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: FT 223
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 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. 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.
FT 223
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 FT Series
of trust
6. Execution and termination The FT Series; Other
of trust agreement 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 FT Series
(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 FT Series
11. Types of securities comprising The FT Series
12. Certain information
regarding periodic payment
plan certificates *
13. (a) Load, fees, expenses, etc. Summary of Essential
Information; Public
Offering; The FT Series
(b) Certain information
regarding periodic payment
plan certificates *
(c) Certain percentages Summary of Essential
Information; The FT
Series; 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 FT Series
by depositor, principal
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 FT Series; Rights of
Unit Holders
17. Withdrawal or redemption The FT Series; 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 FT Series;
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 FT
Series; 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 FT Series
50. Trustee's lien The FT Series
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 FT Series; Rights
agreement with respect of Unit Holders
to selection or elimination
of underlying securities
(b) Transactions involving
elimination of underlying
securities *
(c) Policy regarding The FT Series; Rights
substitution or elimination of Unit Holders
of underlying securities
(d) Fundamental policy not
otherwise covered *
53. Tax status of Trust The FT Series
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.
Preliminary Prospectus Dated October 21, 1997
FT 223
10,000 Units (A Unit Investment Trust)
The attached final Prospectus for a prior Series of the Fund is
hereby used as a preliminary Prospectus for the above stated Series. The
narrative information and structure of the attached final Prospectus will
be substantially the same as that of the final Prospectus for this
Series. Information with respect to pricing, the number of Units, dates
and summary information regarding the characteristics of securities to be
deposited in this Series is not now available and will be different since
each Series has a unique Portfolio. Accordingly the information
contained herein with regard to the previous Series should be considered
as being included for informational purposes only. Ratings of the
securities in this Series are expected to be comparable to those of the
securities deposited in the previous Series.
A registration statement relating to the units of this Series will
be filed with the Securities and Exchange Commission but has not yet
become effective. Information contained herein is subject to completion
or amendment. Such Units may not be sold nor may offer 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 the Units in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
McDonald Select Equity Trust, Series 1997
McDonald Select Equity Trust, Wrap Series 1997
The Trust. The First Trust(registered trademark) Special Situations
Trust, Series 174 consists of the underlying separate unit investment
trusts set forth above. The various trusts are sometimes collectively
referred to herein as the "Trusts." The McDonald Select Equity Trust,
Series 1997 is sometimes referred to herein as the "Traditional Trust."
The McDonald Select Equity Trust, Wrap Series 1997 is sometimes referred
to herein as the "Wrap Trust." Each Trust is a unit investment trust
consisting of a fixed, diversified portfolio containing common stocks
issued by companies which are considered to have the potential for
capital appreciation (the "Equity Securities").
Each Trust is identical in terms of structure and portfolio makeup and
differs only with respect to who can purchase the Units of a Trust and
the sales charge paid by such Unit holder. The Traditional Trust is
available to any investor who seeks the potential for capital
appreciation. The Wrap Trust is available only to investors who purchase
Units through registered broker/dealers who charge periodic fees for
financial planning, investment advisory or asset management services, or
who provide such services in connection with the establishment of an
investment account for which a comprehensive "wrap fee" charge is imposed.
The objective of each Trust is to provide for capital appreciation by
investing each Trust's portfolio in selected common stocks of companies
having, in the Underwriter's opinion on the Initial Date of Deposit, an
above-average potential for capital appreciation. See "Schedule of
Investments" for each Trust. The Trusts have a mandatory termination
date (the "Mandatory Termination Date" or "Trust Ending Date") of
approximately one year from the date of this Prospectus as set forth
under "Summary of Essential Information" for each Trust. There is, of
course, no guarantee that the objective of the Trusts will be achieved.
Each Unit of a Trust represents an undivided fractional interest in all
the Equity Securities deposited therein. The Equity Securities deposited
in a Trust's portfolio have no fixed maturity date and the value of
these underlying Equity Securities will fluctuate with changes in the
values of stocks in general.
The Sponsor may, from time to time after the Initial Date of Deposit,
deposit additional Equity Securities in a Trust or cash (including a
letter of credit) with instructions to purchase additional Equity
Securities in a Trust. Such deposits of additional Equity Securities or
cash will, therefore, be done in such a manner that the original
proportionate relationship amongst the individual issues of the Equity
Securities shall be maintained. Any deposit by the Sponsor of additional
Equity Securities, or the purchase of additional Equity Securities
pursuant to a cash deposit, will duplicate, as nearly as is practicable,
the original proportionate relationship established on the Initial Date
of Deposit, and not the actual proportionate relationship on the
subsequent date of deposit, since the actual proportionate relationship
may be different than the original proportionate relationship. Any such
difference may be due to the sale, redemption or liquidation of any
Equity Securities deposited in a Trust on the Initial, or any
subsequent, Date of Deposit. See "What is the First Trust Special
Situations Trust?" and "How May Equity Securities be Removed from a
Trust?"
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.
McDonald & Company Securities, Inc.
The date of this Prospectus is December 2, 1996
Page 1
Public Offering Price. The Public Offering Price per Unit of each Trust
during the initial offering period is equal to the aggregate underlying
value of the Equity Securities in a Trust (generally determined by the
closing sale prices of listed Equity Securities and the ask prices of
the over-the-counter traded Equity Securities) plus or minus a pro rata
share of cash and receivables (including declared but unpaid dividends),
if any, in the Capital and Income Accounts of a Trust, plus a sales
charge for each Trust as set forth below. The sales charge for the
Traditional Trust consists of a one time up-front sales charge of 3.6%
of the Public Offering Price per Unit (equivalent to 3.734% of the net
amount invested). The sales charge for the Wrap Trust consists of a
deferred sales charge of $0.095 per Unit which will be assessed on a
monthly basis over a ten-month period. Commencing on January 31, 1997,
and on the last business day of each month thereafter, through October
31, 1997, a deferred sales charge of $.0095 will be assessed per Unit of
the Wrap Trust monthly. Units of the Wrap Trust purchased subsequent to
the initial deferred sales charge payment will be charged the amount of
the previously collected deferred sales charge at the time of purchase
and will be subject to the remaining deferred sales charge payments not
yet collected. The deferred sales charge will be paid from funds in the
Income and/or Capital Accounts of the Wrap Trust, if sufficient, or from
the periodic sale of Equity Securities. The total maximum sales charge
assessed to Unit holders of the Wrap Trust on a per Unit basis will be
$0.095 (which on the Initial Date of Deposit is equivalent to .95% of
the Public Offering Price). The total maximum sales charge which may be
assessed to Unit holders of the Wrap Trust on a per Unit basis is 1.5%
of the Public Offering Price (equivalent to a maximum of 1.523% of the
net amount invested, exclusive of the deferred sales charge). The
secondary market Public Offering Price per Unit of the Traditional Trust
will be based upon the aggregate underlying value of the Equity
Securities in the Traditional Trust (generally determined by the closing
sale prices of listed Equity Securities and the bid prices of the over-
the-counter traded Equity Securities) plus or minus a pro rata share of
cash and receivables (including declared but unpaid dividends), if any,
in the Capital and Income Accounts of the Trust plus a maximum sales
charge of 3.1% of the Public Offering Price per Unit (equivalent to
3.199% of the net amount invested) commencing three months after the
Initial Date of Deposit, and 1.95% of the Public Offering Price per Unit
(equivalent to 1.989% of the net amount invested) commencing six months
after the Initial Date of Deposit. The secondary market Public Offering
Price per Unit of the Wrap Trust will be based upon the aggregate
underlying value of the Equity Securities in the Wrap Trust (generally
determined by the closing sale prices of listed Equity Securities and
the bid prices of the over-the-counter traded Equity Securities) plus or
minus a pro rata share of cash and receivables (including declared but
unpaid dividends), if any, in the Capital and Income Accounts of the
Trust plus an initial sales charge equivalent to the amount of the
previously collected deferred sales charge payments, if any, and will be
subject to the remaining deferred sales charge payments not yet
collected. A pro rata share of accumulated dividends, if any, in the
Income Account of a Trust is included in the Public Offering Price. The
minimum amount which an investor may purchase in the Traditional Trust
is $1,000 and the minimum amount which an investor may purchase of the
Wrap Trust is $50,000. Unit holders of McDonald Select Equity Trust,
Series 1996 who elected to become Rollover Unit holders into McDonald
Select Equity Trust, Series 1997 are entitled to purchase Units of such
Trust subject to a sales charge of 1.95% of the Public Offering Price.
Only whole Units may be purchased. The sales charge imposed on
Traditional Trust Units is reduced on a graduated scale for sales
involving at least 10,000 Units. See "How is the Public Offering Price
Determined?"
Dividend and Capital Distributions. Starting on the first day of the
Special Redemption and Liquidation period for Rollover Unit holders, or
upon termination of a Trust for other Unit holders, amounts in the
Income Account (which consist of dividends on the Equity Securities) and
amounts in the Capital Account will be included in amounts distributed
to or on behalf of Unit holders. Distributions of funds in the Capital
Account, in certain circumstances, may be made earlier. Any distribution
of income and/or capital will be net of the expenses of a Trust. See
"What is the Federal Tax Status of Unit Holders?" Additionally, upon
termination of a Trust, the Trustee will distribute, upon surrender of
Units for redemption, to each remaining Unit holder his pro rata share
of a Trust's assets, less expenses, in the manner set forth under
"Rights of Unit Holders-How are Income and Capital Distributed?" Unit
holders who elect to become Rollover Unit holders will not receive the
final liquidation distribution, but will receive units in a new series
of the McDonald Select Equity Trust, if one is being offered. See
"Special Redemption, Liquidation and Investment in a New Trust."
Page 2
Secondary Market for Units. While under no obligation to do so, the
Sponsor intends to, and the Underwriter may, maintain a market for Units
of the Trusts and offer to repurchase such Units at prices which are
based on the aggregate underlying value of Equity Securities in a Trust
(generally determined by the closing sale prices of listed Equity
Securities and the bid prices of the over-the-counter traded Equity
Securities) plus or minus cash and receivables (including declared but
unpaid dividends), if any, in the Capital and Income Accounts of a
Trust. If a secondary market is not maintained, a Unit holder may redeem
Units through the Trustee at prices based upon the aggregate underlying
value of the Equity Securities in a Trust (generally determined by the
closing sale prices of listed Equity Securities and the bid prices of
the over-the-counter traded Equity Securities) plus or minus a pro rata
share of cash and receivables (including declared but unpaid dividends),
if any, in the Capital and Income Accounts of a Trust. A Unit holder
tendering 2,500 Units or more of a Trust for redemption may request a
distribution of shares of Equity Securities (reduced by customary
transfer and registration charges) in lieu of payment in cash. Units of
the Wrap Trust sold or tendered for redemption prior to such time as the
entire deferred sales charge has been collected will be assessed the
amount of the remaining deferred sales charge at the time of sale or
redemption. See "How May Units be Redeemed?"
Special Redemption, Liquidation and Investment in a New Trust. Unit
holders who hold their Units in book entry form will have the option of
specifying by December 3, 1997 (the "Rollover Notification Date") to
have all of their Units redeemed in-kind on the Rollover Notification
Date and the distributed Equity Securities sold by the Trustee, in its
capacity as Distribution Agent, during the Special Redemption and
Liquidation Period. (Unit holders so electing are referred to herein as
"Rollover Unit holders.") The Distribution Agent will appoint the
Sponsor as its agent to determine the manner, timing and execution of
sales of underlying Equity Securities. The proceeds of the redemption
will then be invested in units of a new series of the McDonald Select
Equity Trust, the McDonald Select Equity Trust, Series 1998 or the
McDonald Select Equity Trust, Wrap Series 1998 (the "1998 Trusts"),
depending upon the election of the Rollover Unit holder, created in
conjunction with the termination of either series of the McDonald Select
Equity Trust, if offered, at a reduced sales charge. The Sponsor may,
however, stop creating new units of the 1998 Trusts at any time in its
sole discretion without regard to whether all the proceeds to be
invested have been invested. Cash which has not been invested on behalf
of the Rollover Unit holders in a 1998 Trust will be distributed at the
end of the Special Redemption and Liquidation Period. However, the
Sponsor anticipates that sufficient units can be created, although
moneys in a Trust may not be fully invested until the next business day.
