the Trusts. Although the actual impact of any such redemptions that may
occur will depend upon the specific Bonds that are redeemed, it can be
anticipated that the estimated net annual unit income will be
significantly reduced after the dates on which such Bonds are eligible
for redemption. A Trust may be required to sell zero coupon bonds prior
to maturity (at their current market price which is likely to be less
than their par value) in the event that all the Bonds in the portfolio
other than the zero coupon bonds are called or redeemed in order to pay
expenses of the Trust or in case such Trust is terminated. See "Trust
Administration -- Portfolio Administration" and "Trust Administration --
Amendment or Termination." See "The Trust-Schedule of Investments" in
Part One of this Prospectus for the earliest scheduled call date and the
initial redemption price for each Bond.
An investment in Units of the Trusts should be made with an
understanding of the interest rate risk associated with such an
investment. Generally, bond prices (and therefore Unit prices) will move
inversely with interest rates, and bonds (Trusts) with longer maturities
are likely to exhibit greater fluctuations in market value, all other
things being equal, than bonds (Trusts) with shorter maturities.
To the best knowledge of the Sponsor, there is no material litigation
pending as of the date of this Prospectus in respect of any Bonds which
might reasonably be expected to have a material adverse effect upon the
Fund or any of the Trusts. At any time after the date of this
Prospectus, litigation may be initiated on a variety of grounds with
respect to Bonds in the Trust. The outcome of litigation of such nature
can never be entirely predicted. In addition, other factors may arise
from time to time which potentially may impair the ability of issuers to
meet obligations undertaken with respect to the Bonds.
Redemption of Bonds. Certain of the Bonds in the Trust are subject to
redemption prior to their stated maturity date pursuant to sinking fund
provisions, call provisions or extraordinary optional or mandatory
redemption provisions or otherwise. A sinking fund is a reserve fund
accumulated over a period of time for retirement of debt. A callable
debt obligation is one which is subject to redemption or refunding prior
to maturity at the option of the issuer. A refunding is a method by
which a debt obligation is redeemed, at or before maturity, by the
proceeds of a new debt obligation. In general, call provisions are more
Page 6
likely to be exercised when the offering side valuation is at a premium
over par than when it is at a discount from par. The exercise of
redemption or call provisions will (except to the extent the proceeds of
the called Bonds are used to pay for Unit redemptions) result in the
distribution of principal and may result in a reduction in the amount of
subsequent interest distributions and it may also affect the current
return on Units of the Trust involved. Each Trust portfolio contains a
listing of the sinking fund and call provisions, if any, with respect to
each of the Bonds. Extraordinary optional redemptions and mandatory
redemptions result from the happening of certain events. The Sponsor is
unable to predict all of the circumstances which may result in such
redemption of an issue of Bonds. See "Schedule of Investments" in Part
One of this Prospectus.
Estimated Current Return and Estimated Long-Term Return
As of the date indicated in "Summary of Essential Financial Information"
in Part One of this Prospectus, the Estimated Current Returns and the
Estimated Long-Term Returns were those indicated therein. The Estimated
Current Returns are calculated by dividing the estimated net annual
interest income per Unit by the Public Offering Price. The estimated net
annual interest income per Unit will vary with changes in fees and
expenses of the Trustee, Sponsor and Evaluator and with the principal
prepayment, redemption, maturity, exchange or sale of Bonds, while the
Public Offering Price will vary with changes in the offering price of
the underlying Bonds; therefore, there is no assurance that the present
Estimated Current Returns will be realized in the future. Estimated Long-
Term Returns are calculated using a formula which (i) takes into
consideration, and determines and factors in the relative weightings of,
the market values, yields (which takes into account the amortization of
premiums and the accretion of discounts) and estimated retirements of
all the Bonds in a Trust and (ii) takes into account a compounding
factor and the expenses and sales charge associated with each Trust
Unit. Since the market values and estimated retirements of the Bonds and
the expenses of a Trust will change, there is no assurance that the
present Estimated Long-Term Returns will be realized in the future.
Estimated Current Returns and Estimated Long-Term Returns are expected
to differ because the calculation of Estimated Long-Term Returns
reflects the estimated date and amount of principal returned while
Estimated Current Returns calculations include only net annual interest
income and Public Offering Price.
Trust Operating Expenses
Compensation of Sponsor. Nike Securities L.P., which acts as Sponsor,
reserves the right to charge fees for providing supervisory services in
amounts which will not exceed the amounts as set forth under "Summary of
Essential Financial Information" in Part One of this Prospectus. Any
such charges would be payable in monthly installments and would be based
on the number of Units outstanding on the first day of each month of
each year. The Sponsor may also be reimbursed for bookkeeping and
administrative services in amounts which will not exceed the amounts set
forth under "Summary of Essential Financial Information" in Part One of
this Prospectus. In addition, legal and regulatory filing fees and
expenses associated with annually updating the Trusts' registration
statements are not chargeable to each Trust. Historically, the Sponsor
paid these fees and expenses. With respect to fees payable to the
Sponsor for providing portfolio supervision and bookkeeping and
administrative services to the Trusts, such individual fees may exceed
the actual costs of providing such services for a Trust, but at no time
will the total amount paid to the Sponsor for providing such services
rendered to all unit investment trusts sponsored by the Sponsor or its
affiliates in any calendar year exceed the aggregate cost to the Sponsor
and its affiliates of supplying such services in such year. The
foregoing fees may be increased without approval of the Unitholders 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 or, if such category is no longer
published, in a comparable category. The Sponsor will receive sales
commissions and may realize other profits (or losses) in connection with
the sale of Units.
Evaluator's Fee. For its services, the Evaluator will receive a fee as
set forth under "Summary of Essential Financial Information" in Part One
of this Prospectus. The Evaluator's fees are payable in monthly
installments and would be based on the number of evaluations made. The
Evaluator's fees may be increased without approval of the Unitholders 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 or, if such category is no longer
published, in a comparable category.
