SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: THE FIRST TRUST SPECIAL
SITUATIONS TRUST, SERIES 188
B. Name of Depositor: NIKE SECURITIES L.P.
C. Complete Address of Depositor's 1001 Warrenville Road
Principal Executive Offices: Lisle, Illinois 60532
D. Name and Complete Address of
Agents for Service: NIKE SECURITIES L.P.
Attention: James A. Bowen
Suite 300
1001 Warrenville Road
Lisle, Illinois 60532
E. Title and Amount of
Securities Being Registered: An indefinite number of
Units pursuant to Rule
24f-2 promulgated under
the Investment Company Act
of 1940, as amended.
F. Proposed Maximum Offering
Price to the Public of the
Securities Being Registered: Indefinite.
G. Amount of Filing Fee: $0.00
H. Approximate Date of Proposed
Sale to the Public: ____ Check if it is
proposed that this filing
will become effective on
_____ at ____ p.m.
pursuant to Rule 487.
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 188
Cross-Reference Sheet
(Form N-8B-2 Items required by Instructions as
to the Prospectus in Form S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust Prospectus front cover
(b) Title of securities issued Summary of Essential
Information
2. Name and address of each Information as to
depositor Sponsor, Trustee and
Evaluator
3. Name and address of Information as to
trustee Sponsor, Trustee and
Evaluator
4. Name and address of Underwriting
principal underwriters
5. State of organization The First Trust Special
of trust Situations Trust
6. Execution and termination The First Trust Special
of trust agreement Situations Trust; Other
Information
7. Changes of name *
8. Fiscal Year *
9. Litigation *
II. GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
10. (a) Registered or bearer Rights of Unit Holders
securities
(b) Cumulative or distributive
securities The First Trust Special
Situations Trust
(c) Redemption Rights of Unit Holders
(d) Conversion, transfer, etc. Rights of Unit Holders
(e) Periodic payment plan
certificates *
(f) Voting rights Rights of Unit Holders;
Other Information
(g) Notice of certificate- Rights of Unit Holders;
holders Other Information
(h) Consents required Rights of Unit Holders;
Other Information
(i) Other provisions The First Trust Special
Situations Trust
11. Types of securities comprising The First Trust Special
units Situations Trust
12. Certain information
regarding periodic payment
plan certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The First Trust
Special Situations Trust
(b) Certain information
regarding periodic payment
plan certificates *
(c) Certain percentages Summary of Essential
Information; The First
Trust Special Situations
Trust; Public Offering
(d) Difference in price offered Public Offering
for any class of transactions
to any class or group of
individuals
(e) Certain other load fees, Rights of Unit Holders
expenses, etc. payable by
holders
(f) Certain profits receivable The First Trust Special
by depositor, principal Situations Trust
underwriters, trustee or
affiliated persons
(g) Ratio of annual charges to
income *
14. Issuance of trust's Rights of Unit Holders
securities
15. Receipt and handling of
payments from purchasers *
16. Acquisition and disposition
of underlying securities The First Trust Special
Situations Trust; Rights
of Unit Holders
17. Withdrawal or redemption The First Trust Special
Situations Trust; Public
Offering; Rights of Unit
Holders
18. (a) Receipt, custody and
disposition of income Rights of Unit Holders
(b) Reinvestment of
distributions Rights of Unit Holders
(c) Reserves or special funds Information as to
Sponsor, Trustee and
Evaluator
(d) Schedule of distributions *
19. Records, accounts and
reports Rights of Unit Holders
20. Certain miscellaneous
provisions of trust
agreement
(a) Amendment Other Information
(b) Termination Other Information
(c) and (d) Trustee, removal and
successor Information as to
Sponsor, Trustee and
Evaluator
(e) and (f) Depositor, removal Information as to
and successor Sponsor, Trustee and
Evaluator
21. Loans to security holders *
22. Limitations on liability The First Trust Special
Situations Trust;
Information as to
Sponsor, Trustee and
Evaluator
23. Bonding arrangements Contents of Registration
Statement
24. Other material provisions
of trust agreement *
III. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
25. Organization of depositor Information as to
Sponsor, Trustee and
Evaluator
26. Fees received by depositor *
27. Business of depositor Information as to
Sponsor, Trustee and
Evaluator
28. Certain information as to *
officials and affiliated
persons of depositor
29. Voting securities of *
depositor
30. Persons controlling *
depositor
31. Payment by depositor for *
certain services rendered
to trust
32. Payment by depositor for *
certain other services
rendered to trust
33. Remuneration of other *
persons for certain
services rendered to trust
34. Remuneration of other *
persons for certain services
rendered to trust
IV. DISTRIBUTION AND REDEMPTION
35. Distribution of trust's
securities by states Public Offering
36. Suspension of sales of
trust's securities *
37. Revocation of authority
to distribute *
38. (a) Method of distribution Public Offering
(b) Underwriting agreements Public Offering;
Underwriting
(c) Selling agreements Public Offering
39. (a) Organization of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) N.A.S.D. membership of Information as to
principal underwriters Sponsor, Trustee and
Evaluator
40. Certain fee received by See Items 13(a) and 13(e)
principal underwriters
41. (a) Business of principal Information as to
underwriters Sponsor, Trustee and
Evaluator
(b) Branch offices of
principal underwriters *
(c) Salesmen of principal
underwriters *
42. Ownership of trust's
securities by certain
persons *
43. Certain brokerage
commissions received
by principal underwriters *
44. (a) Method of valuation Summary of Essential
Information; The First
Trust Special Situations
Trust; Public Offering
(b) Schedule as to offering
price *
(c) Variation in offering Public Offering
price to certain persons
45. Suspension of redemption
rights *
46. (a) Redemption Valuation Rights of Unit Holders
(b) Schedule as to redemption
price *
47. Maintenance of position Public Offering; Rights
in underlying securities of Unit Holders
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation Information as to
of trustee Sponsor, Trustee and
Evaluator
49. Fees and expenses of trustee The First Trust Special
Situations Trust
50. Trustee's lien The First Trust Special
Situations Trust
VI. INFORMATION CONCERNING THE INSURANCE OF HOLDERS OR
SECURITIES
51. Insurance of holders of *
trust's securities
VII. POLICY OF REGISTRANT
52. (a) Provisions of trust The First Trust Special
agreement with respect Situations Trust; Rights
to selection or elimination of Unit Holders
of underlying securities
(b) Transactions involving
elimination of underlying
securities *
(c) Policy regarding The First Trust Special
substitution or elimination Situations Trust; Rights
of underlying securities of Unit Holders
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The First Trust Special
Situations Trust
VIII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during
last ten years *
55. Certain information regarding
periodic payment plan
certificates
56. Certain information regarding
periodic payment plan
certificates
57. Certain information regarding *
periodic payment plan
certificates
58. Certain information regarding
periodic payment plan
certificates
59. Financial statements Report of Independent
(Instruction 1(b) to Auditors; Statement of
Form S-6) Net Assets
__________________________
* Inapplicable, answer negative or not required.
SUBJECT TO COMPLETION, DATED FEBRUARY 7, 1997
Emerging Growth & Treasury Securities Trust, Series 1
The Trust. The First Trust(registered trademark) Special Situations
Trust, Series 188 (Emerging Growth & Treasury Securities Trust, Series
1) is a unit investment trust consisting of a portfolio containing zero
coupon U.S. Treasury bonds and common stocks issued by emerging
companies which generally have a small to medium market capitalization.
The objective of the Emerging Growth & Treasury Securities Trust, Series
1 is to protect Unit holders' capital and provide potential capital
appreciation by investing a portion of its portfolio in zero coupon U.S.
Treasury bonds ("Treasury Obligations") and the remainder of the Trust's
portfolio in common stocks ("Equity Securities"). Collectively, the
Treasury Obligations and the Equity Securities are referred to herein as
the "Securities." The Treasury Obligations evidence the right to receive
a fixed payment at a future date from the U.S. Government and are backed
by the full faith and credit of the U.S. Government. The guarantee of
the U.S. Government does not apply to the market value of the Treasury
Obligations or the Units of the Trust, whose net asset value will
fluctuate and, prior to maturity, may be worth more or less than a
purchaser's acquisition cost. The Trust is intended to achieve its
objective over the life of the Trust and as such, is best suited for
those investors capable of holding such Units to maturity. See "Schedule
of Investments" for the Trust. There is, of course, no guarantee that
the objective of the Trust will be achieved. The Trust has a mandatory
termination date (the "Mandatory Termination Date") as set forth under
"Summary of Essential Information."
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. The Trust has been organized
so that purchasers of Units should receive, at the termination of the
Trust, an amount per Unit at least equal to $10.00 (which is equal to
the per Unit value upon maturity of the Treasury Obligations), even if
the Trust never paid a dividend and the value of the Equity Securities
were to decrease to zero, which the Sponsor considers highly unlikely.
This feature of the Trust provides Unit holders who purchase Units at a
price of $10.00 or less per Unit with total principal protection,
including any sales charges paid, although they might forego any
earnings on the amount invested. To the extent that Units are purchased
at a price less than $10.00 per Unit, this feature may also provide a
potential for capital appreciation. As a result of the volatile nature
of the market for zero coupon U.S. Treasury bonds, Units sold or
redeemed prior to maturity will fluctuate in price and the underlying
Treasury Obligations may be valued at a price greater or less than their
value as of the Initial Date of Deposit. UNIT HOLDERS DISPOSING OF THEIR
UNITS PRIOR TO THE MATURITY OF THE TRUST MAY RECEIVE MORE OR LESS THAN
$10.00 PER UNIT, DEPENDING ON MARKET CONDITIONS ON THE DATE UNITS ARE
SOLD OR REDEEMED.
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK
INCLUDING LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
The Boston Group, L.P.
The date of this Prospectus is ___________, 1997
Page 1
The Treasury Obligations deposited in the Trust on the Initial Date of
Deposit will mature on ___________, 2008 (the "Treasury Obligations
Maturity Date"). The Treasury Obligations in the Trust have a maturity
value equal to or greater than the aggregate Public Offering Price
(which includes the sales charge) of the Units of the Trust on the
Initial Date of Deposit. The Equity Securities deposited in the Trust's
portfolio have no fixed maturity date and the value of these underlying
Equity Securities will fluctuate with changes in the values of stocks in
general and with changes in the conditions and performance of the
specific Equity Securities owned by the Trust. See "Portfolio."