Rollover Unit holders may purchase units of a 1998 Trust at a reduced
sales charge. Rollover Unit holders will receive the amount of dividends
in the Income Account of a Trust which will be included in the
reinvestment in units of a 1998 Trust. The exchange option described
above is subject to modification, termination or suspension.
Termination. Each Trust will terminate approximately one year after the
Initial Date of Deposit regardless of market conditions at that time.
Commencing on the Mandatory Termination Date, Equity Securities will
begin to be sold in connection with the termination of a Trust. The
Sponsor will determine the manner, timing and execution of the sale of
the Equity Securities. Written notice of any termination of a Trust
specifying the time or times at which Unit holders may surrender their
certificates for cancellation shall be given by the Trustee to each Unit
holder at his address appearing on the registration books of a Trust
maintained by the Trustee. At least 30 days prior to the Mandatory
Termination Date of a Trust, the Trustee will provide written notice
thereof to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges) if
such Unit holder owns at least 2,500 Units of a Trust, rather than to
receive payment in cash for such Unit holder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity
Securities. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least five business days
prior to the Mandatory Termination Date of a Trust. Unit holders not
electing the "Rollover Option" or a distribution of shares of the Equity
Securities will receive a cash distribution within a reasonable time
after a Trust is terminated. See "Rights of Unit Holders-How are Income
and Capital Distributed?"
Risk Factors. An investment in the Trusts should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
Page 3
the issuers or the general condition of the stock market, changes in
interest rates or an economic recession. The Trusts are not actively
managed and Equity Securities will not be sold by a Trust to take
advantage of market fluctuations or changes in anticipated rates of
appreciation. See "What are Equity Securities?-Risk Factors."
Page 4
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-December 2, 1996
Underwriter: McDonald & Company Securities, Inc.
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
McDonald Select Equity Trust, Series 1997
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units(1) 14,993
Fractional Undivided Interest in the Trust per Unit(1) 1/14,993
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $144,535
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 9.640
Sales Charge of 3.6% of the Public Offering Price per Unit
(3.734% of the net amount invested) (3) $ .360
Public Offering Price per Unit (4) $ 10.000
Sponsor's Initial Repurchase Price per Unit $ 9.640
Redemption Price per Unit (based on aggregate underlying value of Equity Securities) (5) $ 9.640
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP Number 33718T 290
First Settlement Date December 5, 1996
Rollover Notification Date December 3, 1997
Special Redemption and Liquidation
Period Beginning on November 18, 1997, until no later than December 31, 1997.
Mandatory Termination Date December 31, 1997
Discretionary Liquidation Amount The Trust may be terminated if the value of the Equity Securities is less
than the lower of $2,000,000 or 20% of the total value of Equity Securities
deposited in a Trust during the primary offering period.
Trustee's Annual Fee $.0098 per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding, payable to an affiliate of the Sponsor.
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 (6) Maximum of $.0035 per Unit outstanding annually payable to an affiliate of
the Sponsor.
Estimated Annual Amortization of
Organizational and Offering Costs (7) $.015 per Unit.
Income and Capital Distribution Date Starting on the first day of the Special Redemption and Liquidation Period
for Rollover Unit holders, or upon termination of the Trust for other Unit
holders, amounts in the Income Account (which consist of dividends on the
Equity Securities) and amounts in the Capital Account will be included in
amounts distributed to or on behalf of Unit holders.
</TABLE>
[FN]
______________
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each Equity Security listed on a national securities exchange or the
NASDAQ National Market System is valued at the last closing sale price,
or if no such price exists or if the Equity Securities are not so
listed, at the closing ask price thereof.
(3) Unit holders of McDonald Select Equity Trust, Series 1996 who elect
to become Rollover Unit holders into Series 1997 are entitled to
purchase Units of the Trust subject to a sales charge of 1.95% of the
Public Offering Price.
(4) 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.
(5) See "How May Units be Redeemed?"
(6) In addition, the Sponsor will be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of $0.0010
per Unit.
(7) 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, legal fees 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 one year. 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.
Page 5
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-December 2, 1996
Underwriter: McDonald & Company Securities, Inc.
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
McDonald Select Equity Trust, Wrap Series 1997
<TABLE>
<CAPTION>
General Information
<S> <C>
Initial Number of Units (1) 14,991
Fractional Undivided Interest in the Trust per Unit(1) 1/14,991
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $149,916
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 10.000
Maximum Sales Charge of .95% of the Public Offering Price per Unit
(.95% of the net amount invested, exclusive of the deferred sales charge) (3) $ .095
Less Deferred Sales Charge per Unit $ (.095)
Public Offering Price per Unit (3) $ 10.000
Sponsor's Initial Repurchase Price per Unit $ 9.905
Redemption Price per Unit (based on aggregate underlying value of Equity Securities) (4) $ 9.905
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
CUSIP Number 33718T 282
First Settlement Date December 5, 1996
Rollover Notification Date December 3, 1997
Special Redemption and Liquidation
Period Beginning on November 18, 1997, until no later than December 31, 1997.
Mandatory Termination Date December 31, 1997
Discretionary Liquidation Amount The Trust may be terminated if the value of the Equity Securities is less than
the lower of $2,000,000 or 20% of the total value of Equity Securities
deposited in a Trust during the primary offering period.
Trustee's Annual Fee $.0098 per Unit outstanding.
Evaluator's Annual Fee $.0030 per Unit outstanding, payable to an affiliate of the Sponsor.
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 (5) Maximum of $.0035 per Unit outstanding annually payable to an affiliate of the
Sponsor.
Estimated Annual Amortization of
Organizational and Offering Costs (6) $.015 per Unit.
Income and Capital Distribution Date Starting on the first day of the Special Redemption and Liquidation Period for
Rollover Unit holders, or upon termination of the Trust for other Unit holders,
amounts in the Income Account (which consist of dividends on the Equity
Securities) and amounts in the Capital Account will be included in amounts
distributed to or on behalf of Unit holders.
</TABLE>
[FN]
______________
(1) As of the close of business on the Initial Date of Deposit, the
number of Units of the Trust may be adjusted so that the Public Offering
Price per Unit will equal approximately $10.00. Therefore, to the extent
of any such adjustment, the fractional undivided interest per Unit will
increase or decrease accordingly, from the amounts indicated above.
(2) Each Equity Security listed on a national securities exchange or the
NASDAQ National Market System is valued at the last closing sale price,
or if no such price exists or if the Equity Securities are not so
listed, at the closing ask price thereof.
(3) The maximum sales charge consists solely of a deferred sales charge.
The total deferred sales charge amount will equal $0.095 per Unit, which
will be assessed over a ten-month period. Thus, Unit holders will pay a
deferred sales charge of $.0095 per Unit per month commencing January
31, 1997 and on the last business day of each month thereafter through
October 31, 1997. Subsequent to the Initial Date of Deposit, the amount
of the sales charge as a percentage of the Public Offering Price will
vary with changes in the aggregate underlying value of the Equity
Securities in the Trust. Units purchased subsequent to the initial
deferred sales charge payment will be charged the amount of the
previously collected deferred sales charge at the time of purchase and
will be subject to the remaining deferred sales charge payments not yet
collected. These deferred sales charge payments will be paid from funds
in the Income and/or Capital Accounts, if sufficient, or from the
periodic sale of Equity Securities. See "Fee Table" and "Public
Offering" for additional information. On the Initial Date of Deposit
there will be no accumulated dividends in the Income Account. Anyone
ordering Units after such date will pay a pro rata share of any
accumulated dividends in such Income Account. The Public Offering Price
as shown reflects the value of the Equity Securities at the opening of
business on the Initial Date of Deposit and establishes the original
proportionate relationship amongst the individual securities. No sales
to investors will be executed at this price. Additional Equity
Securities will be deposited during the day of the Initial Date of
Deposit which will be valued as of 4:00 p.m. Eastern time and sold to
investors at a Public Offering Price per Unit based on this valuation.
(4) See "How May Units be Redeemed?"
(5) In addition, the Sponsor will be reimbursed for bookkeeping and other
administrative expenses currently at a maximum annual rate of $0.0010
per Unit.
(6) The Trust (and therefore Unit holders) will bear all or a portion of
its organizational and offering costs (including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of the Trust portfolio, legal fees 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 one year. 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.
Page 6
FEE TABLE-McDonald Select Equity Trust, Series 1997
This Fee Table is intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "What are the Expenses and Charges?" Although the Trust
has a term of only approximately one year and is a unit investment trust
rather than a mutual fund, this information is presented to permit a
comparison of fees, assuming the principal amount and distributions are
rolled over each year into a New Trust subject only to the deferred
sales charge.
<TABLE>
<CAPTION>
Amount
per Unit
________
<S> <C>
Unit holder Transaction Expenses
Maximum sales charge imposed on purchase
(as a percentage of the Public Offering Price) 3.60%(a) $0.360
_______ _______
3.60% $0.360
======= =======
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets)
Trustee's fee .099% $.0098
Portfolio supervision, bookkeeping, administrative,
evaluation fees, amortization of organizational and offering costs .228% .0225
Other operating expenses .022% .0022
_______ _______
Total .349% $.0345
======= =======
</TABLE>
<TABLE>
<CAPTION>
Example
Cumulative Expenses Paid for Period:
1 Year 3 Years(b) 5 Years(b) 10 Years(b)
_______ __________ __________ __________
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the McDonald Select Equity Trust,
Series 1997, estimated operating expense ratio of .349%
and a 5% annual return on the investment throughout
the periods $ 39 $ 47 $ 54 $ 77
</TABLE>
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the sales charge imposed on reinvestment of dividends is
not reflected until the year following payment of the dividend; the
cumulative expenses would be higher if sales charges on reinvested
dividends were reflected in the year of reinvestment. The example should
not be considered a representation of past or future expenses or annual
rate of return; the actual expenses and annual rate of return may be
more or less than those assumed for purposes of the example.
[FN]
_____________________
(a) The Maximum Sales Charge is a one-time upfront sales charge of 3.6%
of the Public Offering Price per Unit.
(b) Although the Trust has a term of only one year and is a unit
investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees, assuming the principal amount
and distributions are rolled over each year into a new Trust subject
only to the deferred sales charge.
Page 7
FEE TABLE-McDonald Select Equity Trust, Wrap Series 1997
This Fee Table is intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "What are the Expenses and Charges?" Although the Trust
has a term of only approximately one year and is a unit investment trust
rather than a mutual fund, this information is presented to permit a
comparison of fees, assuming the principal amount and distributions are
rolled over each year into a New Trust subject only to the deferred
sales charge.
<TABLE>
<CAPTION>
Amount
per Unit
_______
<S> <C>
Unit holder Transaction Expenses
Initial sales charge imposed on purchase
(as a percentage of the Public Offering Price) 0.00%(a) $0.000
Deferred sales charge
(as a percentage of Public Offering Price) 0.95%(b) 0.095
_______ _______
0.95% $0.095
======= =======
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets)
Trustee's fee .097% $.0098
Portfolio supervision, bookkeeping, administrative,
evaluation fees, amortization of organizational and offering costs .221% .0225
Other operating expenses .022% .0022
_______ _______
Total .340% $.0345
======= =======
</TABLE>
<TABLE>
<CAPTION>
Example
Cumulative Expenses Paid for Period:
1 Year 3 Years(c) 5 Years(c) 10 Years(c)
_______ __________ __________ __________
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming the McDonald Select Equity Trust, Wrap
Series 1997, estimated operating expense ratio of .340%
and a 5% annual return on the investment throughout
the periods $ 13 $ 40 $ 70 $ 153
</TABLE>
The example assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Securities and
Exchange Commission regulations applicable to mutual funds. For purposes
of the example, the deferred sales charge imposed on reinvestment of
dividends is not reflected until the year following payment of the
dividend; the cumulative expenses would be higher if sales charges on
reinvested dividends were reflected in the year of reinvestment. The
example should not be considered a representation of past or future
expenses or annual rate of return; the actual expenses and annual rate
of return may be more or less than those assumed for purposes of the
example.