Page 7
Trustee's Fee. For its services, the Trustee will receive an annual fee
as set forth under "Summary of Essential Financial Information" in Part
One of this Prospectus. The Trustee's fees are payable in monthly
installments (based on the outstanding principal amount of Bonds in the
Trust as of the first day of each month of each year) on or before the
fifteenth day of each month from the Interest Account to the extent
funds are available and then from the Principal Account. The Trustee's
fee may be periodically adjusted in response to fluctuations in short-
term interest rates (reflecting the cost to the Trustee of advancing
funds to the Trust to meet scheduled distributions) and may be further
increased without approval of the Unitholders 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 or, if such category is no longer published, in a
comparable category. Since the Trustee has the use of the funds being
held in the Principal and Interest Accounts for future distributions,
payment of expenses and redemptions and since such Accounts are non-
interest bearing to Unitholders, the Trustee benefits thereby. Part of
the Trustee's compensation for its services to the Fund is expected to
result from the use of these funds. For a discussion of the services
rendered by the Trustee pursuant to its obligations under the Trust
Agreement, see "Rights of Unit Holders-Reports Provided" and "Trust
Administration."
Miscellaneous Expenses. The following additional charges are or may be
incurred by the Trusts: (i) fees of the Trustee for extraordinary
services, (ii) expenses of the Trustee (including legal and auditing
expenses) and of counsel designated by the Sponsor, (iii) various
governmental charges, (iv) expenses and costs of any action taken by the
Trustee to protect a Trust and the rights and interests of Unitholders,
(v) indemnification of the Trustee for any loss, liability or expenses
incurred by it in the administration of a Trust without gross
negligence, bad faith or willful misconduct on its part, (vi) any
special custodial fees payable in connection with the sale of any of the
Bonds in a Trust and (vii) expenditures incurred in contacting
Unitholders upon termination of a Trust.
The fees and expenses set forth herein are payable out of the Trusts.
When such fees and expenses are paid by or owing to the Trustee, they
are secured by a lien on the portfolio or portfolios of the applicable
Trusts. If the balances in the Interest and Principal Accounts are
insufficient to provide for amounts payable by the Fund, the Trustee has
the power to sell Bonds to pay such amounts.
Tax Status
For purposes of the following discussion and opinion, it is assumed that
the Bonds are included in gross income and are debt for Federal income
tax purposes.
In the opinion of Chapman and Cutler, Counsel for the Sponsor, under
existing law:
(1) Each Trust is not an association taxable as a corporation for
Federal income tax purposes.
(2) Each Unitholder of a Trust is considered to be the owner of a
pro rata portion of each of the Trust assets under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter, the
"Code"). Each Unitholder will be considered to have received his pro
rata share of income derived from each Trust asset when such income is
considered to be received by a Trust. Each Unitholder will also be
required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his interest in any Bonds held
by a Trust at the same time and in the same manner as though the
Unitholder were the direct owner of such interest.
(3) Each Unitholder will have a taxable event when a Bond of a
Trust is disposed of (whether by sale, liquidation, redemption, or
payment at maturity or otherwise), or when the Unitholder redeems or
sells his Units. The Unitholder's tax basis in his Units will equal his
tax basis in his pro rata portion of all of the assets of a Trust. Such
basis is determined (before the adjustments described below) by
apportioning the tax basis for the Units among each of a Trust's assets
according to value as of the valuation date nearest the date of
acquisition of the Units. Unitholders must reduce the tax basis of their
Units for their share of accrued interest received, if any, on Bonds
delivered after the date the Unitholders pay for their Units to the
extent that such interest accrued on such Bonds before the date a Trust
acquired ownership of the Bonds (and the amount of this reduction may
exceed the amount of accrued interest paid to the sellers) and,
consequently, such Unitholders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or
loss upon the sale or redemption of Units is measured by comparing the
Page 8
proceeds of such sale or redemption with the adjusted basis of the
Units. If the Trustee disposes of Bonds (whether by sale, exchange,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unitholder (subject to various nonrecognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unitholder's pro rata share of the total proceeds from
such disposition with his basis for his fractional interest in the asset
disposed of. The basis of each Unit and of each Bond which was issued
with original issue discount (or which has market discount) must be
increased by the amount of accrued original issue discount (and market
discount, if the Unitholder elects to include market discount in income
as it accrues) and the basis of each Unit and of each Bond which was
purchased by a Trust at a premium must be reduced by the annual
amortization of bond premium which the Unitholder has properly elected
to amortize under Section 171 of the Code. The tax basis reduction
requirements of the Code relating to amortization of bond premium may,
under some circumstances, result in the Unitholder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less
than his original cost. 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
Unitholder will be required to include in gross income for each taxable
year the sum of his daily portions of original issue discount 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 Unitholders during such year. 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.
Unitholders should consult their tax advisers regarding the Federal
income tax consequences and accretion of original issue discount.
Each Unitholder's pro rata share of each expense paid by the Trusts is
deductible by the Unitholder to the same extent as though the expense
had been paid directly by the Unitholder. 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 may be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income
(similar limitations also apply to estates and trusts). Unitholders may
be required to treat some or all of the expenses paid by the Trust as
miscellaneous itemized deductions subject to this limitation.
If a Unitholder's tax basis of his pro rata portion in any Bonds held by
the Trusts exceeds the amount payable by the issuer of the Bonds with
respect to such pro rata interest upon maturity of the Bond, such excess
would be considered premium which may be amortized by the Unitholder at
the Unit holder's election as provided in Section 171 of the Code.
Unitholders should consult their tax advisers regarding whether such
election should be made and the manner of amortizing premium.
Certain of the Bonds in the Trusts may have been acquired with "original
issue discount." In the case of any Bonds in the Trusts acquired with
"original issue discount" that exceeds a "de minimis" amount as
specified in the Code, such discount is includable in taxable income of
the Unitholders on an accrual basis computed daily, without regard to
when payments of interest on such Bonds are received. The Code provides
a complex set of rules regarding the accrual of original issue discount.
These rules provide that original issue discount generally accrues on
the basis of a constant compound interest rate over the term of the
Bonds. Unitholders should consult their tax advisers as to the amount of
original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Bond by a Trust 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 Bond issued with original issue discount exceeds his pro
rata portion of its adjusted issue price. Unit holders should also
consult their tax advisers regarding these special rules.
It is possible that a Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation"
within the meaning of Section 163(e)(5) of the Code. To the extent that
Page 9
such an obligation is issued at a yield in excess of six percentage
points over the applicable Federal rate, a portion of the original issue
discount on such obligation will be characterized as a distribution on
stock (e.g., dividends) for purposes of the dividends-received deduction
which is available to certain corporations with respect to certain
dividends received by such corporation.
If a Unitholder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable
portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a
straight-line basis, unless the Unitholder elects to calculate accrued
market discount under a constant yield method. Unitholders should
consult their tax advisers regarding whether an election should be made
and as to the amount of market discount which accrues.