The Sponsor may, from time to time during a period of up to
approximately 360 days after the Initial Date of Deposit, deposit
additional Securities in the Trust, provided it maintains the original
percentage relationship between the Treasury Obligations and Equity
Securities in the Trust's portfolio. Such deposits of additional
Securities will, therefore, be done in such a manner that the maturity
value of each Unit should always be an amount at least equal to $10.00,
and that the original proportionate relationship amongst the individual
issues of the Equity Securities in the Trust shall be maintained. Any
deposit by the Sponsor of additional Securities will duplicate, as
nearly as is practicable, the original proportionate relationship
established on the Initial Date of Deposit, and not the actual
proportionate relationship on the subsequent Date of Deposit, since the
two may differ. Any such difference may be due to the sale, redemption
or liquidation of any Securities deposited in the Trust on the Initial,
or any subsequent, Date of Deposit. See "What is the First Trust Special
Situations Trust?" and "How May Securities be Removed from the Trust?"
Public Offering Price. The Public Offering Price per Unit of the Trust
during the initial offering period is equal to a pro rata share of the
offering prices of the Treasury Obligations and the aggregate underlying
value of the Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the ask prices of
over-the-counter traded Equity Securities) plus or minus a pro rata
share of cash, if any, in the Capital and Income Accounts of the Trust,
plus a maximum sales charge of 5.5% (equivalent to 5.820% of the net
amount invested). A pro rata share of accumulated dividends, if any, in
the Income Account is included in the Public Offering Price. The
secondary market Public Offering Price per Unit will be based upon a pro
rata share of the bid prices of the Treasury Obligations and the
aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of listed Equity
Securities and the bid prices of over-the-counter traded Equity
Securities) plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of the Trust plus a maximum sales charge of
5.5% (equivalent to 5.820% of the net amount invested), subject to a
reduction beginning _________.
The minimum purchase for the Trust is $1,000. The sales charge for the
Trust is reduced on a graduated scale for sales involving at least 5,000
Units of the Trust. See "How is the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions of dividends and
capital, if any, received by the Trust will be paid in cash on the
Distribution Date to Unit holders of record on the Record Date as set
forth in the "Summary of Essential Information." Distributions of funds
in the Capital Account, if any, will be made at least annually in
December of each year. Any distribution of income and/or capital will be
net of the expenses of the Trust. INCOME WITH RESPECT TO THE ACCRUAL OF
ORIGINAL ISSUE DISCOUNT ON THE TREASURY OBLIGATIONS IN THE TRUST WILL
NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH UNIT HOLDERS OF THE TRUST WILL BE
SUBJECT TO INCOME TAX AT ORDINARY INCOME RATES AS IF A DISTRIBUTION HAD
OCCURRED. See "What is the Federal Tax Status of Unit Holders?"
Additionally, upon termination of the Trust, the Trustee will
distribute, upon surrender of Units for redemption, to each Unit holder
his pro rata share of the Trust's assets, less expenses, in the manner
set forth under "Rights of Unit Holders-How are Income and Capital
Distributed?"
Secondary Market for Units. After the initial offering period, while
under no obligation to do so, the Sponsor intends to, and the
Underwriter may, maintain a market for Units of the Trust and offer to
repurchase such Units at prices which are based on the aggregate bid
side evaluation of the Treasury Obligations and the aggregate underlying
value of Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices of
over-the-counter traded Equity Securities) plus or minus cash, if any,
in the Capital and Income Accounts of the Trust. If a secondary market
is maintained during the initial offering period, the prices at which
Units will be repurchased will be based upon the aggregate offering side
evaluation of the Treasury Obligations and the aggregate underlying
Page 2
value of the Equity Securities in the Trust (generally determined by the
closing sale prices of listed Equity Securities and the ask prices of
over-the-counter traded Equity Securities) plus or minus cash, if any,
in the Capital and Income Accounts of the Trust. If a secondary market
is not maintained, a Unit holder may redeem Units of the Trust through
redemption at prices based upon the aggregate bid price of the Treasury
Obligations plus the aggregate underlying value of the Equity Securities
in the Trust (generally determined by the closing sale prices of listed
Equity Securities and the bid prices of over-the-counter traded Equity
Securities) plus or minus a pro rata share of cash, if any, in the
Capital and Income Accounts of the Trust. See "How May Units be Redeemed?"
Termination. Commencing on the Treasury Obligations Maturity Date for
the Trust, Equity Securities will begin to be sold in connection with
the termination of the Trust. The Sponsor will determine the manner,
timing and execution of the sale of the Equity Securities. Written
notice of any termination of the Trust specifying the time or times at
which Unit holders may surrender their certificates for cancellation
shall be given by the Trustee to each Unit holder at his address
appearing on the registration books of the Trust maintained by the
Trustee. At least 60 days prior to the Treasury Obligations Maturity
Date for the Trust, the Trustee will provide written notice thereof to
all Unit holders and will include with such notice a form to enable Unit
holders to elect a distribution of shares of Equity Securities (reduced
by customary transfer and registration charges) if such Unit holder owns
at least 2,500 Units of the Trust, rather than to receive payment in
cash for such Unit holder's pro rata share of the amounts realized upon
the disposition by the Trustee of Equity Securities. All Unit holders of
the Trust will receive their pro rata portion of the Treasury
Obligations in cash upon the termination of the Trust. To be effective,
the election form, together with surrendered certificates and other
documentation required by the Trustee, must be returned to the Trustee
at least five business days prior to the Treasury Obligations Maturity
Date for the Trust. Unit holders not electing a distribution of shares
of Equity Securities will receive a cash distribution from the sale of
the remaining Securities within a reasonable time after the Trust is
terminated. See "Rights of Unit Holders-How are Income and Capital
Distributed?"
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers of the Equity Securities which make up the Trust or the
general condition of the stock market, volatile interest rates and
economic recession. Volatility in the market prices of Securities in the
Trust also changes the value of Units of the Trust. In addition, common
stocks of emerging companies may experience price fluctuations greater
than larger, more established companies. Unit holders tendering Units
for redemption during periods of market volatility may receive
redemption proceeds which are more or less than they paid for the Units.
The Trust is not actively managed and Securities will not be sold by the
Trust to take advantage of market fluctuations or changes in anticipated
rates of appreciation. See "What are Equity Securities?-Risk Factors."
Page 3
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Securities-___________, 1997
Underwriter: The Boston Group, L.P.
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Emerging Growth & Treasury Securities Trust, Series 1
General Information
<S> <C>
Aggregate Maturity Value of Treasury Obligations Initially Deposited $
Initial Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Public Offering Price:
Aggregate Offering Price Evaluation of Securities in Portfolio (1) $
Aggregate Offering Price Evaluation of Securities per Unit $
Sales Charge of 5.5% of the Public Offering Price per Unit,
(5.820% of the net amount invested) $
Public Offering Price per Unit (2) $
Sponsor's Initial Repurchase Price per Unit $
Redemption Price per Unit (based on bid price evaluation of underlying
Treasury Obligations and aggregate underlying value of Equity Securities)
($ less than Public Offering Price per Unit; $ less
than Sponsor's Initial Repurchase Price per Unit) (3) $
</TABLE>
CUSIP Number
First Settlement Date ___________, 1997
Treasury Obligations Maturity Date ___________, 2008
Mandatory Termination Date ___________, 2008
Trustee's Annual Fee $____ per Unit outstanding.
Evaluator's Annual Fee $____ per Unit outstanding.
Evaluations for purposes of
sale, purchase or redemption of
Units are made as of the close
of trading (generally 4:00 p.m.
Eastern time) on the New York
Stock Exchange on each day on
which it is open.
Supervisory Fee (4) Maximum of $____ per Unit
outstanding annually payable to
an affiliate of the Sponsor.
Estimated Annual Amortiization of
Organizational and Offering Costs (5) $____ per Unit.
Income Distribution Record Date Fifteenth day of each June and
December, commencing _______,
1997.
Income Distribution Date (6) Last day of each June and
December, commencing _______,
1997.
[FN]
______________
(1 ) Each Equity Security listed on a national securities exchange or the
NASDAQ National Market System is valued at the last closing sale price,
or if no such price exists or if the Equity Security is not so listed,
at the closing ask price thereof. The Treasury Obligations are valued at
their aggregate offering side evaluation.
(2 ) On the Initial Date of Deposit there will be no accumulated
dividends in the Income Account. Anyone ordering Units after such date
will pay a pro rata share of any accumulated dividends in such Income
Account. The Public Offering Price as shown reflects the value of the
Equity Securities at the opening of business on the Initial Date of
Deposit and establishes the original proportionate relationship amongst
the individual securities. No sales to investors will be executed at
this price. Additional Equity Securities will be deposited during the
day of the Initial Date of Deposit which will be valued as of 4:00 p.m.
Eastern time and sold to investors at a Public Offering Price per Unit
based on this valuation.
(3 ) See "How May Units be Redeemed?"
(4 ) In addition, the Sponsor will also be reimbursed for bookkeeping and
other administrative expenses currently at a maximum annual rate of
$____ per Unit.
(5 ) The Trust (and therefore Unit holders) will bear all or a portion of
its organizational and offering costs (including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of the Trust portfolio and the initial fees
and expenses of the Trustee but not including the expenses incurred in
the printing of preliminary and final prospectuses, and expenses
incurred in the preparation and printing of brochures and other
advertising materials and any other selling expenses) as is common for
mutual funds. Total organizational and offering expenses will be charged
off over a period not to exceed five years from the Initial Date of
Deposit. See "What are the Expenses and Charges?" and "Statement of Net
Assets." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
(6 ) Distributions from the Capital Account, if any, will be made monthly
on the last day of the month to Unit holders of record on the fifteenth
day of such month if the amount available for distribution equals at
least $1.00 per 100 Units. Notwithstanding, distributions of funds in
the Capital Account, if any, will be made in December of each year.
Page 4
EMERGING GROWTH & TREASURY SECURITIES TRUST, SERIES 1
The First Trust Special Situations Trust, Series 188
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 188 is one of a series
of investment companies created by the Sponsor under the name of The
First Trust Special Situations Trust, all of which are generally similar
but each of which is separate and is designated by a different series
number. This Series consists of an underlying separate unit investment
trust designated as: Emerging Growth & Treasury Securities Trust, Series
1 (the "Trust"). The Trust was created under the laws of the State of
New York pursuant to a Trust Agreement (the "Indenture"), dated the
Initial Date of Deposit, with Nike Securities L.P., as Sponsor, The
Chase Manhattan Bank, as Trustee and First Trust Advisors L.P., as
Portfolio Supervisor and Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of zero coupon U.S. Treasury
bonds and common stocks, together with an irrevocable letter or letters
of credit of a financial institution in an amount at least equal to the
purchase price of such securities. In exchange for the deposit of
securities or contracts to purchase securities in the Trust, the Trustee
delivered to the Sponsor documents evidencing the entire ownership of
such Trust.