[FN]
_________________
(a) There is no initial sales charge assessed on Trust Units.
(b) The actual fee is $.095 per month per Unit, irrespective of purchase
or redemption price deducted in each of the ten months during the period
from January 31, 1997 to October 31, 1997. If the Unit price exceeds
$10.00 per Unit, the deferred sales charge will be less than .95%. If
the Unit price is less than $10.00 per Unit, the deferred sales charge
will exceed .95%. Units purchased subsequent to the initial deferred
sales charge payment will be subject to only the Initial Sales Charge
and the remaining deferred sales charge payments. Dividends will be
subject only to the deferred sales charge remaining at the time of
reinvestment. See "How are Income and Capital Distributed?"
(c) Although the Trust has a term of only one year and is a unit
investment trust rather than a mutual fund, this information is
presented to permit a comparison of fees, assuming the principal amount
and distributions are rolled over each year into a new Trust subject
only to the deferred sales charge.
Page 8
MCDONALD SELECT EQUITY TRUST, SERIES 1997
MCDONALD SELECT EQUITY TRUST, WRAP SERIES 1997
The First Trust Special Situations Trust, Series 174
What is The First Trust Special Situations Trust?
The First Trust Special Situations Trust, Series 174 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 the underlying separate unit investment
trusts designated as: McDonald Select Equity Trust, Series 1997 (the
"Traditional Trust") and McDonald Select Equity Trust, Wrap Series 1997
(the "Wrap Trust"). The Traditional Trust and the Wrap Trust are
sometimes referred to collectively as the "Trusts" and individually as a
"Trust." Each 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 common stocks issued by
companies which are considered by the Underwriter to have the potential
for capital appreciation (the "Equity Securities"), 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 Equity Securities.
In exchange for the deposit of securities or contracts to purchase
securities in a Trust, the Trustee delivered to the Sponsor documents
evidencing the entire ownership of such Trust.
The objective of the Trusts is to provide for capital appreciation by
investing in Equity Securities of companies having, in the Underwriter's
opinion on the Initial Date of Deposit, an above-average potential for
capital appreciation. There is, of course, no guarantee that the
objective of the Trusts will be achieved.
With the deposit of the Equity Securities on the Initial Date of
Deposit, the Sponsor established a percentage relationship between the
amounts of Equity Securities in a Trust's portfolio. See "Schedule of
Investments" for each Trust. From time to time following the Initial
Date of Deposit, the Sponsor, pursuant to the Indenture, may deposit
additional Equity Securities in a Trust, or cash (including a letter of
credit) with instructions to purchase additional Equity Securities in a
Trust, and Units may be continuously offered for sale to the public by
means of this Prospectus, resulting in a potential increase in the
outstanding number of Units of such Trust. Any deposit by the Sponsor of
additional Equity Securities, or the purchase of additional Equity
Securities pursuant to a cash deposit, will duplicate, as nearly as is
practicable, the original proportionate relationship and not the actual
proportionate relationship on the subsequent date of deposit, since the
actual proportionate relationship may be different than the original
proportionate relationship. Any such difference may be due to the sale,
redemption or liquidation of any of the Equity Securities deposited in a
Trust on the Initial, or any subsequent, Date of Deposit. See "How May
Equity Securities be Removed from a Trust?" Since the prices of the
underlying Equity Securities will fluctuate daily, the ratio, on a
market value basis, will also change daily. The portion of Equity
Securities represented by each Unit will not change as a result of the
deposit of additional Equity Securities in a Trust. If the Sponsor
deposits cash, however, existing and new investors may experience a
dilution of their investment and a reduction in their anticipated income
because of fluctuations in the prices of the Equity Securities between
the time of the cash deposit and the purchase of the Equity Securities
and because a Trust will pay the associated brokerage fees. To minimize
this effect, each Trust will try to purchase the Equity Securities as
close to the evaluation time or as close to the evaluation price as
possible. The Trustee may from time to time retain and pay compensation
to the Sponsor (or an affiliate of the Sponsor) to act as agent for the
Trusts with respect to acquiring Equity Securities for the Trusts. In
acting in such capacity, the Sponsor or its affiliate will be held
subject to the restrictions under the Investment Company Act of 1940, as
amended.
On the Initial Date of Deposit, each Unit of the Trusts represented the
undivided fractional interest in the Equity Securities deposited in such
Trust as set forth under "Summary of Essential Information" for each
Trust. To the extent that Units of a Trust are redeemed, the aggregate
value of the Equity Securities in a Trust will be reduced and the
Page 9
undivided fractional interest represented by each outstanding Unit of a
Trust will increase. However, if additional Units are issued by a Trust
in connection with the deposit of additional Equity Securities or cash
by the Sponsor, the aggregate value of the Equity Securities in a Trust
will be increased by amounts allocable to additional Units, and the
fractional undivided interest represented by each Unit of such Trust
will be decreased proportionately. See "How May Units be Redeemed?" Each
Trust has a Mandatory Termination Date as set forth herein under
"Summary of Essential Information."
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to the Trusts, 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 Trusts.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee, which is not to exceed the amount set forth
under "Summary of Essential Information," for providing portfolio
supervisory services for the Trusts. Such fee is based on the number of
Units outstanding in a Trust on January 1 of each year except for the
year or years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding at the
end of such month.
Subsequent to the initial offering period, First Trust Advisors L.P.,
the Evaluator and an affiliate of the Sponsor, will receive a fee as
indicated in the "Summary of Essential Information" for each Trust. The
Trustee pays certain expenses of the Trusts for which it is reimbursed
by the Trusts. The Trustee will receive for its ordinary recurring
services to the Trusts an annual fee as indicated in the "Summary of
Essential Information" for each Trust based upon the largest aggregate
number of Units of a Trust outstanding at any time during the calendar
year. For a discussion of the services performed by the Trustee pursuant
to its obligations under the Indenture, reference is made to the
material set forth under "Rights of Unit Holders."
The Trustee's and Evaluator's fees are payable from the Income Account
of a Trust to the extent funds are available and then from the Capital
Account of a Trust. Since the Trustee has the use of the funds being
held in the Capital and Income Accounts for payment of expenses and
redemptions and since such Accounts are noninterest-bearing to Unit
holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to a Trust is expected to result from the
use of these funds.
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 a Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
Expenses incurred in establishing the Trusts, 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 a Trust's portfolio and the
initial fees and expenses of the Trustee and any other out-of-pocket
expenses, will be paid by the Trusts and charged off over a period not
to exceed the life of a Trust, approximately one year. The following
additional charges are or may be incurred by a Trust: all legal expenses
of the Trustee incurred by or in connection with its responsibilities
under the Indenture; the expenses and costs of any action undertaken by
the Trustee to protect such Trust and the rights and interests of the
Unit holders; fees of the Trustee for any extraordinary services
performed under the Indenture; indemnification of the Trustee for any
loss, liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection with
its acceptance or administration of such Trust; indemnification of the
Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
such Trust; all taxes and other government charges imposed upon the
Securities or any part of such Trust (no such taxes or charges are being
Page 10
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 a Trust. In addition, the Trustee is
empowered to sell Equity Securities in a Trust in order to make funds
available to pay all these amounts if funds are not otherwise available
in the Income and Capital Accounts of such Trust. Since the Equity
Securities are all common stocks and the income stream produced by
dividend payments is unpredictable, the Sponsor cannot provide any
assurance that dividends will be sufficient to meet any or all expenses
of a Trust. As described above, if dividends are insufficient to cover
expenses, it is likely that Equity Securities will have to be sold to
meet Trust expenses. These sales may result in capital gains or losses
to Unit holders. See "What is the Federal Tax Status of Unit Holders?"
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. Each Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of each of the assets of a Trust under the
Code; and the income of a 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 the income derived from each Equity
Security when such income is received by a Trust.
2. Each Unit holder will have a taxable event when a Trust disposes of
an Equity Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise) or upon the sale or redemption of Units by
such Unit holder. The price a Unit holder pays for his Units is
allocated among his pro rata portion of each Equity Security held by a
Trust (in proportion to the fair market values thereof on the date the
Unit holder purchases his Units) in order to determine his tax basis for
his pro rata portion of each Equity Security held by a Trust. For
Federal income tax purposes, a Unit holder's pro rata portion of
dividends, as defined by Section 316 of the Code, paid by a corporation
with respect to an Equity Security held by a Trust is taxable as
ordinary income to the extent of such corporation's current and
accumulated "earnings and profits." A Unit holder's pro rata portion of
dividends paid on such Equity Security which exceeds such current and
accumulated earnings and profits will first reduce a Unit holder's tax
basis in such 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. One of the issuers of the Equity Securities intends to qualify
under special Federal income tax rules as a "real estate investment
trust" (a "REIT," shares of such issuer held by a Trust shall be
referred to as the "REIT Shares"). Because Unit holders are deemed to
directly own a pro rata portion of the REIT Shares as discussed above,
Unit holders are advised to consult their tax advisers for information
relating to the tax consequences of owning the REIT Shares. Provided
such issuer qualifies as a REIT, certain distributions by such issuer on
the REIT Shares may qualify as "capital gain dividends," taxable to
shareholders (and, accordingly, to the Unit holders as owners of a pro
rata portion of the REIT Shares) as long-term capital gains, regardless
of how long a shareholder has owned such shares. In addition,
distributions of income or capital gains declared on REIT Shares in
October, November or December will be deemed to have been paid to
shareholders (and, accordingly, to the Unit holders as owners of a pro
rata portion of the REIT Shares) on December 31 of the year they are
declared, even when paid by the REIT during the following January and
received by shareholders or Unit holders in such following year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by a
Trust will generally be considered a capital gain except in the case of
a dealer or financial institution and will be long-term if the Unit
holder has held his Units for more than one year (the date on which the
Page 11
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 Equity Securities held by a Trust will
generally be considered a capital loss (except in the case of a dealer
or financial institution) and, in general, will be long-term if the Unit
holder has held his Units for more than one year. Unit holders should
consult their tax advisers regarding the recognition of gains and losses
for Federal income tax purposes. In particular, a Rollover Unit holder
should be aware that a Rollover Unit holder's loss, if any, incurred in
connection with the exchange of Units for Units in the next new series
of a McDonald Select Equity Trust (the "1998 Trusts") created in
conjunction with the termination of either of these series of the
McDonald Select Equity Trust, will generally be disallowed with respect
to the disposition of any Equity Securities pursuant to such exchange to
the extent that such Unit holder is considered the owner of
substantially identical securities under the wash sale provisions of the
Code taking into account such Unit holder's deemed ownership of the
securities underlying the Units in a 1998 Trust in the manner described
above, if such substantially identical securities were acquired within a
period beginning 30 days before and ending 30 days after such
disposition. However, any gains incurred in connection with such an
exchange by a Rollover Unit holder would be recognized. In addition,
special rules, as described below, apply to a Unit holder's pro rata
portion of the REIT shares.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. The sales
charge for the Wrap Trust is deferred. It is possible that for federal
income tax purposes, a portion of the deferred sales charge may be
treated as interest which would be deductible by a Unit holder subject
to limitations on the deduction of investment interest. In such case,
the non-interest portion of the deferred sales charge should be added to
the Unit holder's tax basis in his or her Units. The deferred sales
charge could cause the Unit holder's Units to be considered to be debt-
financed under Section 264A of the Code which would result in a small
reduction of the dividends-received deduction. In any case, the income
(or proceeds from redemption) a Unit holder must take into account for
federal income tax purposes is not reduced by amounts deducted to pay
the deferred sales charge. Unit holders should consult their own tax
advisers as to the income tax consequences of the deferred sales charge.
