SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 to
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
A. Exact Name of Trust: FT 232
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 232
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.
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1997
AS AMENDED DECEMBER 4, 1997
THE LATIN AMERICAN GOVERNMENT INCOME TRUST
FT 232 is a unit investment trust consisting of a portfolio of interest-
bearing U.S. dollar-denominated sovereign debt obligations of the
Republic of Argentina, the Federative Republic of Brazil, the United
Mexican States, the Republic of Panama and the Republic of Venezuela
(the "Bonds"), including delivery statements relating to contracts for
the purchase of certain such obligations and an irrevocable letter of
credit. The weighted average maturity of the Bonds in the Trust is ___
years.
The Objective of the Trust is to provide a high level of current income
through investment in a fixed portfolio consisting of high-yield, high-risk
U.S. dollar-denominated sovereign debt obligations, if interest thereon is
U.S. source income. The objective of the Trust is dependent upon the
continuing ability of the issuers and/or obligors to meet their respective
obligations. There is, of course, no guarantee that the objective of the
Trust will be achieved. See "What is The FT Series?-Risk Factors" and
"Portfolio."
Bonds issued by each of the aforementioned issuers represent
approximately 20% of the Trust's portfolio, and therefore, the Trust is
subject to greater risk than would exist in a more diversified
portfolio. Furthermore, each of the aforementioned issuers have
experienced periods of economic uncertainty that have, at various times,
resulted in high default rates on outstanding obligations, high
inflation and currency instability. The Bonds included in this Trust
should be viewed as speculative and an investor should review his or her
ability to assume the risks associated with such an investment. for
additional information concerning these risks. ALL OF THE BONDS IN THE
TRUST ARE LOWER RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL
GREATER RISKS, INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED
SECURITIES. BONDS ISSUED BY EACH OF THE AFOREMENTIONED ISSUERS REPRESENT
APPROXIMATELY 20% OF THE TRUST'S PORTFOLIO, AND THEREFORE, THE TRUST IS
SUBJECT TO GREAT RISK THAN WOULD EXIST IN A MORE DIVERSIFIED PORTFOLIO.
JUNK BONDS ISSUED BY FOREIGN ISSUERS CARRY THE ADDITIONAL RISKS OF
UNTIMELY INTEREST AND PRINCIPAL PAYMENTS AND PRICE VOLATILITY THAN
HIGHER RATED SECURITIES, AND MAY PRESENT PROBLEMS OF LIQUIDITY AND
VALUATION. FURTHERMORE, EACH OF THE AFOREMENTIONED ISSUERS HAVE
EXPERIENCED PERIODS OF ECONOMIC UNCERTAINTY THAT HAVE, AT VARIOUS TIMES,
RESULTED IN HIGH DEFAULT RATES ON OUTSTANDING OBLIGATIONS, HIGH
INFLATION AND CURRENCY INSTABILITY. THE BONDS INCLUDED IN THIS TRUST
SHOULD BE VIEWED AS SPECULATIVE AND AN INVESTOR SHOULD REVIEW HIS OR HER
ABILITY TO ASSUME THE RISKS ASSOCIATED WITH SUCH AN INVESTMENT.
INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE
"BOND PORTFOLIO SELECTION" AND "RISK FACTORS" ON PAGE 5 FOR ADDITIONAL
INFORMATION CONCERNING THESE RISKS.
UNITS OF THE TRUST ARE NOT DEPOSITS OF, OR GUARANTEED BY, ANY BANK AND
UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK INCLUDING LOSS
OF PRINCIPAL.
Attention Foreign Investors: Your interest income from the Trust may be
exempt from federal withholding taxes if you are not a United States
citizen or resident and certain conditions are met. See "What is the
Federal Tax Status of Unit Holders?"
Distributions to Unit holders may be reinvested as described herein. See
"Rights of Unit Holders-How Can Distributions to Unit Holders be
Reinvested?"
The Sponsor, although not obligated to do so, intends to maintain a
market for the Units at prices based upon the aggregate bid price of the
Bonds in the portfolio of the Trust. In the absence of such a market, a
Unit holder will nonetheless be able to dispose of the Units through
redemption at prices based upon the bid prices of the underlying Bonds.
See "Rights of Unit Holders-How May Units be Redeemed?"
The Sponsor may, from time to time during a period of up to
approximately one year after the Initial Date of Deposit, deposit
additional Bonds in the Trust. Such deposits of additional Bonds will,
therefore, be done in such a manner that the original proportionate
relationship amongst the individual issues of the Bonds shall be
maintained. See "What is The FT Series?" and "Rights of Unit Holders-How
May Bonds be Removed from the Trust?"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
The date of this Prospectus is ____________, 1997
Page 1
The Public Offering Price of the Units during the initial offering
period is equal to the aggregate offering price of the Bonds in the
portfolio divided by the number of Units outstanding, plus a sales
charge equal to 4.9% of the Public Offering Price (5.152% of the
aggregate offering price of the Bonds). For sales charges in the
secondary market, see "Public Offering." During the initial offering
period, the sales charge is reduced on a graduated scale for sales
involving at least $100,000. The minimum purchase is $1,000.