The objective of the Trust is to protect Unit holders' capital and
provide potential capital appreciation by investing a portion of its
portfolio in zero coupon U.S. Treasury bonds ("Treasury Obligations")
and the remainder of the Trust's portfolio in common stocks issued by
emerging companies which generally have a small to medium market
capitalization ("Equity Securities"). Collectively, the Treasury
Obligations and the Equity Securities are referred to herein as the
"Securities." See "Schedule of Investments." The Trust has a Mandatory
Termination Date as set forth under "Summary of Essential Information."
The Treasury Obligations evidence the right to receive a fixed payment
at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the U.S.
Government does not apply to the market value of the Treasury
Obligations or the Units of the Trust, whose net asset values will
fluctuate and, prior to maturity, may be worth more or less than a
purchaser's acquisition cost. There is, of course, no guarantee that the
objective of the Trust will be achieved.
With the deposit of the Securities in the Trust on the Initial Date of
Deposit, the Sponsor established a percentage relationship between the
principal amounts of Treasury Obligations and Equity Securities in the
Trust's portfolio. From time to time following the Initial Date of
Deposit, the Sponsor, pursuant to the Indenture, may deposit additional
Securities in the Trust and Units may be continuously offered for sale
to the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any additional
Securities deposited in the Trust will maintain, as nearly as is
practicable, the original proportionate relationship of the Treasury
Obligations and Equity Securities in the Trust's portfolio. Such
deposits of additional Securities in the Trust will, therefore, be done
in such a manner that the maturity value of the Treasury Obligations
represented by each Unit should always be an amount at least equal to
$10.00, and that the original proportionate relationship amongst the
individual issues of the Equity Securities shall be maintained. Any
deposit by the Sponsor of additional Securities in the Trust will
duplicate, as nearly as is practicable, the original proportionate
relationship and not the actual proportionate relationship on the
subsequent date of deposit, since the two may differ. Any such
difference may be due to the sale, redemption or liquidation of any of
the Securities deposited in the Trust on the Initial or any subsequent
Date of Deposit. See "How May Securities be Removed from the Trust?" On
a cost basis to the Trust, the original percentage relationship on the
Initial Date of Deposit was approximately % Treasury Obligations
and approximately % Equity Securities. The original percentage
relationship of each Equity Security in the Trust is set forth herein
under "Schedule of Investments." The prices of the underlying Treasury
Obligations and Equity Securities in the Trust will fluctuate daily and
the ratio, on a market value basis, will also change daily. The maturity
value of the Treasury Obligations and the portion of Equity Securities
represented by each Unit of the Trust will not change as a result of the
deposit of additional Securities in the Trust. 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 Trust with respect to acquiring
Page 5
Securities for the Trust. 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.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Securities deposited in the Trust
set forth under "Summary of Essential Information." The Trust has been
organized so that purchasers of Units should receive, at the termination
of the Trust, an amount per Unit at least equal to $10.00 per Unit
(which is equal to the per Unit value upon maturity of the Treasury
Obligations), even if the Equity Securities never paid a dividend and
the value of the Equity Securities in the Trust were to decrease to
zero, which the Sponsor considers highly unlikely. Furthermore, the
Sponsor will take such steps in connection with the deposit of
additional Securities in the Trust as are necessary to maintain a
maturity value of the Units of the Trust at least equal to $10.00 per
Unit. The receipt of only $10.00 per Unit upon the termination of the
Trust (an event which the Sponsor believes is unlikely) represents a
substantial loss on a present value basis. At current interest rates,
the present value of receiving $10.00 per Unit as of the termination of
the Trust would be approximately $ per Unit (the present
value is indicated by the amount per Unit which is invested in Treasury
Obligations). Furthermore, the $10.00 per Unit in no respect protects
investors against diminution in the purchasing power of their investment
due to inflation (although expectations concerning inflation are a
component in determining prevailing interest rates, which in turn
determine present values). If inflation were to occur at the rate of 5%
per annum during the period ending at the termination of the Trust, the
present dollar value of $10.00 per Unit at the termination of the Trust
would be approximately $ per Unit. To the extent that Units
of the Trust are redeemed, the aggregate value of the Securities in the
Trust will be reduced and the undivided fractional interest represented
by each outstanding Unit of the Trust will increase. However, if
additional Units are issued by the Trust in connection with the deposit
of additional Securities by the Sponsor, the aggregate value of the
Securities in the Trust will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by
each Unit of the Trust will be decreased proportionately. See "How May
Units be Redeemed?"
What are the Expenses and Charges?
With the exception of brokerage fees discussed above and bookkeeping and
other administrative services provided to the Trust, for which the
Sponsor will be reimbursed in amounts as set forth under "Summary of
Essential Information," the Sponsor will not receive any fees in
connection with its activities relating to the Trust.
First Trust Advisors L.P. will receive an annual supervisory fee, which
is not to exceed the amount set forth under "Summary of Essential
Information," for providing portfolio supervisory services for the
Trust. Such fee is based on the number of Units outstanding in the Trust
on January 1 of each year except for the year or years in which an
initial offering period occurs in which case the fee for a month is
based on the number of Units outstanding at the end of such month. In
providing such supervisory services, the portfolio Supervisor may
purchase research services from a variety of sources which may include
underwriters or dealers of the Trust.
Subsequent to the initial offering period, First Trust Advisors L.P., in
its capacity as Evaluator for the Trust, will receive a fee as indicated
in the "Summary of Essential Information."
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
recurring services to the Trust an annual fee as indicated in "Summary
of Essential Information." Such fee will be based upon the largest
aggregate number of Units of the Trust outstanding at any time during
the year. For a discussion of the services performed by the Trustee
pursuant to its obligations under the Indenture, reference is made to
the material set forth under "Rights of Unit Holders."
The Trustee's and the above described fees are payable from the Income
Account to the extent funds are available and then from the Capital
Account. Since the Trustee has the use of the funds being held in the
Capital and Income Accounts for payment of expenses and redemptions and
since such Accounts are noninterest-bearing to Unit holders, the Trustee
benefits thereby. Part of the Trustee's compensation for its services to
the Trust is expected to result from the use of these funds. However,
the Trustee may bear from its own resources certain expenses relating to
the Trust, including organization costs and brokerage commissions.
Page 6
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
Expenses incurred in establishing the Trust, including costs of
preparing the registration statement, the trust indenture and other
closing documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of the Trust portfolio and the
initial fees and expenses of the Trustee and any other out-of-pocket
expenses, will be paid by the Trust and charged off over a period not to
exceed five years from the Initial Date of Deposit. The following
additional charges are or may be incurred by the Trust: all legal and
annual auditing expenses of the Trustee incurred by or in connection
with its responsibilities under the Indenture; the expenses and costs of
any action undertaken by the Trustee to protect the Trust and the rights
and interests of the Unit holders; fees of the Trustee for any
extraordinary services performed under the Indenture; indemnification of
the Trustee for any loss, liability or expense incurred by it without
negligence, bad faith or willful misconduct on its part, arising out of
or in connection with its acceptance or administration of the Trust;
indemnification of the Sponsor for any loss, liability or expense
incurred without gross negligence, bad faith or willful misconduct in
acting as Depositor of the Trust; all taxes and other government charges
imposed upon the Securities or any part of the Trust (no such taxes or
charges are being levied or made or, to the knowledge of the Sponsor,
contemplated). The above expenses and the Trustee's annual fee, when
paid or owing to the Trustee, are secured by a lien on the Trust. In
addition, the Trustee is empowered to sell Securities in the Trust in
order to make funds available to pay all these amounts if funds are not
otherwise available in the Income and Capital Accounts of the Trust
except that the Trustee shall not sell Treasury Obligations to pay Trust
expenses. Since the Equity Securities are all common stocks and the
income stream produced by dividend payments is unpredictable, the
Sponsor cannot provide any assurance that dividends will be sufficient
to meet any or all expenses of the Trust. As described above, if
dividends are insufficient to cover expenses, it is likely that Equity
Securities will have to be sold to meet the Trust's expenses. These
sales may result in capital gains or losses to Unit holders. See "What
is the Federal Tax Status of Unit Holders?"
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units of the
Trust, the Sponsor is required to bear the cost of such annual audit to
the extent such cost exceeds $0.0050 per Unit for the Trust. Unit
holders of the Trust covered by an audit may obtain a copy of the
audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as
"capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986 (the
"Code"). Unit holders should consult their tax advisers in determining
the Federal, state, local and any other tax consequences of the
purchase, ownership and disposition of Units in the Trust.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of the assets of the Trust under the Code;
and the income of the Trust will be treated as income of the Unit
holders thereof under the Code. Each Unit holder will be considered to
have received his pro rata share of income derived from each Trust asset
when such income is received by the Trust.
2. Each Unit holder will have a taxable event when the Trust disposes
of an Equity Security (whether by sale, exchange, liquidation,
redemption, or payment at maturity) or upon the sale or redemption of
Page 7
Units by such Unit holder. The price a Unit holder pays for his Units,
including sales charges, is allocated among his pro rata portion of each
Security held by the Trust (in proportion to the fair market values
thereof on the date the Unit holder purchases his Units) in order to
determine his tax basis for his pro rata portion of each Security held
by such Trust. The Treasury Obligations held by the Trust are treated as
stripped bonds and may be treated as bonds issued at an original issue
discount as of the date a Unit holder purchases his Units. Because the
Treasury Obligations represent interests in "stripped" U.S. Treasury
bonds, a Unit holder's tax basis for his pro rata portion of each
Treasury Obligation held by the Trust shall be treated as its "purchase
price" by the Unit holder. Original issue discount is effectively
treated as interest for Federal income tax purposes and the amount of
original issue discount in this case is generally the difference between
the bond's purchase price and its stated redemption price at maturity. A
Unit holder of the Trust will be required to include in gross income for
each taxable year the sum of his daily portions of original issue
discount attributable to the Treasury Obligations held by the Trust as
such original issue discount accrues and will in general be subject to
Federal income tax with respect to the total amount of such original
issue discount that accrues for such year even though the income is not
distributed to the Unit holders during such year to the extent it is not
less than a "de minimis" amount as determined under a Treasury
Regulation issued on December 28, 1992 relating to stripped bonds. To
the extent the amount of such discount is less than the respective "de
minimis" amount, such discount shall be treated as zero. In general,
original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued
interest. In the case of the Treasury Obligations, this method will
generally result in an increasing amount of income to the Unit holders
of the Trust each year. Unit holders of the Trust should consult their
tax advisers regarding the Federal income tax consequences and accretion
of original issue discount under the stripped bond rules. For Federal
income tax purposes, a Unit holder's pro rata portion of dividends, as
defined by Section 316 of the Code, paid by a corporation with respect
to an Equity Security held by the Trust are taxable as ordinary income
to the extent of such corporation's current and accumulated "earnings
and profits." A Unit holder's pro rata portion of dividends paid on such
Equity Security which exceed such current and accumulated earnings and
profits will first reduce a Unit holder's tax basis in such Equity
Security, and to the extent that such dividends exceed a Unit holder's
tax basis in such Equity Security shall generally be treated as capital
gain. In general, any such capital gain will be short-term unless a Unit
holder has held his Units for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust
will generally be considered a capital gain except in the case of a
dealer or a financial institution and, in general, will be long-term if
the Unit holder has held his Units for more than one year (the date on
which the Units are acquired (i.e., the trade date) is excluded for
purposes of determining whether the Units have been held for more than
one year). A Unit holder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust
will generally be considered a capital loss except in the case of a
dealer or a financial institution and will be long-term if the Unit
holder has held his Units for more than one year (the date on which
Units are acquired (i.e., the trade date) is excluded for purposes of
determining whether the Units have been held for more than one year).