Dividends Received Deduction. A Unit holder will be considered to have
received all of the dividends paid on his pro rata portion of each
Equity Security when such dividends are received by a Trust. Unit
holders will be taxed in this manner regardless of whether distributions
from a Trust are actually received by the Unit holder or are
automatically reinvested.
A corporation that owns Units will generally be entitled to a 70%
dividends received deduction with respect to such Unit holder's pro rata
portion of dividends received by a Trust (to the extent such dividends
are taxable as ordinary income, as discussed above) in the same manner
as if such corporation directly owned the Equity Securities paying such
dividends (other than corporate Unit holders, such as "S" corporations,
which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding corporation tax).
However, a corporation owning Units should be aware that Sections 246
and 246A of the Code impose additional limitations on the eligibility of
dividends for the 70% dividends received deduction. These limitations
include a requirement that stock (and therefore Units) must generally be
held at least 46 days (as determined under Section 246(c) of the Code).
Final regulations have recently been issued which address special rules
that must be considered in determining whether the 46-day holding period
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. DIVIDENDS RECEIVED ON THE
REIT SHARES ARE NOT ELIGIBLE FOR THE DIVIDENDS RECEIVED DEDUCTION. 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.
Limitations on Deductibility of Trust Expenses by Unit holders. Each
Unit holder's pro rata share of each expense paid by a Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by such Unit holder, subject to the following
Page 12
limitation. It should be noted that as a result of the Tax Reform Act of
1986, certain miscellaneous itemized deductions, such as investment
expenses, tax return preparation fees and employee business expenses
will be deductible by an individual only to the extent they exceed 2% of
such individual's adjusted gross income. Unit holders may be required to
treat some or all of the expenses of a Trust as miscellaneous itemized
deductions subject to this limitation.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a
Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when an Equity Security is disposed of
by a Trust or if the Unit holder disposes of a Unit (although losses
incurred by Rollover Unit holders may be subject to disallowance, as
discussed above). However, any loss realized by a Unit holder with
respect to the disposition of his or her pro rata portion of the REIT
Shares, to the extent such Unit holder has owned his Units for less than
six months or a Trust has held the REIT Shares for less than six months,
will be treated as long-term capital loss to the extent of such Unit
holder's pro rata portion of any capital gain dividends received (or
deemed to have been received) with respect to the REIT Shares. For
taxpayers other than corporations, net capital gains (which is defined
as net long-term capital gain over net short-term capital loss for a
taxable year) are subject to a maximum stated marginal tax rate of 28%.
However, it should be noted that legislative proposals are introduced
from time to time that affect tax rates and could affect relative
differences at which ordinary income and capital gains are taxed.
"The Revenue Reconciliation Act of 1993" (the "Tax Act") raised tax
rates on ordinary income while capital gains remain subject to a 28%
maximum stated rate for taxpayers other than corporations. Because some
or 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 a Trust
involved including his pro rata portion of all the Equity Securities
represented by the Unit.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units, Termination of a Trust and Investment in a New Trust. As
discussed in "Rights of Unit Holders-How are Income and Capital
Distributed?," under certain circumstances a Unit holder who owns at
least 2,500 Units of a Trust may request an In-Kind Distribution upon
the redemption of Units or the termination of a 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?" As
previously discussed, prior to the redemption of Units or the
termination of a Trust, a Unit holder is considered as owning a pro rata
portion of each of a Trust's assets for Federal income tax purposes. The
receipt of an In-Kind Distribution will result in a Unit holder
receiving 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 or not a Unit holder receives cash
in addition to Equity Securities. An "Equity Security" for this purpose
is a particular class of stock issued by a particular corporation. A
Unit holder will not recognize gain or loss if a Unit holder only
receives Equity Securities in exchange for his or her pro rata portion
in the Equity Securities held by a Trust. However, if a Unit holder also
receives cash in exchange for a fractional share of an Equity Security
held by a Trust, such Unit holder will generally recognize gain or loss
based upon the difference between the amount of cash received by the
Unit holder and his tax basis in such fractional share of an Equity
Security held by a Trust.
Because the Trusts will own many Equity Securities, a Unit holder who
requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Equity Security owned by a 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 Equity Security
owned by a Trust. Unit holders who request an In-Kind Distribution are
advised to consult their tax advisers in this regard.
As discussed in "Rights of Unit Holders-Special Redemption, Liquidation
and Investment in a New Trust," a Unit holder may elect to become a
Page 13
Rollover Unit holder. To the extent a Rollover Unit holder exchanges his
Units for Units of a 1998 Trust in a taxable transaction, such Unit
holder will recognize gains, if any, but generally will not be entitled
to a deduction for any losses recognized upon the disposition of any
Equity Securities pursuant to such exchange to the extent that such Unit
holder is considered the owner of substantially identical securities
under the wash sale provisions of the Code taking into account such Unit
holder's deemed ownership of the securities underlying the Units in a
1998 Trust in the manner described above, if such substantially
identical securities were acquired within a period beginning 30 days
before and ending 30 days after such disposition under the wash sale
provisions contained in Section 1091 of the Code. In the event a loss is
disallowed under the wash sale provisions, special rules contained in
Section 1091(d) of the Code apply to determine the Unit holder's tax
basis in the securities acquired. Rollover Unit holders are advised to
consult their tax advisers.
Computation of the Unit holder's Tax Basis. Initially, a Unit holder's
tax basis in his Units will generally equal the price paid by such Unit
holder for his Units. The cost of the Units is allocated among the
Equity Securities held in a Trust in accordance with the proportion of
the fair market values of such Equity Securities as of the valuation
date nearest 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 a Trust will be reduced to the extent dividends
paid with respect to such Equity Security are received by a Trust which
are not taxable as ordinary income as described above.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified by the Internal Revenue Service that
payments to the Unit holder are subject to back-up withholding. If the
proper taxpayer identification number and appropriate certification are
not provided when requested, distributions by a Trust to such Unit
holder (including amounts received upon the redemption of Units) will be
subject to back-up withholding. Distributions by a Trust will generally
be subject to United States income taxation and withholding in the case
of Units held by non-resident alien individuals, foreign corporations or
other non-United States persons. Such persons should consult their tax
advisers.
Unit holders will be notified annually of the amounts of 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 a Trust Suitable for
Retirement Plans?"
The foregoing discussion relates only to United States Federal income
taxation of Unit holders; Unit holders may be subject to state and local
taxation in other jurisdictions. Unit holders should consult their tax
advisers regarding potential state or local taxation with respect to the
Units, and foreign investors should consult their tax advisers with
respect to United States tax consequences of ownership of Units.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, under the existing income tax laws of
the State of New York, each Trust is not an association taxable as a
corporation and the income of the Trusts will be treated as the income
of the Unit holders thereof.
Why are Investments in a Trust Suitable for Retirement Plans?
Units of the Trusts may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to capital
gains and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible
for special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
Page 14
PORTFOLIO
What are Equity Securities?
Each Trust will seek to achieve its objective of capital appreciation
through an investment in a fixed, diversified portfolio of Equity
Securities.
All of the Equity Securities are of domestic companies. There are no
preferred stock or convertible debt issues, nor are there stocks of
foreign companies.
The portfolio of each Trust is identical and consists of equity
securities selected by Bradley E. Turner, Managing Director of McDonald
& Company Securities, Inc. The companies selected will generally meet
the following criteria on the Initial Date of Deposit: long histories of
earnings and dividend growth, strong or improving balance sheets and
dominant market shares, along with reasonable expectations of continuing
these trends. The reputation of management as well as their share
ownership are important considerations.
Established in 1924, McDonald & Company Securities, Inc. is a leading,
full-service regional investment banking, brokerage and asset management
firm servicing individuals, corporations, institutions and governments
upon the principle that the interest of clients always comes first. In
1991, McDonald & Company Securities, Inc. merged with Gradison &
Company, which now operates as the Gradison Division. This merger has
greatly enhanced the company's asset management capabilities.
McDonald & Company Securities, Inc. is a member of all major exchanges,
as well as the National Association of Securities Dealers (NASD) and the
Securities Investors Protection Corporation (SIPC).
The Underwriter has acquired or will acquire the Equity 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 Trusts, 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.
Investors should also note that because the Underwriter uses the list of
Equity Securities which comprises the portfolios in its independent
capacity as a broker-dealer and 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 more of the Equity Securities. This may have an effect
on the prices of the Equity Securities which is adverse to the interest
of the purchasers of Units of a Trust. Additionally, this may have an
impact on the price paid by a Trust for the Equity Securities as well as
the price received upon redemption of the Units or upon the termination
of a Trust.
What are the Equity Securities Selected for McDonald Select Equity
Trust, Series 1997 and McDonald Select Equity Trust, Wrap Series 1997?
AMP, Inc., headquartered in Harrisburg, Pennsylvania, is the world's
leading producer of electrical/electronic connection devices. It has
over 42,000 employees in 215 facilities in the United States and in 44
other countries.
Capital One Financial Corporation, headquartered in Falls Church,
Virginia, is a financial services company whose principal subsidiaries,
Capital One Bank, and Capital One, F.S.B., offer consumer lending
products. The company's subsidiaries collectively had 8.2 million
customers and $12.1 billion in managed loans outstanding at September
30, 1996, and are among the largest providers of MasterCard and Visa
credit cards in the United States.
Cooper Tire & Rubber Company, headquartered in Findlay, Ohio,
specializes in the manufacturing and marketing of tires and inner tubes
for the automotive aftermarket and components in the categories of
vibration control, hoses, and body and window seals for original
equipment automotive manufacturers.
Deere & Company, headquartered in Moline, Illinois, is the world's
leading producer of agricultural equipment. Company-owned and affiliated
factories in ten countries manufacture products marketed in more than
160 countries.
Enron Corporation, headquartered in Houston, Texas, is one of the
world's largest integrated natural gas and electricity companies with
Page 15
approximately $15 billion in assets. The company operates the largest
natural gas transmission system in the western hemisphere and the second
largest system in the world; is the largest purchaser and marketer of
natural gas and the largest non-regulated marketer of electricity in
North America; produces and markets natural gas liquids worldwide; owns
59% of Enron Oil and Gas Company, one of the largest independent (non-
integrated) exploration and production companies in the United States;
owns 59% of Enron Global Power and Pipelines L.L.C., which is owner and
manager of operating power plants and natural gas pipelines in emerging
markets; and is one of the largest independent developers and producers
of electricity in the world.
Hospitality Properties Trust, headquartered in Newton, Massachusetts, is
a real estate investment trust which provides sale-leaseback financing
to unaffiliated hotel operating companies. The company has investments
totaling approximately $814 million in 82 hotels located in 26 states.
Invacare Corporation, headquartered in Elyria, Ohio, is the world's
leading manufacturer and distributor of home medical equipment and
mobility products for people with disabilities. The company has
manufacturing facilities in the United States, Australia, Canada,
Germany, France, Mexico, New Zealand, Portugal, Switzerland and the
United Kingdom. The company's products are distributed worldwide through
a network of more than 10,000 locations.
Newell Company, headquartered in Freeport, Illinois, manufactures and
markets high-volume staple consumer products which are sold through a
variety of retail and wholesale distribution channels. Product
categories include housewares, home furnishings, office products,
hardware and tools.
PepsiCo, Inc., headquartered in Purchase, New York, operates on a
worldwide basis in the soft drink, snack food and restaurant business
segments. Some of the company's products include "Pepsi-Cola," "Slice"
and "Mountain Dew" soft drinks and "Frito-Lay" snack foods. The company
also operates "Pizza Hut," "Taco Bell" and "Kentucky Fried Chicken"
restaurants worldwide.
Reader's Digest Association, Inc., headquartered in Pleasantville, New
York, is the pre-eminent global publisher and direct marketer of
distinctive products that inform, enrich, entertain and inspire people
of all ages and cultures around the world.