Accrued market discount is generally includable in taxable income to the
Unitholders as ordinary income for Federal tax purposes upon the receipt
of serial principal payments on the Bonds, on the sale, maturity or
disposition of such Bonds by a Trust, and on the sale by a Unitholder of
Units, unless a Unitholder elects to include the accrued market discount
in taxable income as such discount accrues. If a Unitholder does not
elect to annually include accrued market discount in taxable income as
it accrues, deductions for any interest expenses incurred by the
Unitholder which is incurred to purchase or carry his Units will be
reduced by such accrued market discount. In general, the portion of any
interest expense which was not currently deductible would ultimately be
deductible when the accrued market discount is included in income.
Unitholders should consult their tax advisers regarding whether an
election should be made to include market discount in income as it
accrues and as to the amount of interest expense which may not be
currently deductible.
The tax basis of a Unitholder with respect to his interest in a Bond is
increased by the amount of original issue discount (and market discount,
if the Unitholder elects to include market discount, if any, on the
Bonds held by a Trust in income as it accrues) thereon properly included
in the Unitholder's gross income as determined for Federal income tax
purposes and reduced by the amount of any amortized premium which the
Unitholder has properly elected to amortize under Section 171 of the
Code. A Unitholder's tax basis in his Units will equal his tax basis in
his pro rata portion of all of the assets of a Trust.
A Unitholder will recognize taxable capital gain (or loss) when all or
part of his pro rata interest in a Bond is disposed of in a taxable
transaction for an amount greater (or less) than his tax basis therefor
(subject to various non-recognition provisions of the Code). As
previously discussed, gain realized on the disposition of the interest
of a Unitholder in any Bond deemed to have been acquired with market
discount will be treated as ordinary income to the extent the gain does
not exceed the amount of accrued market discount not previously taken
into income. The holding period for any capital gain or loss arising
from the disposition of a Bond by a Trust or the disposition of Units by
a Unitholder will be determined by the period of time the Unitholder
held his or her Unit and the period of time such Trust held the Bond.
The Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Tax Act") provides that for taxpayers other than corporations, net
capital gain (which is defined as net long-term capital gain over net
short-term capital loss for the taxable year) realized form property
(with certain exclusions) is subject to a maximum marginal stated tax
rate of 20% (10% in the case of certain taxpayers in the lowest tax
bracket). Capital gain or loss is long-term if the holding period for
the asset is more than one year, and is short-term if the holding period
for the asset is one year or less. The date on which a Unit is acquired
(i.e., the "trade date") is excluded for purposes for determining the
holding period of the Unit. Capital gains realized form assets held for
one year or less are taxed at the same rates as ordinary income.
The Taxpayer Relief Act of 1997 includes other provisions that treat
certain other transactions designed to reduce or eliminate risk of loss
and opportunities for gain (e.g., short sales, offsetting notional
principal contracts, futures or forward contracts or similar
transactions) as constructive sales for purposes of recognition of gain
(but not loss). Unitholders should consult their own tax advisers with
regard to any such constructive sales rules.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unitholders and prospective investors should
consult with their tax advisers regarding the potential effect of this
provision on their investment in Units.
Page 10
If the Unitholder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all Trust assets, including
his pro rata portion of all of the Bonds represented by the Unit. This
may result in a portion of the gain, if any, on such sale being taxable
as ordinary income under the market discount rules (assuming no election
was made by the Unitholder to include market discount in income as it
accrues) as previously discussed.
A Unitholder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust) will not be subject to United States Federal income taxes,
including withholding taxes, on interest income (including any original
issue discount) on, or any gain from the sale or other disposition of,
his pro rata interest in any Bond or the sale of his Units provided that
all of the following conditions are met: (i) the interest income or gain
is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States, (ii) if the interest is
United States source income (which is the case for most securities
issued by United States issuers), and the Bond is issued after July 18,
1984, then the foreign investor does not own, directly or indirectly,
10% or more of the total combined voting power of all classes of voting
stock of the issuer of the Bond and the foreign investor is not a
controlled foreign corporation related (within the meaning of Section
864(d)(4) of the Code) to the issuer of the Bond, (iii) with respect to
any gain, the foreign investor (if an individual) is not present in the
United States for 183 days or more during his or her taxable year and
(iv) the foreign investor provides all certification which may be
required of his status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Trustee and refiled every
three calendar years thereafter). Foreign investors should consult their
tax advisers with respect to United States tax consequences of ownership
of Units.
It should be noted that certain provisions of the Code eliminate the
exemption from United States taxation, including withholding taxes, for
certain "contingent interest." The provision applies to interest
received after December 31, 1993. No opinion is expressed herein
regarding the potential applicability of this provision and whether
United States taxation or withholding taxes could be imposed with
respect to income derived from the Units as a result thereof.
Unitholders and prospective investors should consult with their tax
advisers regarding the potential effect of this provision on their
investment in Units.
Each Unitholder (other than a foreign investor who has properly provided
the certifications described above) will be requested to provide the
Unitholder's taxpayer identification number to the trustee and to
certify that the Unitholder has not been notified that payments to the
Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided
when requested, distributions by the Trust to such Unitholder, including
amounts received upon the redemption of the Units will be subject to
back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, as of the Initial Date of Deposit for
each Trust, each Trust was not an association taxable as a corporation
and the income of each Trust will be treated as the income of the
Unitholders under the existing income tax laws of the State and City of
New York.
The foregoing discussion relates only to United States Federal and New
York State and City income taxes; Unitholders may be subject to foreign,
state and local taxation in other jurisdictions (including a foreign
investor's country of residence). Unitholders should consult their tax
advisers regarding potential state, local, or foreign taxation with
respect to the Units.
Public Offering
General. Units are offered at the Public Offering Price. The Public
Offering Price is based on the bid prices of the Bonds in the Trust and
includes a sales charge of 4.5% of the Public Offering Price (4.712% of
the aggregate bid price of the Bonds) plus any accrued interest.
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 and its affiliates and broker/dealers may
purchase Units of a Trust without a sales charge in the secondary
offering period.
Investors who purchase Units through registered broker/dealers who
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 may purchase Units in the secondary
Page 11
offering period at the Public Offering Price less the concession the
Sponsor typically would allow such broker/dealer. See "Public Offering--
Unit Distribution."
Accrued Interest. Accrued interest is the accumulation of unpaid
interest on a bond from the last day on which interest thereon was paid.