Unit holders should consult their tax advisers regarding the recognition
of such capital gains and losses for Federal income tax purposes.
Dividends Received Deduction. A Unit holder will be considered to have
received all of the dividends paid on his pro rata portion of each
Equity Security when such dividends are received by the Trust. Unit
holders will be taxed in this manner regardless of whether distributions
from the Trust are actually received by the Unit holder or are
automatically reinvested.
A corporation that owns Units will generally be entitled to a 70%
dividends received deduction with respect to such Unit holder's pro rata
portion of dividends received by the Trust (to the extent such dividends
are taxable as ordinary income, as discussed above) in the same manner
as if such corporation directly owned the Equity Securities paying such
dividends (other than corporate shareholders, such as "S" corporations,
which are not eligible for the deduction because of their special
Page 8
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding corporation tax).
However, a corporation owning Units should be aware that Sections 246
and 246A of the Code impose additional limitations on the eligibility of
dividends for the 70% dividends received deduction. These limitations
include a requirement that stock (and therefore Units) must generally be
held at least 46 days (as determined under Section 246(c) of the Code).
Final regulations have been recently issued which address special rules
that must be considered in determining whether the 46-day holding
requirement is met. Moreover, the allowable percentage of the deduction
will be reduced from 70% if a corporate Unit holder owns certain stock
(or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. It should be noted that
various legislative proposals that would affect the dividends received
deduction have been introduced. Unit holders should consult with their
tax advisers with respect to the limitations on and possible
modifications to the dividends received deduction.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by
the Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when an Equity Security is disposed of
by the Trust or if the Unit holder disposes of a Unit. For taxpayers
other than corporations, net capital gains are subject to a maximum
marginal tax rate of 28%. However, it should be noted that legislative
proposals are introduced from time to time that affect tax rates and
could affect relative differences at which ordinary income and capital
gains are taxed.
Limitations on Deductibility of Trust Expenses by Unit Holders. Each
Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him, subject to the following limitation. It
should be noted that as a result of the Tax Reform Act of 1986, certain
miscellaneous itemized deductions, such as investment expenses, tax
return preparation fees and employee business expenses will be
deductible by an individual only to the extent they exceed 2% of such
individual's adjusted gross income. Unit holders may be required to
treat some or all of the expenses of the Trust as miscellaneous itemized
deductions subject to this limitation.
The Revenue Reconciliation Act of 1993 (the "Tax Act") raised tax rates
on ordinary income while capital gains remain subject to a 28% maximum
stated rate for taxpayers other than corporations. Because some or all
capital gains are taxed at a comparatively lower rate under the Tax Act,
the Tax Act includes a provision that recharacterizes capital gains as
ordinary income in the case of certain financial transactions that are
"conversion transactions" effective for transactions entered into after
April 30, 1993. Unit holders and prospective investors should consult
with their tax advisers regarding the potential effect of this provision
on their investment in Units. If the Unit holder disposes of a Unit, he
is deemed thereby to have disposed of his entire pro rata interest in
all assets of the Trust involved including his pro rata portion of all
the Securities represented by the Unit.
Special Tax Consequences of In-Kind Distributions Upon Termination of
the Trust. As discussed in "Rights of Unit Holders-How are Income and
Capital Distributed?", under certain circumstances a Unit holder who
owns at least 2,500 Units of a Trust may request an In-Kind Distribution
upon the termination of the Trust. The Unit holder requesting an In-Kind
Distribution will be liable for expenses related thereto (the
"Distribution Expenses") and the amount of such In-Kind Distribution
will be reduced by the amount of the Distribution Expenses. See "Rights
of Unit Holders-How are Income and Capital Distributed?" Treasury
Obligations held by the Trust will not be distributed to a Unit holder
as part of an In-Kind Distribution. The tax consequences relating to the
sale of Treasury Obligations are discussed above. As previously
discussed, prior to the termination of the Trust, a Unit holder is
considered as owning a pro rata portion of each of the Trust assets for
Federal income tax purposes. The receipt of an In-Kind Distribution upon
the termination of the Trust would be deemed an exchange of such Unit
holder's pro rata portion of each of the shares of stock and other
assets held by the Trust in exchange for an undivided interest in whole
shares of stock plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution will depend on whether the Unit holder receives cash in
addition to Equity Securities. A "Security" for this purpose is a
particular class of stock issued by a particular corporation (and does
not include the Treasury Obligations). A Unit holder will not recognize
Page 9
gain or loss if a Unit holder only receives Equity Securities in
exchange for his or her pro rata portion in the Equity Securities held
by the Trust. However, if a Unit holder also receives cash in exchange
for a fractional share of an Equity Security held by the Trust, such
Unit holder will generally recognize gain or loss based upon the
difference between the amount of cash received by the Unit holder and
his tax basis in such fractional share of an Equity Security held by the
Trust.
Because the Trust will own many Securities, a Unit holder who requests
an In-Kind Distribution will have to analyze the tax consequences with
respect to each Security owned by the Trust. The amount of taxable gain
(or loss) recognized upon such exchange will generally equal the sum of
the gain (or loss) recognized under the rules described above by such
Unit holder with respect to each Security owned by the Trust. Unit
holders who request an In-Kind Distribution are advised to consult their
tax advisers in this regard.
Computation of the Unit Holder's Tax Basis. Initially, a Unit holder's
tax basis in his Units will generally equal the price paid by such Unit
holder for his Units. The cost of the Units is allocated among the
Equity Securities held in the Trust in accordance with the proportion of
the fair market values of such Equity Securities on the date the Units
are purchased in order to determine such Unit holder's tax basis for his
pro rata portion of each Equity Security.
A Unit holder's tax basis in his Units and his pro rata portion of an
Equity Security held by the Trust will be reduced to the extent
dividends paid with respect to such Equity Security are received by the
Trust which are not taxable as ordinary income as described above.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified by the Internal Revenue Service that
payments to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification are
not provided when requested, distributions by the Trust to such Unit
holder (including amounts received upon the redemption of Units) will be
subject to back-up withholding. Distributions by the Trust will
generally be subject to United States income taxation and withholding in
the case of Units held by non-resident alien individuals, foreign
corporations or other non-United States persons (accrual of original
issue discount on the Treasury Obligations in the Trust may not be
subject to taxation or withholding provided certain requirements are
met). Such persons should consult their tax advisers.
Unit holders will be notified annually of the amounts of original issue
discount and income dividends includable in the Unit holder's gross
income and amounts of Trust expenses which may be claimed as itemized
deductions.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Why are Investments in the Trust Suitable for
Retirement Plans?"
The foregoing discussion relates only to United States federal income
taxes. Unit holders may be subject to state and local taxation in other
jurisdictions. Unit holders should consult their tax advisors regarding
potential state or local taxation with respect to the Units.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, under the existing income tax laws of
the State of New York, the Trust is not an association taxable as a
corporation and the income of the Trust will be treated as the income of
the Unit holders thereof.
Why are Investments in the Trust Suitable for Retirement Plans?
Units of the Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to capital
gains and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible
for special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
Page 10
PORTFOLIO
What are Treasury Obligations?
The Treasury Obligations deposited in the Trust consist of U.S. Treasury
bonds which have been stripped of their unmatured interest coupons. The
Treasury Obligations evidence the right to receive a fixed payment at a
future date from the U.S. Government, and are backed by the full faith
and credit of the U.S. Government. Treasury Obligations are purchased at
a deep discount because the buyer obtains only the right to a fixed
payment at a fixed date in the future and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations) is
that a fixed yield is earned not only on the original investment, but
also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the Treasury
Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than are securities of
comparable quality which make regular interest payments. The effect of
being able to acquire the Treasury Obligations at a lower price is to
permit more of the Trust's portfolio to be invested in Equity Securities.
What are Equity Securities?
The Trust consists of different issues of Equity Securities, all of
which are listed on a national securities exchange, the NASDAQ National
Market System or are traded in the over-the-counter market.
The Equity Securities of the Emerging Growth & Treasury Securities
Trust, Series 1 consist of common stocks issued by emerging companies
which generally have a small to medium market capitalization.
See "What are the Equity Securities Selected for Emerging Growth & Treasury
Securities Trust, Series 1?" for a general description of the companies.
Risk Factors. An investment in Units of the Trust should be made with an
understanding of the risks such an investment may entail.
The Trust consists of such Securities listed under "Schedule of
Investments" as may continue to be held from time to time in the Trust
and any additional Securities acquired and held by the Trust pursuant to
the provisions of the Trust Agreement together with cash held in the
Income and Capital Accounts. Neither the Sponsor nor the Trustee shall
be liable in any way for any failure in any of the Securities. However,
should any contract for the purchase of any of the Securities initially
deposited hereunder fail, the Sponsor will, unless substantially all of
the moneys held in the Trust to cover such purchase are reinvested in
substitute Securities in accordance with the Trust Agreement, refund the
cash and sales charge attributable to such failed contract to all Unit
holders on the next distribution date.