Regis Corporation, headquartered in Minneapolis, Minnesota, is the
largest owner, operator and franchiser of hair and retail product salons
in the world. Regis Corporation currently operates and franchises 3,185
salons in six divisions (Regis Hairstylists, SuperCuts, MasterCuts,
Trade Secret, Wal-Mart and International) and has more than 25,000
employees worldwide.
SBC Communications, Inc., headquartered in San Antonio, Texas, is one of
the world's leading diversified telecommunications companies and the
second largest wireless communications company based in the United
States. SBC Communications, Inc. provides innovative telecommunications
products and services under the Southwestern Bell and Cellular One
brands. Its businesses include wireline and wireless services and
equipment in the United States and interests in wireless businesses in
Europe, Latin America, South Africa and Asia; business and consumer
telecommunications equipment; messaging services; cable television in
both domestic and international markets; and directory advertising and
publishing.
What are Some Additional Considerations for Investors?
Each Trust consists of different issues of Equity Securities, all of
which are listed on a national securities exchange or the NASDAQ
National Market System or are traded in the over-the-counter market.
Each Trust consists of such of the Equity Securities listed under
"Schedule of Investments" for each Trust as may continue to be held from
time to time in such Trust and any additional Equity Securities acquired
and held by a 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 Equity Securities. However, should any contract for the
purchase of any of the Equity Securities initially deposited hereunder
fail, the Sponsor will, unless substantially all of the moneys held in a
Trust to cover such purchase are reinvested in substitute Equity
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.
Risk Factors. 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
Page 16
will not be reinvested, no assurance can be given that a Trust will
retain for any length of time its present size and composition. Due to
the short duration of the Trusts there is no assurance that a Trust's
objective will be achieved or that a Trust will provide for capital
appreciation in excess of a Trust's expenses. Although the portfolios
are not managed, the Sponsor may instruct the Trustee to sell Equity
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell any
securities or other property acquired in exchange for Equity Securities
such as those acquired in connection with a merger or other transaction.
If offered such new or exchanged securities or property, the Trustee
shall reject the offer. However, in the event such securities or
property are nonetheless acquired by a Trust, they may be accepted for
deposit in such Trust and either sold by the Trustee or held in such
Trust pursuant to the direction of the Sponsor (who may rely on the
advice of the Portfolio Supervisor). See "How May Equity Securities be
Removed from a Trust?" Equity Securities, however, will not be sold by a
Trust to take advantage of market fluctuations or changes in anticipated
rates of appreciation or depreciation.
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 Trusts
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 Trusts,
will be adversely affected if trading markets for the Equity Securities
are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Equity Securities or the
general condition of the common stock market may worsen and the value of
the Equity Securities and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market
movements and to volatile increases and decreases of value as market
confidence in and perceptions of the issuers change. These perceptions
are based on unpredictable factors including expectations regarding
government, economic, monetary and fiscal policies, inflation and
interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. Shareholders of common
stocks have rights to receive payments from the issuers of those common
stocks that are generally subordinate to those of creditors of, or
holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by the Trusts 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 portfolios may be expected to fluctuate over the life
of the Trusts 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.
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
Page 17
Securities. As the holder of the Equity Securities, the Trustee will
have the right to vote all of the voting stocks in the Trusts and will
vote such stocks in accordance with the instructions of the Sponsor.
Investors should be aware of certain other considerations before making
a decision to invest in a Trust.
The value of the Equity Securities will fluctuate over the life of a
Trust and may be more or less than the price at which they were
deposited in such Trust. The Equity Securities may appreciate or
depreciate in value (or pay dividends) depending on the full range of
economic and market influences affecting these securities, including the
impact of the Sponsor's purchase and sale of the Equity Securities
(especially during the primary offering period of Units of a Trust and
during the Special Redemption and Liquidation Period) and other factors.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Equity Security. In the event of a
notice that any Equity Security will not be delivered ("Failed Contract
Obligations") to a Trust, the Sponsor is authorized under the Indenture
to direct the Trustee to acquire other Equity Securities ("Replacement
Securities"). Any Replacement Security will 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
paragraphs is not utilized to acquire Replacement Securities in the
event of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
a Trust and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in a 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 a Trust.
The Indenture also authorizes the Sponsor to increase the size of a
Trust and the number of Units thereof by the deposit of additional
Equity Securities, or cash (including a letter of credit) with
instructions to purchase additional Equity Securities, in a Trust and
the issuance of a corresponding number of additional Units. If the
Sponsor deposits cash, existing and new investors could experience a
dilution of their investments and a reduction in anticipated income
because of fluctuations in the prices of the Equity Securities between
the time of the cash deposit and the actual purchase of the Equity
Securities and because a Trust will pay the brokerage fees associated
therewith.
The Trusts consist of the Equity Securities listed under "Schedule of
Investments" for each Trust (or contracts to purchase such Securities)
as may continue to be held from time to time in a Trust and any
additional Equity Securities acquired and held by a Trust pursuant to
the provisions of the Indenture (including provisions with respect to
deposits into a Trust of Equity Securities or cash in connection with
the issuance of additional Units).
Once all of the Equity Securities in a Trust are acquired, the Trustee
will have no power to vary the investments of a 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 Equity Securities
only under limited circumstances. See "How May Equity Securities be
Removed from a Trust?"
To the best of the Sponsor's knowledge, there is no litigation pending
as of the Initial Date of Deposit in respect of any Equity Security
which might reasonably be expected to have a material adverse effect on
the Trusts. At any time after the Initial Date of Deposit, litigation
may be instituted on a variety of grounds with respect to the Equity
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 a Trust.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisers. Further, at any time after the
Initial Date of Deposit, legislation may be enacted, with respect to the
Equity Securities in the Trusts or the issuers of the Equity Securities.
Changing approaches to regulation, particularly with respect to the
environment, may have a negative impact on certain companies represented
Page 18
in the Trusts. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on a
Trust or will not impair the ability of the issuers of the Equity
Securities to achieve their business goals.
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
underlying value of the Equity Securities in a Trust (generally
determined by the closing sale price of listed Equity Securities and the
ask price of over-the-counter traded Equity Securities), plus or minus
cash and receivables (including dividends declared but not paid), if
any, in the Income and Capital Accounts of a Trust, plus a sales charge
for each Trust as set forth below divided by the amount of Units of a
Trust outstanding. The sales charge for the Traditional Trust consists
of a one-time upfront sales charge of 3.6% of the Public Offering Price
per Unit (equivalent to 3.734% of the net amount invested). The sales
charge for the Wrap Trust consists of a deferred sales charge of $0.095
per Unit which will be assessed on a monthly basis over a ten-month
period. Commencing on January 31, 1997, and on the last business day of
each month thereafter, through October 31, 1997, a deferred sales charge
of $.0095 will be assessed per Unit of the Wrap Trust monthly. Units of
the Wrap Trust purchased subsequent to the initial deferred sales charge
payment will be charged the amount of the previously collected deferred
sales charge at the time of purchase and will be subject to the
remaining deferred sales charge payments not yet collected. The deferred
sales charge will be paid from funds in the Income and/or Capital
Accounts of the Wrap Trust, if sufficient, or from the periodic sale of
Equity Securities. The total maximum sales charge assessed to Unit
holders of the Wrap Trust on a per Unit basis will be $0.095 (which on
the Initial Date of Deposit is equivalent to .95% of the Public Offering
Price). The total maximum sales charge which may be assessed to Unit
holders of the Wrap Trust on a per Unit basis is1.5% of the Public
Offering Price (equivalent to a maximum of 1.523% of the net amount
invested, exclusive of the deferred sales charge).
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying value of the Equity Securities in a
Trust, (generally determined by the closing sale price of listed Equity
Securities and the ask price of over-the-counter traded Equity
Securities), plus or minus cash and receivables (including dividends
declared but not paid), if any, in the Income and Capital Accounts of a
Trust divided by the number of Units of a Trust outstanding. For
secondary market sales of the Traditional Trust, the Public Offering
Price is also based on the aggregate underlying value of the Equity
Securities in the Trust (generally determined by the closing sale price
of listed Equity Securities and the bid price of over-the-counter traded
Equity Securities), plus or minus cash and receivables (including
dividends declared but not paid), if any, in the Income and Capital
Accounts of the Trust, plus a maximum sales charge of 3.1% of the Public
Offering Price per Unit (equivalent to 3.199% of the net amount
invested) commencing three months after the Initial Date of Deposit, and
1.95% of the Public Offering Price per Unit (equivalent to 1.989% of the
net amount invested) commencing six months after the Initial Date of
Deposit, divided by the number of outstanding Units of the Trust. For
secondary market sales of the Wrap Trust, the Public Offering Price is
also based upon the aggregate underlying value of the Equity Securities
in the Wrap Trust (generally determined by the closing sale prices of
listed Equity Securities and the bid prices of the over-the-counter
traded Equity Securities) plus or minus a pro rata share of cash and
receivables (including declared but unpaid dividends), if any, in the
Capital and Income Accounts of the Trust plus an initial sales charge
equivalent to the amount of the previously collected deferred sales
charge payments, if any, and will be subject to the remaining deferred
sales charge payments not yet collected, divided by the number of
outstanding Units of the Trust.
The minimum amount which an investor may purchase of the Traditional
Trust is $1,000 and the minimum amount which an investor may purchase of
the Wrap Trust is $50,000. Only whole Units may be purchased. The
applicable sales charge for primary and secondary market sales of the
Traditional Trust is reduced by a discount as indicated below for volume
purchases:
Page 19
<TABLE>
<CAPTION>
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ __________ __________
<S> <C> <C>
10,000 to 24,999 0.25% 0.2506%
25,000 to 49,999 0.50% 0.5025%
50,000 to 99,999 0.75% 0.7557%
100,000 or more 1.50% 1.5228%
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, dealer, bank or other selling agent. The reduced sales
charge structure will apply on all purchases of Units in the Traditional
Trust by the same person on any one day from the Underwriter or any
dealer, bank or other selling agent. Additionally, Units of the
Traditional Trust 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 on
purchases of Units of the Traditional Trust 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 or dealer of any such combined purchase prior to the sale in
order to obtain the indicated discount. Unit holders of McDonald Select
Equity Trust, Series 1996 who elected to become Rollover Unit holders
into McDonald Select Equity Trust, Series 1997 are entitled to purchase
Units of the Traditional Trust subject to a sales charge of 1.95% of the
Public Offering Price. In addition, with respect to the employees,
officers and directors (including their immediate family members,
defined as spouses, children, grandchildren, parents, grandparents,
siblings, 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, dealers, banks or other selling
agents and their affiliates, the sales charge on purchases of Units of
the Traditional Trust is reduced by 1.0% of the Public Offering Price
for purchases of Units during the primary offering period.
Had the Units of the Trusts been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information" for each
Trust. 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" for each Trust in accordance
with fluctuations in the prices of the underlying Equity Securities.
During the initial offering period, the aggregate value of the Units of
a Trust shall be determined on the basis of the aggregate underlying
value of the Equity Securities therein plus or minus cash and
receivables (including declared but unpaid dividends), if any, in the
Income and Capital Accounts of a Trust. 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 therefore is other than on the exchange,
the evaluation shall generally be based on the current ask prices 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 aggregate underlying
value of the Equity Securities therein, plus or minus cash and
receivables (including declared but unpaid dividends), if any, in the
Income and Capital Accounts of a Trust plus the applicable sales charge.
The calculation of the aggregate underlying value of the Equity
Securities for secondary market sales is calculated in the same manner
as described above for sales made during the initial offering period
with the exception that bid prices are used instead of ask prices.
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 an owner of Units on the date of
Page 20
settlement provided payment has been received. Cash, if any, made
available to the Sponsor prior to the date of settlement for the
purchase of Units may be used in the Sponsor's business and may be
deemed to be a benefit to the Sponsor, subject to the limitations of the
Securities Exchange Act of 1934. Delivery of Certificates representing
Units so ordered will be made three business days following such order
or shortly thereafter. See "Rights of Unit Holders-How May Units be
Redeemed?" for information regarding the ability to redeem Units ordered
for purchase.