Interest on Bonds generally is paid semi-annually, although the Trust
accrues such interest daily. Because of this, each Trust always has an
amount of interest earned but not yet collected by the Trustee. For this
reason, the Public Offering Price of Units will have added to it the
proportionate share of accrued interest to the date of settlement.
Unitholders will receive on the next distribution date of the respective
Trust the amount, if any, of accrued interest paid on their Units.
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by a Trust and distributed to Unitholders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unitholder sells or redeems all or
a portion of his Units, he will be entitled to receive his proportionate
share of the accrued interest from the purchaser of his Units. Since the
Trustee has the use of the funds held in the Interest Account for
distributions to Unitholders and since such Account is noninterest-
bearing to Unitholders, the Trustee benefits thereby.
Offering Price. The Public Offering Price of the Units will vary from
the amounts stated under "Summary of Essential Financial Information" in
Part One of this Prospectus in accordance with fluctuations in the
prices of the underlying Bonds in each Trust.
As indicated above, the price of the Units as of the opening of business
on the date of this Prospectus was determined by adding to the
determination of the aggregate bid price of the Bonds an amount equal to
4.712% of such value and dividing the sum so obtained by the number of
Units outstanding. This computation produced a gross underwriting profit
equal to 4.50% of the Public Offering Price. The Evaluator will appraise
or cause to be appraised daily the value of the underlying Bonds as of
the close of trading on the New York Stock Exchange (generally 4:00 p.m.
Eastern time) on days the New York Stock Exchange is open (or as of any
earlier closing time on a day on which the New York Stock Exchange is
scheduled in advance to close at such earlier time) for each day on
which any Unit of a Trust is tendered for redemption, and it shall
determine the aggregate value of such Trust as of 4:00 p.m. Eastern time
(or as of any earlier closing time on a day on which the New York Stock
Exchange is scheduled in advance to close at such earlier time) on such
other days as may be necessary. Such Public Offering Price will be
effective for all orders received at or prior to 4:00 p.m. Eastern time
(or as of any earlier closing time on a day on which the New York Stock
Exchange is scheduled in advance to close at such earlier time) on each
such day. Orders received by the Trustee, Sponsor or any dealer for
purchases, sales or redemptions after that time, or on a day when the
New York Stock Exchange is closed, will be held until the next
determination of price.
The aggregate price of the Bonds in each Trust has been and will be
determined on the basis of bid prices (i) on the basis of current market
prices for the Bonds obtained from dealers or brokers who customarily
deal in bonds comparable to those held by a Trust; (ii) if such prices
are not available for any particular Bonds, on the basis of current
market prices for comparable bonds; (iii) by causing the value of the
Bonds to be determined by others engaged in the practice of evaluation,
quoting or appraising comparable bonds; or (iv) by any combination of
the above.
The Public Offering Price per Unit is based on the bid price per Unit of
the Bonds in each Trust plus the applicable sales charge plus accrued
interest. The offering price of Bonds in each Trust may be expected to
range from 1-3% more than the bid price of such Bonds.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. However, delivery
of certificates, if any are requested in writing, representing Units so
ordered will be made as soon as possible following such order or shortly
thereafter. A person will become the owner of 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.
Unit Distribution. Units repurchased in the secondary market, if any,
may be offered by this prospectus at the secondary Public Offering Price
in the manner described above. The Sponsor intends to qualify the Units
for sale in a number of states. Broker-dealers and other selling agents
Page 12
will be allowed a concession or agency commission in connection with the
distribution of Units equal to 3.0% of the Public Offering Price per Unit.
Sponsor Compensation. The Sponsor will receive a gross sales commission
equal to 4.50% of the Public Offering Price of the Units (equivalent to
4.712% of the net amount invested), less any reduced sales charge as
described under "Public Offering - General." See "Public Offering - Unit
Distribution" for information regarding concessions or agency
commissions available to broker-dealers and other selling agents.
As stated under "Public Market" below, the Sponsor intends to maintain a
secondary market for the Units of the Fund. In so maintaining a market,
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 is based on the bid prices
of the Bonds in the Trust and includes a sales charge). In addition, the
Sponsor will also realize profits or sustain losses resulting from a
redemption of such repurchased Units at a price above or below the
purchase price for such Units, respectively.
At various times the Sponsor may implement programs under which the
sales forces of the brokers, dealers, banks and/or others may be
eligible to win nominal awards for certain sales efforts, or under which
the Sponsor will reallow to any such brokers, dealers, banks and/or
others that sponsor sales contests or recognition programs conforming to
criteria established by the Sponsor, or participate in sales programs
sponsored by the Sponsor, an amount not exceeding the total applicable
sales charges on the sales generated by such person at the public
offering price during such programs. Also, the Sponsor in its discretion
may from time to time pursuant to objective criteria established by the
Sponsor pay fees to the brokers, dealers, banks or others 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 Unitholders pay for their Units or the amount that
a Trust will receive from the Units sold.
Public Market. Although not obligated to do so, the Sponsor intends to
maintain a market for the Units offered hereby and to offer continuously
to purchase such Units at the bid price of the Bonds in the portfolio
plus interest accrued to the date of settlement plus any principal cash
on hand, less any amounts representing taxes or other governmental
charges payable out of a Trust and less any accrued Trust expenses. If
the supply of Units exceeds demand or if some other business reason
warrants it, the Sponsor may either discontinue all purchases of Units
or discontinue purchases of Units at such prices. In the event that a
market is not maintained for the Units and the Unitholder cannot find
another purchaser, a Unitholder desiring to dispose of his Units may
dispose of such Units by tendering them to the Trustee for redemption at
the Redemption Price, which is based upon the aggregate bid price of the
Bonds in the portfolio of a Trust and any accrued interest. The
aggregate bid prices of the underlying Bonds in a Trust are expected to
be less than the related aggregate offering prices. See "Rights of
Unitholders-Redemption of Units." A UNITHOLDER WHO WISHES TO DISPOSE OF
HIS UNITS SHOULD INQUIRE OF HIS BROKER AS TO CURRENT MARKET PRICES IN
ORDER TO DETERMINE WHETHER THERE IS IN EXISTENCE ANY PRICE IN EXCESS OF
THE REDEMPTION PRICE AND, IF SO, THE AMOUNT THEREOF.