Because certain of the Equity Securities from time to time may be sold
under certain circumstances described herein, and because the proceeds
from such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trust will retain for any
length of time its present size and composition. Although the Portfolio
is not managed, the Sponsor may instruct the Trustee to sell Equity
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However, in the event such securities or
property are nonetheless acquired by the Trust, they may be accepted for
deposit in the Trust and either sold by the Trustee or held in such
Trust pursuant to the direction of the Sponsor (who may rely on the
advice of the Portfolio Supervisor). See "How May Securities be Removed
from the Trust?" Equity Securities, however, will not be sold by the
Trust to take advantage of market fluctuations or changes in anticipated
rates of appreciation or depreciation.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Equity Securities or the
general condition of the common stock market may worsen and the value of
the Equity Securities and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market
Page 11
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common
stocks have rights to receive payments from the issuers of those common
stocks that are generally subordinate to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trust have a right
to receive dividends only when and if, and in the amounts, declared by
the issuer's board of directors and have a right to participate in
amounts available for distribution by the issuer only after all other
claims on the issuer have been paid or provided for. Common stocks do
not represent an obligation of the issuer and, therefore, do not offer
any assurance of income or provide the same degree of protection of
capital as do debt securities. The issuance of additional debt
securities or preferred stock will create prior claims for payment of
principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its
common stock or the rights of holders of common stock with respect to
assets of the issuer upon liquidation or bankruptcy. The value of common
stocks is subject to market fluctuations for as long as the common
stocks remain outstanding, and thus the value of the Equity Securities in
the Portfolio may be expected to fluctuate over the life of the Trust to
values higher or lower than those prevailing on the Initial Date of Deposit.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
In addition to the risks of investing in common stock, investments in
common stock of small to medium capitalization companies tend to be
riskier and more volatile than investments in common stock of larger
capitalized companies and may not be suited for investors seeking income
and security. As a general definition, companies referred to as "small
to medium capitalization" companies typically have a market
capitalization between $10 million and $6.7 billion. As a general
definition, companies referred to as "small capitalization" companies
typically have a market capitalization between $50 million and $500
million; and "mid capitalization" companies between $500 million and
$6.7 billion. In addition, small capitalization companies generally have
lower revenue than larger companies (i.e., less than $1.5 billion), and
are often newly public companies or in the early stages of their product
cycle or in a niche-oriented business and may be regionally limited
companies (e.g., certain banks and insurance companies).
Whether or not the Equity Securities are listed on a national securities
exchange, the principal trading market for the Equity Securities may be
in the over-the-counter market. As a result, the existence of a liquid
trading market for the Equity Securities may depend on whether dealers
will make a market in the Equity Securities. There can be no assurance
that a market will be made for any of the Equity Securities, that any
market for the Equity Securities will be maintained or of the liquidity
of the Equity Securities in any markets made. In addition, the Trust may
be restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions, and the value of the Trust,
will be adversely affected if trading markets for the Equity Securities
are limited or absent.
Unit holders will be unable to dispose of any of the Equity Securities
in the Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee will
have the right to vote all of the voting stocks in the Trust and will
vote such stocks in accordance with the instructions of the Sponsor.
Investors should note that because the Underwriter uses the list of
Securities which comprises the portfolio in its independent capacity as
an investment advisor to individuals, mutual funds, employee benefit
plans and other institutions and persons and distributes this
information to various individuals and entities, the Underwriter may
recommend or effect from time to time the purchase or sale of one or
Page 12
more of the Securities. This may have an effect on the prices of the
Securities which is adverse to the interest of the purchasers of Units
of the Trust. Additionally, this may have an impact on the price paid by
the Trust for the Securities as well as the price received upon
redemption of the Units or upon the termination of the Trust. Investors
should also note that Securities will not be removed from the Trust and
additional Units of the Trust may be created even if the Underwriter no
longer believes certain or all of the Securities have the potential to
provide capital appreciation over the life of the Trust or issues a sell
recommendation regarding any of the Securities included in the Trust.
The Underwriter has acquired or may acquire the Securities for the
Sponsor and thereby benefits from transaction fees. The Underwriter in
its general securities business acts as agent or principal in connection
with the purchase and sale of equity securities, including the Equity
Securities in the Trust, and may act as a market maker in certain of the
Equity Securities. The Underwriter also from time to time may issue
reports on and make recommendations relating to equity securities, which
may include the Equity Securities.
What are the Equity Securities Selected for Emerging Growth & Treasury
Securities Trust, Series 1?
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust.
The value of the Equity Securities, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may be more
or less than the price at which they were deposited in the Trust. The
Equity Securities may appreciate or depreciate in value (or pay
dividends) depending on the full range of economic and market influences
affecting these securities. However, the Sponsor believes that, upon
termination of the Trust, even if the Equity Securities deposited in the
Trust are worthless, an event which the Sponsor considers highly
unlikely, the Treasury Obligations will provide sufficient principal to
at least equal $10.00 per Unit (which is equal to the per Unit value
upon maturity of the Treasury Obligations). This feature of the Trust
provides Unit holders with principal protection, although they might
forego any earnings on the amount invested. To the extent that Units are
purchased at a price less than $10.00 per Unit, this feature may also
provide a potential for capital appreciation.
Unless a Unit holder purchases Units of the Trust on the Initial Date of
Deposit (or another date when the value of the Units is $10.00 or less),
total distributions, including distributions made upon termination of
the Trust, may be less than the amount paid for a Unit.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Security. In the event of a notice
that any Treasury Obligations or Equity Securities will not be delivered
("Failed Contract Obligations") to the Trust, the Sponsor is authorized
under the Indenture to direct the Trustee to acquire other Treasury
Obligations or Equity Securities ("Replacement Securities"). Any
Replacement Security deposited in the Trust will, in the case of
Treasury Obligations have the same maturity value and, as closely as can
be reasonably acquired by the Sponsor, the same maturity date or, in the
case of Equity Securities, be identical to those which were the subject
of the failed contract. The Replacement Securities must be purchased
within 20 days after delivery of the notice of a failed contract and the
purchase price may not exceed the amount of funds reserved for the
purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraph is not utilized to acquire Replacement Securities in the event
of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
the Trust and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
Page 13
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in such Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of the Trust.
The Indenture also authorizes the Sponsor to increase the size of the
Trust and the number of Units thereof by the deposit of additional
Securities in the Trust and the issuance of a corresponding number of
additional Units.
The Trust consists of the Securities listed under "Schedule of
Investments" (or contracts to purchase such Securities) as may continue
to be held from time to time in the Trust and any additional Securities
acquired and held by the Trust pursuant to the provisions of the
Indenture (including provisions with respect to deposits into the Trust
of Securities in connection with the issuance of additional Units).
Once all of the Securities in the Trust are acquired, the Trustee will
have no power to vary the investments of the Trust, i.e., the Trustee will
have no managerial power to take advantage of market variations to improve
a Unit holder's investment, and may dispose of Securities only under
limited circumstances. See "How May Securities be Removed from the Trust?"
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Security which might
reasonably be expected to have a material adverse effect on the Trust.
At any time after the Initial Date of Deposit, litigation may be
instituted on a variety of grounds with respect to the Securities. The
Sponsor is unable to predict whether any such litigation will be
instituted, or if instituted, whether such litigation might have a
material adverse effect on the Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. During the initial
offering period, the Public Offering Price is based on the aggregate of
the offering side evaluation of the Treasury Obligations in the Trust
and the aggregate underlying value of the Equity Securities in the Trust
(generally determined by the closing sale prices of listed Equity
Securities and the ask prices of over-the-counter traded Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a sales charge of 5.5% (equivalent to 5.820%
of the net amount invested) divided by the number of Units of the Trust
outstanding.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate of the offering side evaluation of the Treasury
Obligations in the Trust and the aggregate underlying value of the
Equity Securities in the Trust (generally determined by the closing sale
prices of listed Equity Securities and the ask prices of over-the-
counter traded Equity Securities), plus or minus cash, if any, in the
Income and Capital Accounts of the Trust divided by the number of Units
of the Trust outstanding. For secondary market sales after the
completion of the initial offering period, the Public Offering Price is
based on the aggregate bid side evaluation of the Treasury Obligations
in the Trust and the aggregate underlying value of the Equity Securities
in the Trust (generally determined by the closing sale prices of listed
Equity Securities and bid prices of over-the-counter traded Equity
Securities), plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, plus a maximum sales charge of 5.5% of the Public
Offering Price (equivalent to 5.820% of the net amount invested),
subject to reduction beginning _________, 1997, divided by the number of
outstanding Units of the Trust.
The minimum purchase of the Trust is $1,000. The applicable sales charge
is reduced by a discount as indicated below for volume purchases (except
for sales made pursuant to a "wrap fee account" or similar arrangements
as set forth below):
<TABLE>
<CAPTION>
Primary and Secondary
_____________________
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ _________ __________
<S> <C> <C>
5,000 but less than 10,000 0.25% 0.2506%
10,000 but less than 25,000 0.50% 0.5025%
25,000 but less than 50,000 1.00% 1.0101%
50,000 or more 2.00% 2.0408%
</TABLE>
Page 14
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker/dealer, bank or other selling agent. The reduced
sales charge structure will apply on all purchases of Units in the Trust
by the same person on any one day from the Underwriter, or any one
broker/dealer, bank or other selling agent. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser under 21 years of age will be deemed, for the
purposes of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also be
applicable to a trustee or other fiduciary purchasing securities for a
single trust estate or single fiduciary account. The purchaser must
inform the Underwriter, broker/dealer, bank or other selling agent of
any such combined purchase prior to the sale in order to obtain the
indicated discount. In addition, with respect to the employees, officers
and directors (including their immediate family members, defined as
spouses, children, grandchildren, parents, grandparents, mothers-in-law,
fathers-in-law, sons-in-law and daughters-in-law, and trustees,
custodians or fiduciaries for the benefit of such persons) of the
Sponsor, Underwriter, broker/dealers, banks or other selling agents and
their affiliates, Units may be purchased in the primary or secondary
market at the Public Offering Price less the concession the Sponsor
typically allows to dealers and other selling agents for purchases.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to
dealers and other selling agents for purchases (see "Public Offering-How
are Units Distributed?") by investors who purchase Units through
registered investment advisers, certified financial planners or
registered broker-dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
Had the Units of the Trust been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price for the
Trust would have been as indicated in "Summary of Essential
Information." The Public Offering Price of Units on the date of the
prospectus or during the initial offering period may vary from the
amount stated under "Summary of Essential Information" in accordance
with fluctuations in the prices of the underlying Securities. During the
initial offering period, the aggregate value of the Units of the Trust
shall be determined (a) on the basis of the offering prices of the
Treasury Obligations and the aggregate underlying value of the Equity
Securities therein plus or minus cash, if any, in the Income and Capital
Accounts of the Trust, (b) if offering prices are not available for the
Treasury Obligations, on the basis of offering prices for comparable
securities, (c) by determining the value of the Treasury Obligations on
the offer side of the market by appraisal, or (d) by any combination of
the above. The aggregate underlying value of the Equity Securities will
be determined in the following manner: If the Equity Securities are
listed on a national securities exchange or the NASDAQ National Market
System, this evaluation is generally based on the closing sale prices on
that exchange or that system (unless it is determined that these prices
are inappropriate as a basis for valuation) or, if there is no closing
sale price on that exchange or system, at the closing ask prices. If the
Equity Securities are not so listed or, if so listed and the principal
market therefor is other than on the exchange, the evaluation shall
generally be based on the current ask price on the over-the-counter
market (unless it is determined that these prices are inappropriate as a
basis for evaluation). If current ask prices are unavailable, the
evaluation is generally determined (a) on the basis of current ask
prices for comparable securities, (b) by appraising the value of the
Equity Securities on the ask side of the market or (c) by any
combination of the above.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the bid price per Unit of
the Treasury Obligations in the Trust and the aggregate underlying value
of the Equity Securities therein, plus or minus cash, if any, in the
Income and Capital Accounts of the Trust plus the applicable sales
charge. The offering price of the Treasury Obligations may be expected
to be greater than the bid price of the Treasury Obligations by less than 2%.