How are Units Distributed?
During the initial offering period (i) for Units issued on the Initial
Date of Deposit and (ii) for additional Units issued after such date as
additional Equity Securities are deposited by the Sponsor, Units will be
distributed to the public at the then current Public Offering Price.
During such period, the Sponsor may deposit additional Equity Securities
or cash in a Trust and create additional Units. Units reacquired by the
Sponsor during the initial offering period (at prices based upon the
aggregate underlying value of the Equity Securities in a Trust plus or
minus a pro rata share of cash and receivables (including declared but
unpaid dividends), 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 Trusts for
sale in a number of states. Sales of the Traditional Trust initially
will be made to dealers and others at prices which represent a
concession or agency commission of 2.0% of the Public Offering Price,
and, for secondary market sales, commencing six months after the Date of
Deposit, a dealer will receive from the Sponsor a dealer concession of
1.0% of the Public Offering Price. However, resales of Units of the
Trusts by such dealers and others to the public will be made at the
Public Offering Price described in the prospectus. The Sponsor reserves
the right to change the amount of the concession or agency commission
from time to time. Certain commercial banks may be making Units of the
Trusts 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 above. Under the Glass-Steagall Act,
banks are prohibited from underwriting Trust Units; however, the Glass-
Steagall Act does permit certain agency transactions and the banking
regulators have not indicated that these particular agency transactions
are not permitted under such Act. In Texas and in certain other states,
any banks making Units available must be registered as broker/dealers
under state law.
What are the Sponsor's Profits?
The Underwriter of the Traditional Trust will receive a gross sales
commission equal to 3.6% of the Public Offering Price of the Units
(equivalent to 3.734% 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?" and less any reduced sales
charge for Rollover Unit holders of the 1996 Trust. The Underwriter of
the Wrap Trust will receive a gross sales commission equal to $0.095 of
the Public Offering Price per Unit (equivalent to .95% of the net amount
invested). See "Underwriting" for information regarding the receipt of
the excess gross sales commissions by the Sponsor from the Underwriter.
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 Equity Securities to a Trust (which
is based on the Evaluator's determination of the aggregate offering
price of the underlying Equity Securities of such Trust on the Initial
Date of Deposit as well as on subsequent deposits) and the cost of such
Equity Securities to the Sponsor. See "Underwriting" and Note (2) of
"Schedule of Investments" for each Trust. During the initial offering
period, the Underwriter also may realize profits or sustain losses as a
result of fluctuations after the Date of Deposit in the Public Offering
Price received by the Underwriter upon the sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of $0.095 of the Public
Page 21
Offering Price per Unit in the case of the Wrap Trust and 3.1% of the
Public Offering Price per Unit in the case of the Traditional Trust
commencing three months after the Initial Date of Deposit, and 1.95% of
the Public Offering Price per Unit in the case of the Traditional Trust
commencing six months after the Initial Date of Deposit) or redeemed.
The secondary market public offering price of Units may be greater or
less than the cost of such Units to the Sponsor.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated to do
so, the Sponsor intends to, 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 underlying value
of the Equity Securities in a Trust plus or minus cash and receivables
(including dividends declared but not paid), if any, in the Income and
Capital Accounts of a 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. Only
Unit holders who elect to hold Units in uncertificated form are eligible
to participate as a Rollover Unit holder. 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 22
How are Income and Capital Distributed?
Starting on the first day of the Special Redemption and Liquidation
Period for Rollover Unit holders, or upon termination of a Trust for
other Unit holders, amounts in the Income Account (which consist of
dividends on the Equity Securities) and amounts in the Capital Account
will be included in amounts distributed to or on behalf of Unit holders.
See "Summary of Essential Information." 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. Proceeds received on the sale of any Equity Securities in a
Trust, to the extent not used to meet redemptions of Units or pay
expenses, will, however, be distributed on the last day of each month to
Unit holders of record on the fifteenth day of such month if the amount
available for distribution equals at least $0.01 per Unit. The Trustee
is not required to pay interest on funds held in the Capital Account of
a Trust (but may itself earn interest thereon and therefore benefit from
the use of such funds). See "What is the Federal Tax Status of Unit Holders?"
It is anticipated that the deferred sales charge applicable to Wrap
Trust Units will be collected from the Capital Account and that amounts
in the Capital Account will be sufficient to cover the cost of the
deferred sales charge. However, to the extent that amounts in the
Capital Account are insufficient to satisfy the then current deferred
sales charge obligation, Equity Securities may be sold to meet such
shortfall. Distributions of amounts necessary to pay the deferred
portion of the sales charge will be made to an account designated by the
Sponsor for purposes of satisfying Unit holders' deferred sales charge
obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
a Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable 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 a Trust is terminated, each Unit holder
who is not a Rollover Unit holder 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 or she elects an In-Kind
Distribution as described below and (ii) a pro rata share of any other
assets of a Trust, less expenses of such Trust. Not less than 30 days
prior to the Mandatory Termination Date of the Trusts the Trustee will
provide written notice thereof to all Unit holders and will include with
such notice a form to enable Unit holders to elect a distribution of
shares of Equity Securities (an "In-Kind Distribution"), if such Unit
holder owns at least 2,500 Units of a Trust, rather than to receive
payment in cash for such Unit holder's pro rata share of the amounts
realized upon the disposition by the Trustee of Equity Securities. An In-
Kind Distribution will be reduced by customary transfer and registration
charges. To be effective, the election form, together with surrendered
certificates and other documentation required by the Trustee, must be
returned to the Trustee at least five business days prior to the
Mandatory Termination Date of a Trust. A Unit holder may, of course, at
any time after the Equity Securities are distributed, sell all or a
portion of the shares.
The Trustee will credit to the Income Account of the Trust any dividends
received on the Equity Securities therein. All other receipts (e.g.
return of principal, etc.) are credited to the Capital Account of a Trust.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for state and local taxes, if any, and any governmental charges
payable out of such 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
Page 23
of a Trust the following information in reasonable detail: (1) a summary
of transactions in the respective Trust for such year; (2) any Equity
Securities sold during the year and the Equity Securities held at the
end of such year by the respective 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.
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 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 (if such day is a
day on which the New York Stock Exchange is open for trading), except
that as regards Units received after 4:00 p.m. Eastern time (or as of
any earlier closing time on a day on which the New York Stock Exchange
is scheduled in advance to close at such earlier time), the date of
tender is the next day on which 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. Units of the Wrap Trust
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
the remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 2,500 Units or more of a Trust for redemption
may request by written notice submitted at the time of tender from the
Trustee in lieu of a cash redemption a distribution of shares of Equity
Securities in an amount and value of Equity Securities per Unit equal to
the Redemption Price Per Unit as determined as of the evaluation next
following tender. To the extent possible, In-Kind Distributions ("In-
Kind Distributions") shall be made by the Trustee through the
distribution of each of the Equity Securities in book-entry form to the
account of the Unit holder's bank or broker-dealer at the Depository
Trust Company. An In-Kind Distribution will be reduced by customary
transfer and registration charges. The tendering Unit holder will
receive his pro rata number of whole shares of each of the Equity
Securities comprising the portfolio and cash from the Capital Account
equal to the fractional shares to which the tendering Unit holder is
entitled. The Trustee may adjust the number of shares of any issue of
Equity Securities included in a Unit holder's In-Kind Distribution to
facilitate the distribution of whole shares, such adjustment to be made
on the basis of the value of Equity Securities on the date of tender. If
funds in the Capital Account are insufficient to cover the required cash
distribution to the tendering Unit holder, the Trustee may sell Equity
Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. 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 a 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 a Trust.
The Trustee is empowered to sell Equity Securities of a Trust in order
to make funds available for redemption. To the extent that Equity
Securities are sold, the size and diversity of a 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.
Page 24
The Redemption Price per Unit and the Public Offering Price per Unit
(which includes the sales charge) during the initial offering period (as
well as the secondary market Public Offering Price) will be determined
on the basis of the aggregate underlying value of the Equity Securities
in a Trust plus or minus cash and receivables (including declared but
unpaid dividends), if any, in the Income and Capital Accounts of a
Trust. The Redemption Price per Unit is the pro rata share of each Unit
determined by the Trustee by adding: (1) the cash on hand in a Trust
other than cash deposited in a Trust to purchase Equity Securities not
applied to the purchase of such Equity Securities; (2) the aggregate
value of the Equity Securities (including "when issued" contracts, if
any) held in a Trust, as determined by the Evaluator on the basis of the
aggregate underlying value of the Equity Securities in a 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 a Trust; (2) any amounts owing to the Trustee for its
advances; (3) an amount representing estimated accrued expenses of a
Trust, including but not limited to fees and expenses of the Trustee
(including legal fees), the Evaluator and supervisory fees, if any; (4)
cash held for distribution to Unit holders of record of a Trust as of
the business day prior to the evaluation being made; and (5) other
liabilities incurred by a Trust; and finally dividing the results of
such computation by the number of Units of a Trust outstanding as of the
date thereof. For Unit holders of the Wrap Trust, the redemption price
per Unit will be assessed the amount, if any, of the remaining deferred
sales charge at the time of redemption.
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 therefore is other than on the exchange, the evaluation shall
generally be based on the current bid prices 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.
Special Redemption, Liquidation and Investment in a New Trust
It is expected that a special redemption and liquidation will be made of
all Units of a Trust held by any Unit holder (a "Rollover Unit holder")
who affirmatively notifies the Trustee in writing that he or she desires
to take advantage of such special redemption and liquidation by the
Rollover Notification Date specified in the "Summary of Essential
Information."
All Units of Rollover Unit holders will be redeemed In-Kind during the
Special Redemption and Liquidation Period and the underlying Equity
Securities will be distributed to the Distribution Agent on behalf of
the Rollover Unit holders. During the Special Redemption and Liquidation
Period (as set forth in "Summary of Essential Information" for each
Trust), the Distribution Agent will be required to sell all of the
underlying Equity Securities on behalf of Rollover Unit holders. The
sales proceeds will be net of brokerage fees, governmental charges or
any expenses involved in the sales.
The Distribution Agent will engage the Sponsor as its agent to sell the
distributed Equity Securities. The Sponsor will attempt to sell the
Equity Securities as quickly as is practicable during the Special
Redemption and Liquidation Period. The Sponsor does not anticipate that
Page 25
the period will be longer than ten business days, and it could be as
short as one day, given that the Equity Securities are usually highly
liquid. The liquidity of any Equity Security depends on the daily
trading volume of the Equity Security and the amount that the Sponsor
has available for sale on any particular day.
It is expected (but not required) that the Sponsor will generally follow
the following guidelines in selling the Equity Securities: for highly
liquid Equity Securities, the Sponsor will generally sell Equity
Securities on the first day of the Special Redemption and Liquidation
Period; for less liquid Equity Securities, on each of the first two days
of the Special Redemption and Liquidation Period, the Sponsor will
generally sell any amount of any underlying Equity Securities at a price
no less than 1/2 of one point under the closing sale price of those
Equity Securities on the preceding day. Thereafter, the Sponsor intends
to sell without any price restrictions at least a portion of the
remaining underlying Equity Securities, the numerator of which is one
and the denominator of which is the total number of days remaining
(including that day) in the Special Redemption and Liquidation Period.