Rights of Unitholders
Ownership of Units. Ownership of Units of any Trust will not be
evidenced by certificates unless a Unitholder, the Unitholder's
registered broker/dealer or the clearing agent for such broker/dealer
makes a written request to the Trustee. Certificates, if issued, will be
so noted on the confirmation statement sent to the Unitholder's broker.
Non-receipt of such certificate(s) must be reported to the Trustee
within one year; otherwise, a 2% surety bond fee will be required for
replacement.
Units are transferable by making a written request to the Trustee and,
in the case of Units evidenced by a certificate, by presenting and
surrendering such certificate to the Trustee properly endorsed or
accompanied by a written instrument or instruments of transfer which
should be sent registered or certified mail for the protection of the
Unitholder. Unitholders must sign such written request, and such
certificate or transfer instrument, exactly as their names appear on the
records of the Trustee and on any certificate representing the Units to
be transferred. Such signatures must be guaranteed by a participant in
the Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guarantee program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee.
Page 13
Although no such charge is now made or contemplated, the Trustee may
require a Unitholder to pay a reasonable fee for each certificate
reissued or transferred and to pay any governmental charge that may be
imposed in connection with each such transfer or interchange. Destroyed,
stolen, mutilated or lost certificates will be replaced upon delivery to
the Trustee of satisfactory indemnity, evidence of ownership and payment
of expenses incurred. Mutilated certificates must be surrendered to the
Trustee for replacement.
Distributions of Interest and Principal. Interest received by the
Trusts, including that part of the proceeds of any disposition of Bonds
which represents accrued interest and including any insurance proceeds
representing interest due on defaulted Bonds, is credited by the Trustee
to the Interest Account of the appropriate Trust. Other receipts are
credited to the Principal Account of the appropriate Trust. Interest
received by a Trust will be distributed on or shortly after the
fifteenth day of each month on a pro rata basis to Unitholders of record
as of the preceding record date (which will be the first day of the
month). All distributions will be net of applicable expenses. The pro
rata share of cash in the Principal Account will be computed as of the
applicable record date, and distributions to the Unitholders as of such
record date will be made on or shortly after the fifteenth day of such
month. Proceeds received from the disposition of any of the Bonds after
such record date and prior to the following distribution date will be
held in the Principal Account and not distributed until the next
distribution date. The Trustee is not required to pay interest on funds
held in the Principal or Interest Accounts (but may itself earn interest
thereon and therefore benefits from the use of such funds) nor to make a
distribution from the Principal Account unless the amount available for
distribution shall equal at least $0.01 per Unit.
The distribution to the Unitholders as of each record date will be made
on the following distribution date or shortly thereafter and shall
consist of an amount substantially equal to one twelfth of the
Unitholders' pro rata share of the estimated net annual unit income in
the Interest Account after deducting estimated expenses. Because
interest payments are not received by the Trusts at a constant rate
throughout the year, such interest distribution may be more or less that
the amount credited to the Interest Account as of the record date. For
the purpose of minimizing fluctuation in the distributions from the
Interest Account, the Trustee is authorized to advance such amounts as
may be necessary to provide interest distributions of approximately
equal amounts. The Trustee shall be reimbursed for any such advances
from funds in the Interest Account on the ensuing record date. Persons
who purchase Units will commence receiving distributions only after such
person becomes a record owner. 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.
As of the first day of each month, the Trustee will deduct from the
Interest Account and, to the extent funds are not sufficient therein,
from the Principal Account, amounts necessary to pay the expenses of the
Trusts (as determined on the basis set forth under "Trust Operating
Expenses"). The Trustee also may withdraw from said accounts such
amounts, if any, as it deems necessary to establish a reserve for any
governmental charges or extraordinary charges payable out of the Trusts.
Amounts so withdrawn shall not be considered a part of a Trust's assets
until such time as the Trustee shall return all or any part of such
amounts to the appropriate accounts. In addition, the Trustee may
withdraw from the Interest and Principal Accounts such amounts as may be
necessary to cover redemption of Units by the Trustee.
Reinvestment Option. Unitholders of the Trust may elect to have each
distribution of interest income, capital gains and/or principal on their
Units automatically reinvested in shares of any mutual fund in the
Delaware Investments Family of Mutual Funds which are registered in the
Unitholder's state of residence. Such mutual funds are hereinafter
collectively referred to as the "Reinvestment Funds."
Each Reinvestment Fund has investment objectives which differ from those
of the Trust. The prospectus relating to each Reinvestment Fund
describes the investment policies of such fund and sets forth the
procedures to follow to commence reinvestment. A Unitholder should
obtain a prospectus for the respective Reinvestment Fund by writing to
Delaware Distributors, L.P. at 1818 Market Street, Philadelphia,
Pennsylvania 19103 or by phone at 800-362-7500.
After becoming a participant in a reinvestment plan, each distribution
of interest income, capital gains and/or principal on the participant's
Units will, on the applicable distribution date, automatically be
applied, as directed by such person, as of such distribution date by the
Trustee to purchase shares (or fractions thereof) of the applicable
Reinvestment Fund at a net asset value as computed as of the next end of
a "business day" as defined in the Reinvestment Fund's prospectus.
Page 14
Confirmations of all reinvestments by a Unitholder into a Reinvestment
Fund will be mailed to the Unitholder by such Reinvestment Fund. A
participant may at any time prior to five days preceding the next
succeeding distribution date, by so notifying the Trustee in writing,
elect to terminate his or her reinvestment plan and receive future
distributions on his or her Units in cash. There will be no charge or
other penalty for such termination. Each Reinvestment Fund, its sponsor
and its investment adviser shall have the right to terminate at any time
the reinvestment plan relating to such fund.
Reports Provided. The Trustee shall furnish Unitholders of a Trust in
connection with each distribution a statement of the amount of interest
and, if any, the amount of other receipts being distributed expressed in
each case as a dollar amount representing the pro rata share of each
Unit of the Trust outstanding. For as long as the Sponsor deems it to be
in the best interests of the Unitholders, the accounts of each Trust
shall be audited, not less frequently than annually, by independent
certified public accountants and the report of such accountants shall be
furnished by the Trustee to Unitholders of such Trust upon request.