Although payment is normally made three business days following the
order for purchase (the date of settlement), payment may be made prior
thereto. A person will become owner of the Units on the date of
settlement provided payment has been received. Cash, if any, made
available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be
Page 15
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934. Delivery of Certificates representing
Units so ordered will be made three business days following such order
or shortly thereafter. See "Rights of Unit Holders-How May Units be
Redeemed?" for information regarding the ability to redeem Units ordered
for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Securities are deposited by the Sponsor, Units will be
distributed to the public at the then current Public Offering Price. The
initial offering period may be up to approximately 360 days. During such
period, the Sponsor may deposit additional Securities in the Trust and
create additional Units. Units reacquired by the Sponsor during the
initial offering period (at prices based upon aggregate offering price
of the Treasury Obligations and the aggregate underlying value of the
Equity Securities in the Trust plus or minus a pro rata share of cash,
if any, in the Income and Capital Accounts of such Trust) may be resold
at the then current Public Offering Price. Upon the termination of the
initial offering period, unsold Units created or reacquired during the
initial offering period will be sold or resold at the then current
Public Offering Price.
Upon completion of the initial offering, Units repurchased in the
secondary market (see "Will There be a Secondary Market?") may be
offered by this prospectus at the secondary market public offering price
determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales initially will be made to dealers and
others at prices which represent a concession or agency commission of
3.2% of the Public Offering Price and secondary market sales (or 65% of
the then current maximum sales charge after _________). Volume
concessions or agency commissions of an additional .40% of the Public
Offering Price will be given to any broker/dealer or bank, who purchases
from the Sponsor at least $100,000 of the Trust on the Initial Date of
Deposit or $250,000 on any other day thereafter. Volume concessions or
agency commissions of an additional .55% of the Public Offering Price
will be given to any broker/dealer or bank, who purchases from the
Sponsor at least $1,000,000 on the Initial Date of Deposit. The Sponsor
reserves the right to change the amount of the concession or agency
commission from time to time. Effective on each _________, commencing
_________, the sales charge of the Trust will be reduced by 1/2 of 1% to
a minimum sales charge of 3.0%. However, resales of Units of the Trust
by such broker/dealers, banks and other selling agents to the public
will be made at the Public Offering Price described in the prospectus.
Certain commercial banks may be making Units of the Trust available to
their customers on an agency basis. A portion of the sales charge paid
by these customers is retained by or remitted to the banks in the
amounts indicated in the second preceding sentence. Under the Glass-
Steagall Act, banks are prohibited from underwriting Units of the Trust;
however, the Glass-Steagall Act does permit certain agency transactions
and the banking regulators have not indicated that these particular
agency transactions are not permitted under such Act. In Texas and in
certain other states, any banks making Units available must be
registered as broker/dealers under state law.
What are the Sponsor's and Underwriter's Profits?
The Underwriter of the Trust will receive a gross sales commission equal
to 5.5% of the Public Offering Price of the Units (equivalent to 5.820%
of the net amount invested), less any reduced sales charge for quantity
purchases as described under "Public Offering-How is the Public Offering
Price Determined?" See "Underwriter" for information regarding the
receipt of the excess gross sales commissions by the Sponsor from the
Underwriter and additional concessions available to the Underwriter,
broker/dealers, banks and other selling agents. In addition, the Sponsor
may be considered to have realized a profit or to have sustained a loss,
as the case may be, in the amount of any difference between the cost of
the Securities to the Trust (which is based on the Evaluator's
determination of the aggregate offering price of the underlying
Securities of the Trust on the Initial Date of Deposit as well as on
subsequent deposits) and the cost of such Securities to the Sponsor. See
Note (2) of "Schedule of Investments" for the Trust. During the initial
offering period, the broker/dealers, banks and other selling agents also
may realize profits or sustain losses as a result of fluctuations after
the Initial Date of Deposit in the Public Offering Price received by
such dealers and others upon the sale of Units.
Page 16
In maintaining a market for the Units, the Sponsor and Underwriter will
also realize profits or sustain losses in the amount of any difference
between the price at which Units are purchased and the price at which
Units are resold (which price includes a sales charge of 5.5% of the
Public Offering Price, subject to reduction beginning _________, 1997)
or redeemed. The secondary market public offering price of Units may be
greater or less than the cost of such Units to the Sponsor or the
Underwriter.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated to do
so, the Sponsor intends to ,and the Underwriter may, maintain a market
for the Units and continuously offer to purchase Units at prices,
subject to change at any time, based upon the aggregate bid price of the
Treasury Obligations in the Trust and the aggregate underlying value of
the Equity Securities in the Trust plus or minus cash, if any, in the
Income and Capital Accounts of the Trust. All expenses incurred in
maintaining a secondary market, other than the fees of the Evaluator and
the costs of the Trustee in transferring and recording the ownership of
Units, will be borne by the Sponsor. If the supply of Units exceeds
demand, or for some other business reason, the Sponsor may discontinue
purchases of Units at such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF
HIS UNITS, HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES
PRIOR TO MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority. Record ownership
may occur before settlement.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
Page 17
How are Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted interest
on the Treasury Obligations) received with respect to any of the
Securities in the Trust on or about the Income Distribution Dates to
Unit holders of record on the preceding Income Record Date. See "Summary
of Essential Information." Because dividends are not received by the
Trust at a constant rate throughout the year, such distributions to Unit
holders may be more or less than the amount credited to the Income
Account as of the Record Date. Notification to the Trustee of the
transfer of Units is the responsibility of the purchaser, but in the
normal course of business such notice is provided by the selling broker-
dealer. The pro rata share of cash in the Capital Account of the Trust
will be computed as of the fifteenth day of each month. Proceeds
received on the sale of any Securities in the Trust, to the extent not
used to meet redemptions of Units or pay expenses, will, however, be
distributed on the last day of each month to Unit holders of record on
the fifteenth day of each month if the amount available for distribution
equals at least $1.00 per 100 Units. The Trustee is not required to pay
interest on funds held in the Capital Account of the Trust (but may
itself earn interest thereon and therefore benefit from the use of such
funds). Notwithstanding, distributions of funds in the Capital Account,
if any, will be made on the last day of each December to Unit holders of
record as of December 15. Income with respect to the original issue
discount on the Treasury Obligations in the Trust will not be
distributed currently, although Unit holders will be subject to Federal
income tax as if a distribution had occurred. See "What is the Federal
Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder only when filing a tax return. Under
normal circumstances the Trustee obtains the Unit holder's tax
identification number from the selling broker. However, a Unit holder
should examine his or her statements from the Trustee to make sure that
the Trustee has been provided a certified tax identification number in
order to avoid this possible "back-up withholding." In the event the
Trustee has not been previously provided such number, one should be
provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
of the Trust will, upon surrender of his Units for redemption, receive:
(i) the pro rata share of the amounts realized upon the disposition of
Equity Securities, unless he elects an In-Kind Distribution as described
under "How May the Indenture be Amended or Terminated?", (ii) a pro rata
share of the amounts realized upon the disposition of the Treasury
Obligations and (iii) a pro rata share of any other assets of the Trust,
less expenses of the Trust, subject to the limitation that Treasury
Obligations may not be sold to pay for Trust expenses.
The Trustee will credit to the Income Account of the Trust any dividends
received on the Equity Securities therein. All other receipts (e.g.,
return of capital, etc.) are credited to the Capital Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of the Trust the following information in reasonable detail: (1) a
summary of transactions in the Trust for such year; (2) any Securities
sold during the year and the Securities held at the end of such year by
the Trust; (3) the redemption price per Unit based upon a computation
thereof on the 31st day of December of such year (or the last business
day prior thereto); and (4) amounts of income and capital distributed
during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trust furnished to it by the Evaluator.
Page 18
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
Trustee at its corporate trust office in the City of New York of the
certificates representing the Units to be redeemed, or in the case of
uncertificated Units, delivery of a request for redemption, duly
endorsed or accompanied by proper instruments of transfer with the
signature guaranteed as explained above (or by providing satisfactory
indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee, except that as regards Units received after 4:00 p.m. Eastern
time, the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"How are Income and Capital Distributed?" In the event the Trustee has
not been previously provided such number, one must be provided at the
time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Equity
Securities are sold, the size and diversity of the Trust will be
reduced. Such sales may be required at a time when Equity Securities
would not otherwise be sold and might result in lower prices than might
otherwise be realized. Equity Securities will be sold to meet
redemptions of Units before Treasury Obligations, although Treasury
Obligations may be sold if the Trust is assured of retaining a
sufficient principal amount of Treasury Obligations to provide funds
upon maturity of such Trust at least equal to $10.00 per Unit.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Treasury Obligations and the aggregate underlying value of the Equity
Securities in the Trust plus or minus cash, if any, in the Income and
Capital Accounts of the Trust, while the Public Offering Price per Unit
during the initial offering period will be determined on the basis of
the offering price of such Treasury Obligations, as of the close of
trading on the New York Stock Exchange on the date any such
determination is made and the aggregate underlying value of the Equity
Securities in the Trust, plus or minus cash, if any, in the Income and
Capital Accounts of the Trust. On the Initial Date of Deposit the Public
Offering Price per Unit (which is based on the offering prices of the
Treasury Obligations and the aggregate underlying value of the Equity
Securities in the Trust and includes the sales charge) exceeded the Unit
value at which Units could have been redeemed (based upon the currentbid
prices of the Treasury Obligations and the aggregate underlying value of
the Equity Securities in the Trust) by the amount shown under "Summary
of Essential Information." The Redemption Price per Unit of the Trust is
the pro rata share of each Unit determined by the Trustee by adding: (1)
the cash on hand in the Trust other than cash deposited in the Trust to
purchase Securities not applied to the purchase of such Securities; (2)
the aggregate value of the Securities (including "when issued"
contracts, if any) held in the Trust, as determined by the Evaluator on
the basis of bid prices of the Treasury Obligations and the aggregate
underlying value of the Equity Securities in the Trust next computed;
and (3) dividends receivable on the Equity Securities trading ex-
dividend as of the date of computation; and deducting therefrom: (1)
amounts representing any applicable taxes or governmental charges
payable out of the Trust; (2) an amount representing estimated accrued
expenses of the Trust, including but not limited to fees and expenses of
the Trustee (including legal and auditing fees), the Evaluator and
Page 19
supervisory fees, if any; (3) cash held for distribution to Unit holders
of record of the Trust as of the business day prior to the evaluation
being made; and (4) other liabilities incurred by the Trust; and finally
dividing the results of such computation by the number of Units of the
Trust outstanding as of the date thereof.