The Rollover Unit holders' proceeds will (depending on the election of
the Rollover Unit holder) be invested in a new series of the Traditional
Trust or the Wrap Trust (the "1998 Trusts") created in conjunction with
the termination of either of these series of the McDonald Select Equity
Trust, if then registered in the Unit holder's state and being offered,
the portfolio of which will contain the new Equity Securities selected
by the Underwriter as of the day prior to the Date of Deposit of the
1998 Trusts. The proceeds of redemption available on each day will be
used to buy 1998 Trust Units as the proceeds become available at the
Public Offering Price of a 1998 Trust, including the applicable sales
charge per Unit (which for Rollover Unit Holders is currently expected
to be 1.95% of the Public Offering Price per Unit for the 1998
Traditional Trust and .95% of the Public Offering Price per Unit for the
1998 Wrap Trust).
The Sponsor intends to create 1998 Trust Units as quickly as possible,
dependent upon the availability and reasonably favorable prices of the
Equity Securities included in the 1998 Trust portfolios, and it is
intended that Rollover Unit holders will be given first priority to
purchase the 1998 Trust Units. There can be no assurance, however, as to
the exact timing of the creation of 1998 Trust Units or the aggregate
number of 1998 Trust Units which the Sponsor will create. The Sponsor
may, in its sole discretion, stop creating new Units (whether
permanently or temporarily) at any time it chooses, regardless of
whether all proceeds of the Special Redemption and Liquidation have been
invested on behalf of Rollover Unit holders. Cash which has not been
invested on behalf of the Rollover Unit holders in 1998 Trust Units will
be distributed at the end of the Special Redemption and Liquidation
Period. However, since the Sponsor can create Units, the Sponsor
anticipates that sufficient Units can be created, although moneys in the
1998 Trusts may not be fully invested on the next business day.
Any Rollover Unit holder may thus be redeemed out of a Trust and become
a holder of an entirely different Trust, a 1998 Trust, with a different
portfolio of Equity Securities. The Rollover Unit holders' Units will be
redeemed In-Kind and the distributed Equity Securities shall be sold
during the Special Redemption and Liquidation Period. In accordance with
the Rollover Unit holders' offer to purchase the 1998 Trust Units, the
proceeds of the sales (and any other cash distributed upon redemption)
will be invested in a 1998 Trust, at the public offering price of the
respective 1998 Trust, including the applicable sales charge per Unit
(which for Rollover Unit holders is currently expected to be 1.95% of
the Public Offering Price per Unit for the 1998 Traditional Trust and
.95% of the Public Offering Price per Unit for the 1998 Wrap Trust).
This process of redemption, liquidation, and investment in a new Trust
is intended to allow for the fact that the portfolios selected by the
Underwriter are chosen on the basis of potential for capital
appreciation only for a year, at which point a new portfolio is chosen.
It is contemplated that a similar process of redemption, liquidation and
investment in a new trust will be available for the 1998 Trusts and each
subsequent series of the Trusts, approximately a year after that Series'
creation.
The Sponsor believes that the gradual redemption, liquidation and
investment in a Trust will help mitigate any negative market price
consequences stemming from the trading of large volumes of securities
and of the underlying Equity Securities in a Trust in a short,
publicized period of time. The above procedures may, however, be
insufficient or unsuccessful in avoiding such price consequences. In
fact, market price trends may make it advantageous to sell or buy more
quickly or more slowly than permitted by these procedures. Rollover Unit
holders could then receive a less favorable average Unit price than if
they bought all their Units of a Trust on any given day of the period.
Page 26
It should also be noted that Rollover Unit holders may realize taxable
capital gains on the Special Redemption and Liquidation but, in certain
unlikely circumstances, will not be entitled to a deduction for certain
capital losses and, due to the procedures for investing in a 1998 Trust,
no cash would be distributed at that time to pay any taxes. Included in
the cash for the Special Redemption and Liquidation will be an amount of
cash attributable to the distribution of dividend income; accordingly,
Rollover Unit holders also will not have cash distributed to pay any
taxes. See "What is the Federal Tax Status of Unit Holders?"
In addition, during this period a Unit holder will be at risk to the
extent that Equity Securities are not sold and will not have the benefit
of any stock appreciation to the extent that moneys have not been
invested; for this reason, the Sponsor will be inclined to sell and
purchase the Equity Securities in as short a time period as it can
without materially adversely affecting the price of the Equity
Securities.
Unit holders who do not inform the Distribution Agent that they wish to
have their Units so redeemed and liquidated ("Remaining Unit holders")
will continue to hold Units of a Trust as described in this Prospectus
until such Trust is terminated or until the Mandatory Termination Date
listed in the Summary of Essential Information, whichever occurs first.
These Remaining Unit holders will not realize capital gains or losses
due to the Special Redemption and Liquidation, and will not be charged
any additional sales charge. If a large percentage of Unit holders
become Rollover Unit holders, the aggregate size of a Trust will be
sharply reduced. As a consequence, expenses, if any, in excess of the
amount to be borne by the Trustee would constitute a higher percentage
amount per Unit than prior to the Special Redemption, Liquidation and
Investment in a 1998 Trust. The Trusts might also reduce to the
Discretionary Liquidation Amount listed in the Summary of Essential
Information because of the lesser number of Units in a Trust, and
possibly also due to a value reduction, however temporary, in Units
caused by the Sponsor's sales of Equity Securities; if so, the Sponsor
could then choose to liquidate a Trust without the consent of the
remaining Unit holders. See "How May the Indenture be Amended or
Terminated?" The Equity Securities remaining in a Trust after the
Special Redemption and Liquidation Period will be sold by the Sponsor as
quickly as possible without, in its judgment, materially adversely
affecting the market price of the Equity Securities.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor the 1998 Trusts or any subsequent series of the Trusts, without
penalty or incurring liability to any Unit holder. If the Sponsor so
decides, the Sponsor shall notify the Unit holders before the Special
Redemption and Liquidation Period would have commenced. All Unit holders
will then be remaining Unit holders, with rights to ordinary redemption
as stated above. See "How May Units be Redeemed?" The Sponsor may modify
the terms of the 1998 Trusts or any subsequent series of the Trusts. The
Sponsor may also modify, suspend or terminate the Rollover Option upon
notice to the Unit holders of such amendment at least 60 days prior to
the effective date of such amendment.
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 Equity Securities be Removed from a Trust?
The portfolios of the Trusts are 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
Page 27
been declared, that any action or proceeding has been instituted
restraining the payment of dividends or there exists any legal question
or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments
of dividends, the credit standing of the issuer or otherwise impair the
sound investment character of the Equity Security, that the issuer has
defaulted on the payment on any other of its outstanding obligations,
that the price of the Equity Security has declined to such an extent or
other such credit factors exist so that in the opinion of the Sponsor,
the retention of such Equity Securities would be detrimental to a Trust.
Except as stated under "Portfolio -What are Some Additional
Considerations for Investors?" for Failed Obligations, the acquisition
by a Trust of any securities or other property other than the Equity
Securities is prohibited. Pursuant to the Indenture and with limited
exceptions, the Trustee may sell any securities or other property
acquired in exchange for Equity Securities such as those acquired in
connection with a merger or other transaction. If offered such new or
exchanged securities or property, the Trustee shall reject the offer.
However, in the event such securities or property are nonetheless
acquired by a Trust, they may be accepted for deposit in such Trust and
either sold by the Trustee or held in such Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). Proceeds from the sale of Equity Securities by the Trustee
are credited to the Capital Account of a Trust for distribution to Unit
holders or to meet redemptions.
The Trustee may also sell Equity Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose of
redeeming Units of a Trust tendered for redemption and the payment of
expenses.
The Sponsor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Equity Securities. To the extent this is not
practicable, the composition and diversity of the Equity Securities may
be altered. In order to obtain the best price for a Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Equity Securities are to be sold. 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 a Trust's portfolio transactions.
INFORMATION AS TO UNDERWRITER, SPONSOR, TRUSTEE AND EVALUATOR
Who is the Underwriter?
The Underwriter, McDonald & Company Securities, Inc., is a corporation
organized under the laws of the State of Ohio. The Underwriter is a
member firm of the New York Stock Exchange, Inc. as well as other major
securities and commodities exchanges and is a member of the National
Association of Securities Dealers, Inc. The Underwriter is involved in
the business of origination, underwriting, distribution, trading,
investment banking, and brokerage of fixed income and equity securities.
The Underwriter also acts as a dealer in unlisted securities and
municipal bonds and in addition to participating as a member of various
selling groups or as an agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of
securities of such companies and sells securities to such companies in
its capacity as a broker or dealer in securities. The Underwriter makes
a market in certain securities including Equity Securities purchased by
a Trust and may from time to time, through an affiliate or otherwise,
make principal investments in those companies and their securities.
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 and
The First Trust GNMA. 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
Page 28
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 Trusts or to any series thereof or to any other
Underwriter. The information is included herein only for the purpose of
informing investors as to the financial responsibility of the Sponsor
and its ability to carry out its contractual obligations. More detailed
financial information will be made available by the Sponsor upon request.)
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Equity 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 Equity 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.
Page 29
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Equity Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of a Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust 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.
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 each Trust shall terminate upon the
Mandatory Termination Date indicated herein under "Summary of Essential
Information" for each Trust. The Trusts may be liquidated at any time by
consent of 100% of the Unit holders of a Trust or by the Trustee when
the value of the Equity Securities owned by a Trust as shown by any
evaluation, is less than the lower of $2,000,000 or 20% of the total
value of Equity Securities deposited in such Trust during the primary
offering period, or in the event that Units of a Trust not yet sold
aggregating more than 60% of the Units of such Trust are tendered for
redemption by the Underwriter, including the Sponsor. If a Trust is
liquidated because of the redemption of unsold Units of such 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 such Trust. Within a reasonable period after
termination, the Trustee will follow the procedures set forth under "How
are Income and Capital Distributed?" The Special Redemption and
Liquidation in a Trust could cause a Trust to be reduced below the
Discretionary Liquidation Amount and a Trust could therefore be
terminated at that time before the Mandatory Termination Date of such
Trust.
Commencing on the Mandatory Termination Date, Equity Securities will
begin to be sold in connection with the termination of a Trust. The
Sponsor will determine the manner, timing and execution of the sale of
the Equity Securities. Written notice of any termination of a Trust
specifying the time or times at which Unit holders may surrender their
certificates for cancellation shall be given by the Trustee to each Unit
holder at his address appearing on the registration books of a Trust
maintained by the Trustee. At least 60 days prior to the Mandatory
Termination Date of a Trust the Trustee will provide written notice
thereof to all Unit holders and will include with such notice a form to
enable Unit holders to elect a distribution of shares of Equity
Securities (reduced by customary transfer and registration charges), if
such Unit holder owns at least 2,500 Units of a Trust, rather than to
receive payment in cash for such Unit holder's pro rata share of the
amounts realized upon the disposition by the Trustee of Equity
Securities. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least five business days
prior to the Mandatory Termination Date of a Trust. Unit holders not
electing a distribution of shares of Equity Securities and who do not
elect the Rollover Option will receive a cash distribution from the sale
of the remaining Equity Securities within a reasonable time after a
Trust is terminated. Regardless of the distribution involved, the
Trustee will deduct from the funds of a Trust any accrued costs,
expenses, advances or indemnities provided by the Trust Agreement,
Page 30
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 Equity
Securities in a Trust upon termination may result in a lower amount than
might otherwise be realized if such sale were not required at such time.
The Trustee will then distribute to each Unit holder his pro rata share
of the balance of the Income and Capital Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The statements of net assets, including the schedules of investments, of
the Trusts at the opening of business on the Initial Date of Deposit
appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
UNDERWRITING
The Underwriter below has purchased Units in the following amount:
<TABLE>
<CAPTION>
Number of Units
_______________
Name Address Traditional Trust Wrap Trust
____ _______ _________________ __________
<S> <C> <C> <C>
Underwriter
McDonald & Company 800 Superior Street, Suite 2100, 14,993 14,991
Securities, Inc. Cleveland, OH 44114
====== ======
</TABLE>
On the Initial Date of Deposit, the Underwriter of the Trusts became the
owner of the Units of the Trusts 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 Trusts 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 Sponsor will receive from the
Underwriter the difference between the gross sales concession and 2.5%
of the Public Offering Price of the Traditional Trust Units, which is
retained by the Underwriter. The Sponsor will receive from the
Underwriter the entire amount of the gross sales concession received on
Wrap Trust Units, $0.095 per Unit.
From time to time the Sponsor may implement programs under which the
Underwriter and dealers of a Trust may receive nominal awards from the
Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of an Underwriter or dealer 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
qualifying Underwriters or dealers for certain services or activities
which are primarily intended to result in sales of Units of a Trust.