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 registered Unitholder of such Trust a statement (i)
as to the Interest Account: interest received (including amounts
representing interest received upon any disposition of the Bonds),
deductions for applicable taxes and for fees and expenses of such Trust,
for purchases of Replacement Bonds and for redemptions of Units, if any,
reservations made by the Trustee, if any, and the balance remaining
after such distributions and deductions, expressed in each case both as
a total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar
year; (ii) as to the Principal Account: the dates of disposition of any
Bonds and the net proceeds received therefrom (excluding any portion
representing accrued interest), the amount paid for purchases of
Replacement Bonds and for redemptions of Units, if any, reservations
made by the Trustee, if any, deductions for payment of applicable taxes,
fees and expenses of such Trust and the balance remaining after such
distributions and deductions expressed both as a total dollar amount and
as a dollar amount representing the pro rata share of each Unit
outstanding on the last business day of such calendar year; (iii) a list
of the Bonds held and the number of Units outstanding on the last
business day of such calendar year; (iv) the Redemption Price per Unit
based upon the last computation thereof made during such calendar year;
and (v) amounts actually distributed during such calendar year from the
Interest and Principal Accounts, separately stated, expressed both as
total dollar amounts and as dollar amounts representing the pro rata
share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations
of the Bonds in a Trust furnished to it by the Evaluator.
Redemption of Units. A Unitholder who does not dispose of Units in the
secondary market described above may cause Units to be redeemed by the
Trustee by making a written request to the Trustee, at its unit
investment trust office, The Chase Manhattan Bank, 4 New York Plaza, New
York, New York 10004- 2413 and, in the case of Units evidenced by a
certificate, by tendering such certificate to the Trustee, properly
endorsed or accompanied by a written instrument or instruments of
transfer in form satisfactory to the Trustee. Unitholders must sign the
request, and such certificate or transfer instrument, exactly as their
names appear on the records of the Trustee and on any certificate
representing the Units to be redeemed. If the amount of the redemption
is $25,000 or less and the proceeds are payable to the Unitholder(s) of
record at the address of record, no signature guarantee is necessary for
redemptions by individual account owners (including joint owners).
Additional documentation may be requested, and a signature guarantee is
always required, from corporations, executors, administrators, trustees,
guardians or associations. The signatures must be guaranteed by a
participant in the STAMP or such other guarantee program in addition to,
or in substitution for, STAMP, as may be accepted by the Trustee. A
certificate should only be sent by registered or certified mail for the
protection of the Unitholder. Since tender of the certificate is
required for redemption when one has been issued, Units represented by a
certificate cannot be redeemed until the certificate representing such
Units has been received by the purchasers. The Trustee's toll-free
number for customer assistance is 1-800-682-7520, available 9:00 a.m. to
5:00 p.m. EST any business day.
Redemption shall be made by the Trustee on the third business day
following the day on which a tender for redemption is received (the
"Redemption Date"). Such redemption shall be made by payment of cash,
equivalent to the Redemption Price for such Trust, determined as set
forth below as of the evaluation time stated under "Summary of Essential
Financial Information" in Part One of this Prospectus next following
such tender, multiplied by the number of Units being redeemed. Any Units
Page 15
redeemed shall be cancelled and any undivided fractional interest in the
Fund extinguished. The price received upon redemption might be more or
less than the amount paid by the Unitholder depending on the value of
the Bonds in the appropriate Trust at the time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee
will be required to withhold a specified percentage of the principal
amount of a Unit redemption if the Trustee has not been furnished the
redeeming Unitholder'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 Unitholder only
when filing a return. Under normal circumstances the Trustee obtains the
Unitholder's tax identification number from the selling broker. However,
at any time a Unitholder elects to tender Units for redemption, such
Unitholder should provide a tax identification number to the Trustee in
order to avoid this possible "back-up withholding" in the event the
Trustee has not been previously provided such number.
Accrued interest paid on redemption shall be withdrawn from the Interest
Account or, if the balance therein is insufficient, from the Principal
Account. All other amounts will be withdrawn from the Principal Account.
The Trustee is empowered to sell underlying Bonds in order to make funds
available for redemption. Units so redeemed shall be cancelled.
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
Bonds in a Trust, as of the close of trading on the New York Stock
Exchange on days of trading on the New York Stock Exchange (or as of any
earlier closing time on a day on which the New York Stock Exchange is
scheduled in advance to close at such earlier time) on the date any such
determination is made. While the Trustee has the power to determine the
Redemption Price per Unit when Units are tendered for redemption, such
authority has been delegated to the Evaluator which determines the price
per Unit on a daily basis. The Redemption Price per Unit is the pro rata
share of each Unit in a Trust determined on the basis of (i) the cash on
hand in such Trust or monies in the process of being collected, (ii) the
value of the Bonds in such Trust based on the bid prices of the Bonds
(including "when issued" contracts, if any) and (iii) interest accrued
thereon, less (a) amounts representing taxes or other governmental
charges payable out of such Trust and (b) the accrued expenses of such
Trust. The Evaluator may determine the value of the Bonds in a Trust by
employing any of the methods set forth in "Public Offering-Offering
Price."
The price at which Units may be redeemed could be less than the price
paid by the Unitholder and may be less than the par value of the Bonds
represented by the Units so redeemed. As stated above, the Trustee may
sell Bonds to cover redemptions. When Bonds are sold, the size of the
affected Trust will be, and the diversity may be, reduced. Such sales
may be required at a time when Bonds would not otherwise be sold and
might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or an emergency exists, as a result of which
disposal or evaluation of the Bonds in a Trust is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. 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.
Trust Administration
Sponsor Purchases of Units. 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 the close of
business on the date of such notification and by making payment therefor
to the Unitholder 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.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then currently
effective prospectus describing such Units. Any profit resulting from
the resale of such Units will belong to the Sponsor which likewise will
bear any loss resulting from a lower offering or redemption price
subsequent to its acquisition of such Units.
Portfolio Administration. The Trustee is empowered to sell, for the
purpose of redeeming Units tendered by any Unitholder, and for the
payment of expenses for which funds may not be available, such of the
Page 16
Bonds designated by the Sponsor as the Trustee in its sole discretion
may deem necessary. The Sponsor, in designating such Bonds, will
consider a variety of factors, including (i) interest rates, (ii) market
value and (iii) marketability. The Sponsor may direct the Trustee to
dispose of Bonds in the event there is a decline in price or the
occurrence of other market or credit factors, including advance
refunding (i.e., the issuance of refunding securities and the deposit of
the proceeds thereof in trust or escrow to retire the refunded
securities on their respective redemption dates), so that in the opinion
of the Sponsor the retention of such Securities would be detrimental to
the interest of the Unitholders. The Trustee may, from time to time,
retain and pay compensation to the Sponsor (or an affiliate of the
Sponsor) to act as agent for the Trusts with respect to selling Bonds
from the Trusts. In acting in such capacity, the Sponsor or its
affiliate will be held subject to the restrictions under the Investment
Company Act of 1940, as amended.