The aggregate value of the Equity Securities will be determined in the
following manner: if the Equity Securities are listed on a national
securities exchange or the NASDAQ National Market System, this
evaluation is generally based on the closing sale prices on that
exchange or that system (unless it is determined that these prices are
inappropriate as a basis for valuation) or, if there is no closing sale
price on that exchange or system, at the closing bid prices. If the
Equity Securities are not so listed or, if so listed and the principal
market therefor is other than on the exchange, the evaluation shall
generally be based on the current bid price on the over-the-counter
market (unless these prices are inappropriate as a basis for
evaluation). If current bid prices are unavailable, the evaluation is
generally determined (a) on the basis of current bid prices for
comparable securities, (b) by appraising the value of the Equity
Securities on the bid side of the market or (c) by any combination of
the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
How May Securities be Removed from the Trust?
The Portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of an Equity Security in
the event that an issuer defaults in the payment of a dividend that has
been declared, that any action or proceeding has been instituted
restraining the payment of dividends or there exists any legal question
or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments
of dividends, the credit standing of the issuer or otherwise impair the
sound investment character of the Equity Security, that the issuer has
defaulted on the payment on any other of its outstanding obligations,
that the price of the Equity Security has declined to such an extent or
other such credit factors exist so that in the opinion of the Sponsor,
the retention of such Equity Securities would be detrimental to the
Trust. Treasury Obligations may be sold by the Trustee only pursuant to
the liquidation of the Trust or to meet redemption requests. Except as
stated under "Portfolio-What are Some Additional Considerations for
Investors?" for Failed Contract Obligations, the acquisition by the
Trust of any securities other than the Securities is prohibited.
Pursuant to the Indenture and with limited exceptions, the Trustee may
sell any securities or other property acquired in exchange for Equity
Securities such as those acquired in connection with a merger or other
transaction. If offered such new or exchanged securities or property,
the Trustee shall reject the offer. However, in the event such
Page 20
securities or property are nonetheless acquired by the Trust, they may
be accepted for deposit in the Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities by the Trustee are credited to the Capital Account of the
Trust for distribution to Unit holders or to meet redemptions. 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 Trust with
respect to selling Securities from the Trust. 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 Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses;
provided, however, that in the case of Securities sold to meet
redemption requests, Treasury Obligations may only be sold if the Trust
is assured of retaining a sufficient principal amount of Treasury
Obligations to provide funds upon maturity of the Trust at least equal
to $10.00 per Unit. Treasury Obligations may not be sold by the Trustee
to meet Trust expenses.
The Sponsor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Equity Securities. To the extent this is not
practicable, the composition and diversity of the Equity Securities may
be altered. In order to obtain the best price for the Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Equity Securities are to be sold. The Sponsor
may consider sales of Units of unit investment trusts which it sponsors
in making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trust's portfolio transactions.
INFORMATION AS TO UNDERWRITER, SPONSOR, TRUSTEE AND EVALUATOR
Who is the Underwriter?
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, The First Trust Special Situations Trust, The First Trust
Insured Corporate Trust, The First Trust of Insured Municipal Bonds, The
First Trust GNMA, Templeton Growth and Treasury Trust, Templeton Foreign
Fund & U.S. Treasury Securities Trust and The Advantage Growth and
Treasury Securities Trust. First Trust introduced the first insured unit
investment trust in 1974 and to date more than $9 billion in First Trust
unit investment trusts have been deposited. The Sponsor's employees
include a team of professionals with many years of experience in the
unit investment trust industry. The Sponsor is a member of the National
Association of Securities Dealers, Inc. and Securities Investor
Protection Corporation and has its principal offices at 1001 Warrenville
Road, Lisle, Illinois 60532; telephone number (630) 241-4141. As of
December 31, 1995 the total partners' capital of Nike Securities L.P.
was $9,033,760 (audited). (This paragraph relates only to the Sponsor
and not to the Trust or to any series thereof or to any other
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
Page 21
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trusts as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor and the Trustee,
in which event the Sponsor and the Trustee are to use their best efforts
to appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
Page 22
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the maturity,
redemption or other disposition of the last of the Treasury Obligations
held in such Trust, but in no event beyond the Mandatory Termination
Date indicated herein under "Summary of Essential Information." The
Trust may be liquidated at any time by consent of 100% of the Unit
holders of the Trust, or by the Trustee in the event that Units of the
Trust not yet sold aggregating more than 60% of the Units of the Trust
are tendered for redemption by the Underwriter, including the Sponsor.
If the Trust is liquidated because of the redemption of unsold Units of
the Trust by the Underwriter, the Sponsor will refund to each purchaser
of Units of the Trust the entire sales charge paid by such purchaser. In
the event of termination, written notice thereof will be sent by the
Trustee to all Unit holders of the Trust. Within a reasonable period
after termination, the Trustee will follow the procedures set forth
under "How are Income and Capital Distributed?"
Commencing on the Treasury Obligations Maturity Date, Equity Securities
will begin to be sold in connection with the termination of the Trust.
The Sponsor will determine the manner, timing and execution of the sale
of the Equity Securities. Written notice of any termination of the Trust
specifying the time or times at which Unit holders may surrender their
certificates for cancellation shall be given by the Trustee to each Unit
holder at his address appearing on the registration books of the Trust
maintained by the Trustee. At least 60 days prior to the Treasury
Obligations Maturity Date, the Trustee will provide written notice
thereof to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges), if
such Unit holder owns at least 2,500 Units of the Trust, rather than to
receive payment in cash for such Unit holder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity
Securities. All Unit holders of the Trust will receive their pro rata
portion of the Treasury Obligations in cash upon the termination of the
Trust. To be effective, the election form, together with surrendered
certificates and other documentation required by the Trustee, must be
returned to the Trustee at least five business days prior to the
Treasury Obligations Maturity Date. Unit holders not electing a
distribution of shares of Equity Securities will receive a cash
distribution from the sale of the remaining Securities within a
reasonable time after the Trust is terminated. A Unit holder may, of
course, at any time after the Equity Securities are distributed, sell
all or a portion of the shares. Regardless of the distribution involved,
the Trustee will deduct from the funds of the Trust any accrued costs,
expenses, advances or indemnities provided by the Trust Agreement,
including estimated compensation of the Trustee and costs of liquidation
and any amounts required as a reserve to provide for payment of any
applicable taxes or other governmental charges. Any sale of Securities
in the Trust upon termination may result in a lower amount than might
otherwise be realized if such sale were not required at such time. The
Trustee will then distribute to each Unit holder his pro rata share of
the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statement of net assets, including the schedule of investments, of
the Trust at the opening of business on the Initial Date of Deposit
appearing in this Prospectus and Registration Statement has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement,
and is included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
Page 23
UNDERWRITING
The Underwriter named below has purchased Units in the following amount:
<TABLE>
<CAPTION>
Number
Name Address of Units
_______ __________ ________
<S> <C> <C>
Underwriter
The Boston Group, L.P. 2049 Century Park East
Los Angeles, CA 90067
=======
</TABLE>
On the Initial Date of Deposit, the Underwriter of the Trust became the
owner of the Units of the Trust and entitled to the benefits thereof, as
well as the risks inherent therein.
The Underwriter Agreement provides that a public offering of the Units
of the Trust will be made at the Public Offering Price described in the
Prospectus. Units may also be sold to or through dealers and others
during the initial offering period and in the secondary market at prices
representing a concession or agency commission as described in "Public
Offering-How are Units Distributed?"
The Underwriter has agreed to underwrite additional Units of the Trust
as they become available. The Sponsor will receive from the Underwriter
% of the Public Offering Price per Unit.
From time to time the Sponsor may implement programs under which the
Underwriter and dealers of the Trust may receive nominal awards from the
Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of the Underwriter or dealers may be eligible to win
other nominal awards for certain sales efforts, or under which the
Sponsor will reallow to any such Underwriter or dealer that sponsors
sales contests or recognition programs conforming to criteria
established by the Sponsor, or participates in sales programs sponsored
by 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 Underwriter or qualifying dealers for certain services or
activities which are primarily intended to result in sales of Units of
the Trust. Such payments are made by the Sponsor out of its own assets,
and not out of the assets of the Trust. These programs will not change
the price Unit holders pay for their Units or the amount that the Trust
will receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar Trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as the common stocks
comprising the Dow Jones Industrial Average, corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ from
those of the Trust. U.S. Government bonds, for example, are backed by
the full faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of the Trust are
described more fully elsewhere in this Prospectus.
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
Trust performance may be compared to performance on a total return basis
of the Dow Jones Industrial Average, the S&P 500 Composite Price Stock
Index, or performance data from Lipper Analytical Services, Inc. and
Page 24
Morningstar Publications, Inc. or from publications such as Money, The
New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of the Trust's relative performance for
any future period.
Page 25
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 188
We have audited the accompanying statement of net assets, including the
schedule of investments, of The First Trust Special Situations Trust,
Series 188, comprised of Emerging Growth & Treasury Securities Trust,
Series 1 as of the opening of business on ___________, 1997. The
statement of net assets is the responsibility of the Trust's Sponsor.
Our responsibility is to express an opinion on the statement of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on ___________,
1997. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of The First
Trust Special Situations Trust, Series 188, comprised of Emerging Growth
& Treasury Securities Trust, Series 1 at the opening of business on
___________, 1997 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
___________, 1997
Page 26
Statement of Net Assets
EMERGING GROWTH & TREASURY SECURITIES TRUST, SERIES 1
The First Trust Special Situations Trust, Series 188
At the Opening of Business on the Initial Date of Deposit
___________, 1997
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Securities represented by purchase contracts (1) (2) $
Organizational and offering costs (3)
________
Less accrued organizational and offering costs (3) ( )
________
Net assets $
========
Units outstanding
ANALYSIS OF NET ASSETS
Cost to investors (4) $
Less sales charge (4) ( )
________
Net assets $
========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Securities listed under "Schedule of
Investments" for Emerging Growth & Treasury Securities Trust, Series 1
is based on the offering side evaluations of the Treasury Obligations
and the aggregate underlying value of the Equity Securities.