Such payments are made by the Sponsor out of its own assets, and not out
of the assets of a Trust. These programs will not change the price Unit
holders pay for their Units or the amount that a Trust will receive from
the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the returns on the Trusts and returns over specified periods on
other similar trusts sponsored by Nike Securities L.P. with returns on
Page 31
investments such as corporate or U.S. Government bonds, bank CDs and
money market accounts or money market funds, each of which has
investment characteristics that may differ from those of the Trusts.
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 Trusts 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 Trusts are
not actively managed. Unit price and return fluctuate with the value of
the common stocks in the portfolio, so there may be a gain or loss when
Units are sold.
A Trust's performance may be compared to performance on a total return
basis with the Dow Jones Industrial Average, the S&P 500 Composite Price
Stock Index, or performance data from Lipper Analytical Services, Inc.
and Morningstar Publications, Inc. or from publications such as Money,
The New York Times, U.S. News and World Report, Business Week, Forbes or
Fortune. As with other performance data, performance comparisons should
not be considered representative of a Trust's relative performance for
any future period.
Page 32
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
THE FIRST TRUST SPECIAL SITUATIONS TRUST, SERIES 174
We have audited the accompanying statements of net assets, including the
schedules of investments, of The First Trust Special Situations Trust,
Series 174, comprised of McDonald Select Equity Trust, Series 1997 and
McDonald Select Equity Trust, Wrap Series 1997, as of the opening of
business on December 2, 1996. These statements of net assets are the
responsibility of the Trusts' Sponsor. Our responsibility is to express
an opinion on these statements of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letters of credit held by the Trustee and deposited in the Trusts on
December 2, 1996. An audit also includes assessing the accounting
principles used and significant estimates made by the Sponsor, as well
as evaluating the overall presentation of the statements of net assets.
We believe that our audit of the statements of net assets provides a
reasonable basis for our opinion.
In our opinion, the statements of net assets referred to above presents
fairly, in all material respects, the financial position of The First
Trust Special Situations Trust, Series 174, comprised of McDonald Select
Equity Trust, Series 1997 and McDonald Select Equity Trust, Wrap Series
1997, at the opening of business on December 2, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 2, 1996
Page 33
Statement of Net Assets
MCDONALD SELECT EQUITY TRUST, SERIES 1997
The First Trust Special Situations Trust, Series 174
At the Opening of Business on the Initial Date of Deposit
December 2, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase contracts (1) (2) $144,535
Organizational and offering costs (3) 45,000
_________
189,535
Less accrued organizational and offering costs (3) (45,000)
_________
Net assets $144,535
=========
Units outstanding 14,993
ANALYSIS OF NET ASSETS
Cost to investors (4) $149,933
Less sales charge (4) (5,398)
_________
Net assets $144,535
=========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $200,000 issued by Bankers
Trust Company has been deposited with the Trustee covering the monies
necessary for the purchase of the Equity Securities pursuant to
contracts for the purchase of such Equity Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over a period
not to exceed one year from the Initial Date of Deposit. The estimated
organizational and offering costs are based on 3,000,000 Units of the
Trust expected to be issued. To the extent the number of Units issued is
larger or smaller, the estimate will vary.
(4) The aggregate cost to investors includes a sales charge computed at
the rate of 3.6% of the Public Offering Price (equivalent to 3.734% of
the net amount invested), assuming no reduction of sales charge for
Rollover Unit holders of McDonald Select Equity Trust, Series 1996, or
for quantity purchases.
Page 34
Statement of Net Assets
MCDONALD SELECT EQUITY TRUST, WRAP SERIES 1997
The First Trust Special Situations Trust, Series 174
At the Opening of Business on the Initial Date of Deposit
December 2, 1996
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Investment in Equity Securities represented by purchase contracts (1) (2) $149,916
Organizational and offering costs (3) 7,500
_________
157,416
Less accrued organizational and offering costs (3) (7,500)
_________
Less liability for deferred sales charge (4) (1,424)
Net assets $148,492
=========
Units outstanding 14,991
ANALYSIS OF NET ASSETS
Cost to investors (5) $149,916
Less sales charge (5) (1,424)
_________
Net assets $148,492
=========
</TABLE>
[FN]
NOTES TO STATEMENT OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule of
Investments" is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $200,000 issued by Bankers
Trust Company has been deposited with the Trustee covering the monies
necessary for the purchase of the Equity Securities pursuant to
contracts for the purchase of such Equity Securities.
(3) The Trust will bear all or a portion of its estimated organizational
and offering costs which will be deferred and charged off over a period
not to exceed one year from the Initial Date of Deposit. The estimated
organizational and offering costs are based on 500,000 Units of the
Trust expected to be issued. To the extent the number of Units issued is
larger or smaller, the estimate will vary.
(4) Represents the amount of mandatory distributions from the Trust
($0.095 per Unit), payable to the Sponsor in ten equal monthly
installments beginning on January 31, 1997, and on the last business day
of each month thereafter through October 31, 1997. If Units are redeemed
prior to October 31, 1997, the remaining amount of the deferred sales
charge applicable to such Units will be payable at the time of
redemption.
(5) The aggregate cost to investors includes a sales charge computed at
the rate of .95% of the Public Offering Price (equivalent to .95% of the
net amount invested, exclusive of the deferred sales charge).
Page 35
Schedule of Investments
MCDONALD SELECT EQUITY TRUST, SERIES 1997
The First Trust Special Situations Trust, Series 174
At the Opening of Business on the Initial Date of Deposit
December 2, 1996
<TABLE>
<CAPTION>
Market Cost of
Number Percentage of Value Equity
of Ticker Symbol and Aggregate per Securities to
Shares Name of Issuer of Equity Securities (1) Offering Price Share the Trust (2)
______ _______________________________________ ______________ _______ _____________
<S> <C> <C> <C> <C>
315 AMP AMP, Inc. 8.33% $38.250 $12,049
334 COF Capital One Financial Corporation 8.35% 36.125 12,066
588 CTB Cooper Tire & Rubber Company 8.34% 20.500 12,054
270 DE Deere & Company 8.34% 44.625 12,049
263 ENE Enron Corporation 8.32% 45.750 12,032
446 HPT Hospitality Properties Trust 8.33% 27.000 12,042
446 IVCR Invacare Corporation 8.41% 27.250 12,153
389 NWL Newell Company 8.34% 31.000 12,059
398 PEP PepsiCo, Inc. 8.23% 29.875 11,890
320 RDA Reader's Digest Association, Inc. 8.33% 37.625 12,040
482 RGIS Regis Corporation 8.34% 25.000 12,050
229 SBC SBC Communications, Inc. 8.34% 52.625 12,051
________ ________
Total Investments 100% $144,535
======== ========
</TABLE>
[FN]
______________
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
contracts to purchase Equity Securities were entered into by the Sponsor
on December 2, 1996. The Trust has a mandatory termination date of
December 31, 1997.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded Equity
Securities on the business day preceding the Initial Date of Deposit).
The valuation of the Equity Securities has been determined by the
Evaluator, an affiliate of the Sponsor. The aggregate underlying value
of the Equity Securities on the Initial Date of Deposit, was $144,535.
Cost and loss to Sponsor relating to the purchase of the Equity
Securities sold to the Trust were $144,993 and $458, respectively.
Page 36
Schedule of Investments
MCDONALD SELECT EQUITY TRUST, WRAP SERIES 1997
The First Trust Special Situations Trust, Series 174
At the Opening of Business on the Initial Date of Deposit
December 2, 1996
<TABLE>
<CAPTION>
Market Cost of
Number Percentage of Value Equity
of Ticker Symbol and Aggregate per Securities to
Shares Name of Issuer of Equity Securities (1) Offering Price Share the Trust (2)
______ _______________________________________ _______________ _______ _____________
<S> <C> <C> <C> <C>
327 AMP AMP, Inc. 8.34% $38.250 $12,508
346 COF Capital One Financial Corporation 8.34% 36.125 12,499
610 CTB Cooper Tire & Rubber Company 8.34% 20.500 12,505
280 DE Deere & Company 8.34% 44.625 12,495
272 ENE Enron Corporation 8.30% 45.750 12,444
463 HPT Hospitality Properties Trust 8.34% 27.000 12,501
463 IVCR Invacare Corporation 8.42% 27.250 12,617
403 NWL Newell Company 8.33% 31.000 12,493
413 PEP PepsiCo, Inc. 8.23% 29.875 12,338
332 RDA Reader's Digest Association, Inc. 8.33% 37.625 12,491
500 RGIS Regis Corporation 8.34% 25.000 12,500
238 SBC SBC Communications, Inc. 8.35% 52.625 12,525
________ ________
Total Investments 100% $149,916
======== ========
</TABLE>
[FN]
______________
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
contracts to purchase Equity Securities were entered into by the Sponsor
on December 2, 1996. The Trust has a mandatory termination date of
December 31, 1997.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded Equity
Securities on the business day preceding the Initial Date of Deposit).
The valuation of the Equity Securities has been determined by the
Evaluator, an affiliate of the Sponsor. The aggregate underlying value
of the Equity Securities on the Initial Date of Deposit, was $149,916.
Cost and loss to Sponsor relating to the purchase of the Equity
Securities sold to the Trust were $150,391 and $475, respectively.
Page 37
This page is intentionally left blank.
Page 38
This page is intentionally left blank.
Page 39
CONTENTS:
Summary of Essential Information:
McDonald Select Equity Trust, Series 1997 5
McDonald Select Equity Trust, Wrap Series 1997 6
The First Trust Special Situations Trust, Series 174:
What is The First Trust Special Situations Trust? 9
What are the Expenses and Charges? 10
What is the Federal Tax Status of Unit Holders? 11
Why are Investments in a Trust Suitable for
Retirement Plans? 14
Portfolio:
What are Equity Securities? 15
What are the Equity Securities Selected for
McDonald Select Equity Trust, Series 1997 and
McDonald Select Equity Trust, Wrap Series 1997? 15
What are Some Additional Considerations for
Investors? 16
Risk Factors 16
Public Offering:
How is the Public Offering Price Determined? 19
How are Units Distributed? 21
What are the Sponsor's Profits? 21
Will There be a Secondary Market? 22
Rights of Unit Holders:
How is Evidence of Ownership Issued and Transferred? 22
How are Income and Capital Distributed? 23
What Reports will Unit Holders Receive? 23
How May Units be Redeemed? 24
Special Redemption, Liquidation and
Investment in a New Trust 25
How May Units be Purchased by the Sponsor? 27
How May Equity Securities be Removed from a Trust? 27
Information as to Underwriter, Sponsor, Trustee
and Evaluator:
Who is the Underwriter? 28
Who is the Sponsor? 28
Who is the Trustee? 29
Limitations on Liabilities of Sponsor and Trustee 29
Who is the Evaluator? 30
Other Information:
How May the Indenture be Amended or Terminated? 30
Legal Opinions 31
Experts 31
Underwriting 31
Report of Independent Auditors 33
Statements of Net Assets:
McDonald Select Equity Trust, Series 1997 34
McDonald Select Equity Trust, Wrap Series 1997 35
Schedules of Investments:
McDonald Select Equity Trust, Series 1997 36
McDonald Select Equity Trust, Wrap Series 1997 37
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE TRUST
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
McDonald Select Equity Trust
Series 1997
McDonald Select Equity Trust
Wrap Series 1997
McDonald & Company
Securities, Inc.
800 Superior Street
Suite 2100
Cleveland, OH 44114
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
December 2, 1996
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
MEMORANDUM
Re: FT 223
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 174, which is the
current fund, and FT 223, 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 174 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, FT 223 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 October 21, 1997.
FT 223
(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 Director of
Nike Securities October 21, 1997
Corporation, the
General Partner of
Nike Securities L.P. Robert M. Porcellino
Attorney-in-Fact**
David J. Allen Director of Nike
Securities Corporation,
the General Partner of
Nike Securities L.P.
___________________________
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., 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 223 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