The Sponsor is required to instruct the Trustee to reject any offer made
by an issuer of any of the Bonds to issue new obligations in exchange or
substitution for any Bond pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept or reject
such an offer or to take any other action with respect thereto as the
Sponsor may deem proper if (i) the issuer is in default with respect to
such Bond or (ii) in the written opinion of the Sponsor the issuer will
probably default with respect to such Bond in the reasonably foreseeable
future. Any obligation so received in exchange or substitution will be
held by the Trustee subject to the terms and conditions of the Trust
Agreement to the same extent as Bonds originally deposited thereunder.
Within five days after the deposit of obligations in exchange or
substitution for underlying Bonds, the Trustee is required to give
notice thereof to each Unitholder, identifying the Bonds eliminated and
the Bonds substituted therefor. Except as stated herein, the acquisition
by a Trust of any obligations other than the Bonds initially deposited
is not permitted.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor within 30 days, the
Trustee is required to notify the Sponsor thereof. If the Sponsor fails
to instruct the Trustee to sell or to hold such Bond within 30 days
after notification by the Trustee to the Sponsor of such default, the
Trustee may in its discretion sell the defaulted Bond and not be liable
for any depreciation or loss thereby incurred.
Amendment or Termination. The Sponsor and the Trustee have the power to
amend the Trust Agreement without the consent of any of the Unitholders
when such an amendment is (i) to cure an ambiguity or to correct or
supplement any provision of the Trust Agreement which may be defective
or inconsistent with any other provision contained therein or (ii) to
make such other provisions as shall not adversely affect the interest of
the Unitholders (as determined in good faith by the Sponsor and the
Trustee), provided that the Trust Agreement may not be amended to
increase the number of Units issuable thereunder or to permit the
deposit or acquisition of obligations either in addition to or in
substitution for any of the Bonds initially deposited in a Trust, except
for the substitution of certain refunding obligations for such Bonds,
for Replacement Bonds and for subsequent deposits (see "The Fund"). In
the event of any amendment requiring the consent of Unitholders, the
Trustee is obligated to notify promptly all Unitholders of the substance
of such amendment.
A Trust may be terminated at any time by consent of Unitholders
representing 66-2/3% of the Units of such Trust then outstanding or by
the Trustee when the value of such Trust, as shown by any semi-annual
evaluation, is less than the minimum value indicated under "Summary of
Essential Financial Information" in Part One of the Prospectus. A Trust
will be liquidated by the Trustee in the event that a sufficient number
of Units not yet sold are tendered for redemption by the underwriters,
including the Sponsor, so that the net worth of such Trust would be
reduced to less than 40% of the initial principal amount of such Trust.
If the Trust is liquidated because of the redemption of unsold Units by
the Underwriter, the Sponsor will refund to each purchaser of Units the
entire sales charge paid by such purchaser.
The Trust Agreement provides that a Trust shall terminate upon the
redemption, sale or other disposition of the last Bond held in such
Trust, but in no event shall it continue beyond the end of the year
preceding the fiftieth anniversary of the Trust Agreement. In the event
of termination of a Trust, written notice thereof will be sent by the
Trustee to each Unitholder of such Trust at his address appearing on the
registration books of such Trust maintained by the Trustee, such notice
specifying the time or times at which the Unitholder may surrender his
certificate or certificates, if any were issued, for cancellation.
Within a reasonable time thereafter the Trustee shall liquidate any
Bonds then held in such Trust and shall deduct from the funds of such
Trust any accrued costs, expenses or indemnities provided by the Trust
Agreement, including estimated compensation of the Trustee and costs of
Page 17
liquidation and any amounts required as a reserve to provide for payment
of any applicable taxes or other governmental charges. The sale of Bonds
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. For
this reason, among others, the amount realized by a Unitholder upon
termination may be less than the principal amount or par amount of Bonds
represented by the Units held by such Unitholder. The Trustee shall then
distribute to each Unitholder his or her share of the balance of the
Interest and Principal Accounts. With such distribution the Unitholders
shall be furnished a final distribution statement of the amount
distributable. At such time as the Trustee in its sole discretion shall
determine that any amounts held in reserve are no longer necessary, it
shall make distribution thereof to Unitholders in the same manner.
Limitation on Liabilities. The Sponsor, the Evaluator and the Trustee
shall be under no liability to Unitholders for taking any action or for
refraining from taking any action in good faith pursuant to the Trust
Agreement, or for errors in judgment, but shall be liable only for their
own willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of their reckless disregard of
their obligations and duties thereunder. The Trustee shall not be liable
for depreciation or loss incurred by reason of the sale by the Trustee
of any of the Bonds. In the event of the failure of the Sponsor to act
under the Trust Agreement, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Trust
Agreement.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Trust Agreement or upon or in
respect of the Fund which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the
Trustee.
The Trustee, Sponsor and Unitholders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Trust
Agreement 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 Unitholders 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.
Sponsor. We, Nike Securities L.P., specialize in the underwriting,
trading and wholesale distribution of unit investment trusts under the
"First Trust" brand name and other securities. An Illinois limited
partnership formed in 1991, we act as Sponsor for successive series of:
The First Trust Combined Series
FT Series (formerly known as The First Trust Special Situations Trust)
The First Trust Insured Corporate Trust
The First Trust of Insured Municipal Bonds
The First Trust GNMA
First Trust introduced the first insured unit investment trust in 1974.
To date we have deposited more than $27 billion in First Trust unit
investment trusts. Our employees include a team of professionals with
many years of experience in the unit investment trust industry.
We are a member of the National Association of Securities Dealers, Inc.
and Securities Investor Protection Corporation. Our principal offices
are at 1001 Warrenville Road, Lisle, Illinois 60532; telephone number
(630) 241-4141. As of December 31, 1999, the total partners' capital of
Nike Securities L.P. was $19,881,035 (audited).
This information refers only to the Sponsor and not to the Trust or to
any series of the Trust or to any other dealer. We are including this
information only to inform you of our financial responsibility and our
ability to carry out our contractual obligations. We will provide more
detailed financial information on request.