(2) An irrevocable letter of credit totaling $ issued by
Bankers Trust Company has been deposited with the Trustee as collateral
covering the monies necessary for the purchase of the Securities in the
Emerging Growth & Treasury Securities Trust, Series 1 pursuant to
contracts for the purchase of such Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over a period
not to exceed five years from the Initial Date of Deposit. The estimated
organizational and offering costs are based on Units of the
Trust expected to be issued. To the extent the number of Units issued is
larger or smaller, the estimate will vary.
(4) The aggregate cost to investors includes a sales charge computed at
the rate of 5.5% of the Public Offering Price (equivalent to 5.820% of
the net amount invested), assuming no reduction of sales charge for
quantity purchases.
Page 27
Schedule of Investments
EMERGING GROWTH & TREASURY SECURITIES TRUST, SERIES 1
The First Trust Special Situations Trust, Series 188
At the Opening of Business on the Initial Date of Deposit
___________, 1997
<TABLE>
<CAPTION>
Approximate
Percentage of Market Value
Aggregate per Share Cost
Maturity Offering of Equity Securities
Value Name of Issuer and Title of Security (1) Price (3) Securities to Trust (2)
________ ________________________________________ _____________ ____________ ____________
<C> <S> <C> <C> <C>
$ Zero coupon U.S. Treasury bonds % $
maturing ___________, 2008
Number Ticker Symbol and
of Shares Name of Issuer of Equity Securities (1)
________ _______________________________________
% $
%
%
%
%
%
_____ ______
Total Equity Securities %
_____ ______
Total Investments 100% $
===== ======
</TABLE>
[FN]
______________
(1) The Treasury Obligations were purchased at a discount from their par
value because there is no stated interest income thereon (such
securities are often referred to as zero coupon U.S. Treasury bonds).
Over the life of the Treasury Obligations the value increases, so that
upon maturity the holders will receive 100% of the principal amount
thereof. All Securities are represented by regular way contracts to
purchase such Securities for the performance of which an irrevocable
letter of credit has been deposited with the Trustee. The contracts to
purchase Securities were entered into by the Sponsor on ________, 1997
and _______, 1997.
(2) The cost of the Securities to the Trust represents the offering side
evaluation as determined by the Evaluator, an affiliate of the Sponsor,
with respect to the Treasury Obligations and the aggregate underlying
value with respect to the Equity Securities acquired (generally
determined by the closing sale prices of the listed Equity Securities
and the ask prices of the over-the-counter traded Equity Securities on
the business day preceding the Initial Date of Deposit). The offering
side evaluation of the Treasury Obligations is greater than the bid side
evaluation of such Treasury Obligations which is the basis on which the
Redemption Price per Unit will be determined after the initial offering
period. The aggregate value, based on the bid side evaluation of the
Treasury Obligations and the aggregate underlying value of the Equity
Securities on the Initial Date of Deposit, was $ . Cost and profit to
the Sponsor relating to the Treasury Obligations sold to the Trust were
$ and $ , respectively. Cost and loss to Sponsor relating to the
Page 28
Equity Securities sold to the Trust were $ and $ ,
respectively.
(3) The portfolio may contain additional Equity Securities each of which
will not exceed approximately 5% of the Aggregate Offering Price for
Equity Securities. Although it is not the Sponsor's intention, certain
of the Equity Securities listed above may not be included in the final
portfolio. Also, the percentages of the Aggregate Offering Price for the
Equity Securities are approximate amounts and may vary in the final
portfolio.
Page 29
This page is intentionally left blank.
Page 30
This page is intentionally left blank.
Page 31
CONTENTS:
Summary of Essential Information 4
The First Trust Special Situations Trust, Series 188:
What is The First Trust Special Situations Trust? 5
What are the Expenses and Charges? 6
What is the Federal Tax Status of Unit Holders? 7
Why are Investments in the Trusts Suitable for
Retirement Plans? 10
Portfolios:
What are Treasury Obligations? 11
What are Equity Securities? 11
Risk Factors 11
What are the Equity Securities Selected for
Emerging Growth & Treasury Securities Trust,
Series 1? 13
What are Some Additional Considerations for 13
Investors?
Public Offering:
How is the Public Offering Price Determined? 14
How are Units Distributed? 16
What are the Sponsor's and Underwriter's Profits? 16
Will There be a Secondary Market? 17
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 17
How are Income and Capital Distributed? 18
What Reports will Unit Holders Receive? 18
How May Units be Redeemed? 19
How May Units be Purchased by the Sponsor? 20
How May Securities be Removed from the Trust? 20
Information as to Underwriter, Sponsor, Trustee
and Evaluator:
Who is the Underwriter? 21
Who is the Sponsor? 21
Who is the Trustee? 21
Limitations on Liabilities of Sponsor and Trustee 22
Who is the Evaluator? 22
Other Information:
How May the Indenture be Amended or Terminated? 23
Legal Opinions 23
Experts 23
Underwriting 24
Report of Independent Auditors 26
Statement of Net Assets 27
Notes to Statement of Net Assets 27
Schedule of Investments 28
______________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL 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.
The Boston Group, L.P.
Emerging Growth & Treasury Securities Trust
Series 1
The Boston Group, L.P.
2049 Century Park East
Los Angeles, CA 90067
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
___________, 1997
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 32
MEMORANDUM
Re: The First Trust Special Situations Trust, Series 188
As indicated in our cover letter transmitting the
Registration Statement on Form S-6 and other related material
under the Securities Act of 1933 to the Commission, the only
difference of consequence (except as described below) between The
First Trust Special Situations Trust, Series 176, which is the
current fund, and The First Trust Special Situations Trust,
Series 188, the filing of which this memorandum accompanies, is
the change in the series number. The list of securities
comprising the Fund, the evaluation, record and distribution
dates and other changes pertaining specifically to the new
series, such as size and number of Units in the Fund and the
statement of condition of the new Fund, will be filed by
amendment.
1940 ACT
FORMS N-8A AND N-8B-2
These forms were not filed, as the Form N-8A and Form N-8B-2
filed in respect of Templeton Growth and Treasury Trust, Series 1
and subsequent series (File No. 811-05903) related also to the
subsequent series of the Fund.
1933 ACT
PROSPECTUS
The only significant changes in the Prospectus from the
Series 176 Prospectus relate to the series number and size and
the date and various items of information which will be derived
from and apply specifically to the securities deposited in the
Fund.
CONTENTS OF REGISTRATION STATEMENT
ITEM A Bonding Arrangements of Depositor:
Nike Securities L.P. is covered by a Broker's Fidelity
Bond, in the total amount of $1,000,000, the insurer
being National Union Fire Insurance Company of
Pittsburgh.
ITEM B This Registration Statement on Form S-6 comprises the
following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
Exhibits
Financial Data Schedule
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, The First Trust Special Situations Trust, Series
188 has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Lisle and State of Illinois on February 7, 1997.
THE FIRST TRUST SPECIAL SITUATIONS
TRUST, SERIES 188
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Sole Director of
Nike Securities February 7, 1997
Corporation, 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., the Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with Amendment No. 1 to form S-6 of The First Trust Combined
Series 258 (File No. 33-63483) and the same is hereby
incorporated by this reference.
S-2
CONSENTS OF COUNSEL
The consents of counsel to the use of their names in the
Prospectus included in this Registration Statement will be
contained in their respective opinions to be filed as Exhibits
3.1, 3.2, 3.3 and 3.4 of the Registration Statement.
CONSENT OF ERNST & YOUNG LLP
The consent of Ernst & Young LLP to the use of its name and
to the reference to such firm in the Prospectus included in this
Registration Statement will be filed by amendment.
CONSENT OF FIRST TRUST ADVISORS L.P.
The consent of First Trust Advisors L.P. to the use of its
name in the Prospectus included in the Registration Statement is
filed as Exhibit 4.1 to the Registration Statement.
S-3
EXHIBIT INDEX
1.1 Form of Standard Terms and Conditions of Trust for The
First Trust Special Situations Trust, Series 22 and
certain subsequent Series, effective November 20, 1991
among Nike Securities L.P., as Depositor, United States
Trust Company of New York as Trustee, Securities
Evaluation Service, Inc., as Evaluator, and Nike
Financial Advisory Services L.P. as Portfolio Supervisor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-43693] filed on behalf of The First Trust
Special Situations Trust, Series 22).
1.1.1* Form of Trust Agreement for Series 188 among Nike
Securities L.P., as Depositor, The Chase Manhattan Bank,
as Trustee and First Trust Advisors L.P., as Evaluator
and Portfolio Supervisor.
1.2 Copy of Certificate of Limited Partnership of Nike
Securities L.P. (incorporated by reference to Amendment
No. 1 to Form S-6 [File No. 33-42683] filed on behalf of
The First Trust Special Situations Trust, Series 18).
1.3 Copy of Amended and Restated Limited Partnership Agreement
of Nike Securities L.P. (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
1.4 Copy of Articles of Incorporation of Nike Securities
Corporation, the general partner of Nike Securities L.P.,
Depositor (incorporated by reference to Amendment No. 1
to Form S-6 [File No. 33-42683] filed on behalf of The
First Trust Special Situations Trust, Series 18).
1.5 Copy of By-Laws of Nike Securities Corporaiton, the
general partner of Nike Securities L.P., Depositor
(incorporated by reference to Amendment No. 1 to Form S-6
[File No. 33-42683] filed on behalf of The First Trust
Special Situations Trust, Series 18).
2.1 Copy of Certificate of Ownership (included in Exhibit 1.1
filed herewith on page 2 and incorporated herein by
reference).
3.1* Opinion of counsel as to legality of Securities being
registered.
3.2* Opinion of counsel as to Federal income tax status of
Securities being registered.
S-4
3.3* Opinion of counsel as to New York income tax status of
Securities being registered.
3.4* Opinion of counsel as to advancement of funds by Trustee.
4.1* Consent of First Trust Advisors L.P.
6.1 List of Directors and Officers of Depositor and other
related information (incorporated by reference to
Amendment No. 1 to Form S-6 [File No. 33-42683] filed on
behalf of The First Trust Special Situations Trust,
Series 18).
7.1 Power of Attorney executed by the Director listed on page
S-3 of this Registration Statement (incorporated by
reference to Amendment No. 1 to Form S-6 [File No.
33-63483] filed on behalf of The First Trust Combined
Series 258).
___________________________________
* To be filed by amendment.
S-5