If the Sponsor shall fail to perform any of its duties under the Trust
Agreement or become incapable of acting or become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (i)
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, (ii) terminate the Trust Agreement
and liquidate the Fund as provided therein or (iii) continue to act as
Trustee without terminating the Trust Agreement.
Page 18
Code of Ethics. The Sponsor and the Trustee have adopted a code of
ethics requiring the Sponsor's employees who have access to information
on Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to a Trust.
Evaluator. Muller Data Corporation serves as Evaluator. The Evaluator
may resign or be removed by the Sponsor in which event the Sponsor is to
use its best efforts to appoint a satisfactory successor. Such
resignation or removal shall become effective upon acceptance of
appointment by the successor evaluation. 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. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to
each Unitholder.
Trustee. The Trustee, The Chase Manhattan Bank, with its principal
executive offices located at 270 Park Avenue, New York, New York 10017
and its unit investment trust office at 4 New York Plaza, New York, New
York 10004-2413. The Trustee is subject to supervision by the
Superintendent of Banks of the State of New York, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve
System.
The duties of the Trustee are primarily ministerial in nature. It did
not participate in the selection of Bonds for the portfolio of the Trust.
In accordance with the Trust Agreement, the Trustee shall keep proper
books of record and account of all transactions at its office for the
Fund. Such records shall include the name and address of, and the
certificates issued by a Trust to, every Unitholder. Such books and
records shall be open to inspection by any Unitholder at all reasonable
times during usual business hours. The Trustee shall make such annual or
other reports as may from time to time be required under any applicable
state or Federal statute, rule or regulation (see "Rights of Unitholders
-Reports Provided"). The Trustee is required to keep a certified copy
or duplicate original of the Trust Agreement on file in its office
available for inspection at all reasonable times during the usual
business hours by any Unitholder, together with a current list of the
Bonds held in the Trusts.
Under the Trust Agreement, the Trustee or any successor trustee may
resign and be discharged of the Trust created by the Trust Agreement by
executing an instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than 60 days
before the date specified in such notice when such resignation is to
take effect. The Sponsor upon receiving notice of such resignation is
obligated to appoint a successor trustee promptly. If, upon such
resignation, no successor trustee has been appointed and 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 Sponsor may remove the Trustee and appoint a successor
trustee as provided in the Trust Agreement. Notice of such removal and
appointment shall be mailed to each Unitholder by the Sponsor. Upon
execution of a written acceptance of such appointment by such successor
trustee, all the rights, powers, duties and obligations of the original
trustee shall vest in the 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 corporation organized under the
laws of the United States or any State, be authorized to exercise trust
powers and have at all times an aggregate capital, surplus and undivided
profits of not less than $5,000,000.
Other Matters
Legal Opinions. The legality of the Units offered hereby and certain
matters relating to Federal and state 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 Trust.
Experts. The financial statements of each Trust as of the date presented
in Part One of this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing
Page 19
elsewhere herein, and are included in reliance upon such report given
the authority of such firm as experts in accounting and auditing.
Page 20
Description of Bond Ratings*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I Likelihood of default -- capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA:
Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA:
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A:
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB:
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
BB, B, CCC, CC:
Debt rated BB, B, CCC and CC is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposure to
adverse conditions.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
_________________
* As published by the ratings companies.
Page 21
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
Moody's. A brief description of the applicable Moody's rating symbols
and their meanings follows:
Aaa:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa:
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
A:
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future. The market value of A-rated bonds may be influenced to some
degree by economic performance during a sustained period of depressed
business conditions, but, during periods of normalcy, A-rated bonds
frequently move in parallel with Aaa and Aa obligations, with the
occasional exception of oversupply in a few specific instances.
A1 and Baa1:
Bonds which are rated A1 and Baa1 offer the maximum in security within
their quality group, can be bought for possible upgrading in quality,
and additionally, afford the investor an opportunity to gauge more
precisely the relative attractiveness of offerings in the market place.
Baa:
Bonds which are rated Baa are considered as medium grade obligations;
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well. The market value of Baa-rated bonds is more sensitive to
changes in economic circumstances, and aside from occasional speculative
factors applying to some bonds of this class, Baa market valuations will
move in parallel with Aaa, Aa, and A obligations during periods of
economic normalcy, except in instances of oversupply.
Ba:
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Page 22
B:
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at
the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Con.(-):
Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis
of condition.
Fitch Investors Service, L.P. A brief description of the applicable
Fitch rating symbols and their meanings follows:
AAA:
These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and
repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA:
These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, which is very
strong, is somewhat less than for AAA-rated securities or more subject
to possible change over the term of the issue.
A:
These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB:
These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than
bonds with higher ratings.
BB:
These bonds are considered speculative and of low investment grade. The
obligor's ability to pay interest and repay principal is not strong and
is considered likely to be affected over time by adverse economic
changes.
B:
These bonds are considered highly speculative. Bonds in this class are
lightly protected as to the obligors ability to pay interest over the
life of the issue and repay principal when due.
A "+" or a "-" sign after a rating symbol indicates relative standing in
its rating.
Page 23
No person is authorized to give any information or to make any
representations not contained in this Prospectus; and any information or
representation not contained herein must not be relied upon as having
been authorized by the Fund, the Sponsor or the Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any state to any person to whom it is not
lawful to make such offer in such state.
___________________
TABLE OF CONTENTS
The Fund 3
Risk Factors 4
Estimated Current Return and
Estimated Long-Term Return 7
Trust Operating Expenses 7
Tax Status 8
Public Offering 11
Rights of Unitholders 13
Trust Administration 16
Other Matters 19
Description of Bond Ratings 21
___________________
This Prospectus contains information concerning the Fund and the
Sponsor, but does not contain all of 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.
PROSPECTUS
FIRST TRUST UNIT INVESTMENT TRUSTS
CORPORATE HIGH YIELD SERIES
PROSPECTUS PART TWO
June 30, 2000
Page 24
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, Unit Investment Trust, Series 10, certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment of its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the
Village of Lisle and State of Illinois on June 30, 2000.
UNIT INVESTMENT TRUST, SERIES 10
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
David J. Allen Sole Director of )
Nike Securities )
Corporation, ) June 30, 2000
the General Partner )
of Nike Securities L.P. )
)
) Robert M. Porcellino
) 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-2
9
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated June 9, 2000 in this
Post-Effective Amendment to the Registration Statement and
related Prospectus of The First Trust Unit Investment Trust
Series dated June 28, 2000.
ERNST & YOUNG
Chicago, Illinois
June 27, 1999