Portfolio Supervisor's Annual Fee. In performing its duties as Portfolio
Supervisor, First Trust Advisors L.P. may obtain research and other
information from a variety of sources. Such information will consist of
comments covering the financial condition and business prospects of the
issuers and an analysis of the respective market sectors, including
economic, tax, currency, political, regulatory and other similar risks.
The Sponsor believes that the information will be beneficial in the
present circumstances due to the complexity of the foreign high-yield
debt markets. First Trust Advisors L.P. will receive $.0070 per Unit for
its supervisory services. THE SUPERVISORY FEE IS SET FORTH UNDER
"SUMMARY OF ESSENTIAL INFORMATION" AND IS GREATER FOR THIS TRUST THAN
FOR OTHER TRUSTS OF WHICH NIKE SECURITIES L.P. ACTS AS SPONSOR.
Risk Factors. An investment in the Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, loss of principal and/or interest due to the possible
deterioration of the financial condition of the issuer governments,
governmental, political, economic and fiscal policies of the
representative countries, changes in economic conditions, volatile
interest rates, lack of liquidity, lack of adequate financial
information concerning an issuer government, exchange control
restrictions impacting foreign issuers and changing perceptions
regarding junk bonds. In addition, as the Trust contains only ___ Bonds,
a default by any one issuer will negatively impact the amount of
interest received by the Trust. See "Risk Factors."
Page 2
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Bonds-____________, 1997
Underwriter: First Miami Securities, Inc.
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: Muller Data Corporation
<TABLE>
<CAPTION>
General Information
<S> <C>
Principal Amount of Bonds in the Trust $
Number of Units
Fractional Undivided Interest in the Trust per Unit 1/
Principal Amount (Par Value) of Bonds per Unit (1) $
Public Offering Price
Aggregate Offering Price Evaluation of Bonds in the Portfolio $
Aggregate Offering Price Evaluation per Unit $
Sales Charge (2) $
Public Offering Price per Unit (3) $
Sponsor's Initial Repurchase Price per Unit (3) $
Redemption Price per Unit (4) $
Excess of Public Offering Price per Unit Over Redemption Price per Unit $
Excess of Sponsor's Initial Repurchase Price per Unit Over Redemption Price per Unit $
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date ____________, 1997
Mandatory Termination Date (5) ____________, 20__
Supervisory Fee (6) Maximum of $.0070 per Unit annually, payable to an affiliate of the Sponsor
Evaluator's Fee $ per daily evaluation
Estimated Annual Amortization of
Organizational and Offering Costs (7) $ per Unit
____________
<FN>
(1) Because certain of the Bonds in the Trust may from time to time under
certain circumstances be sold or redeemed or will be called or mature in
accordance with their terms, there is no guarantee that the value of
each Unit at the Trust's termination will be equal to the Principal
Amount (Par Value) of Bonds per Unit stated above.
(2) The sales charge for the Trust, expressed as a percentage of the
Public Offering Price per Unit and in parenthesis as a percentage of the
Aggregate Offering Price Evaluation per Unit is 4.9% (5.152%).
(3) Anyone ordering Units for settlement after the First Settlement Date
will pay accrued interest from such date to the date of settlement
(normally three business days after order) less distributions from the
Interest Account subsequent to the First Settlement Date. For purchases
settling on the First Settlement Date, no accrued interest will be added
to the Public Offering Price. After the initial offering period, the
Sponsor's Repurchase Price per Unit will be determined as described
under the caption "Will There Be a Secondary Market?"
(4) See "How May Units be Redeemed?"
(5) The Trust may be terminated prior to the Mandatory Termination Date
if the principal value thereof is less than 20% of the original
principal amount of Bonds deposited in the Trust during the primary
offering period.
(6) The Sponsor may also be reimbursed for bookkeeping and other
administrative expenses, currently at a maximum annual rate of $_____
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 five years from the Initial Date of
Deposit. See "What are the Expenses and Charges?" and "Statement of Net
Assets." Historically, the sponsors of unit investment trusts have paid
all the costs of establishing such trusts.
</FN>
</TABLE>
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.
Page 3
THE LATIN AMERICAN GOVERNMENT INCOME TRUST
FT 232
What is The FT Series?
The FT Series is one of a series of investment companies created by the
Sponsor, all of which are generally similar, but each of which is
separate and is designated by a different series number. The FT Series
was formerly known as The First Trust Special Situations Trust Series.
This Series was created under the laws of the State of New York pursuant
to a Trust Agreement (the "Indenture"), dated the Initial Date of
Deposit, with Nike Securities L.P., as Sponsor, The Chase Manhattan
Bank, as Trustee, Muller Data Corporation as Evaluator and First Trust
Advisors L.P., as Portfolio Supervisor.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
interest-bearing U.S. dollar-denominated sovereign debt obligations of
the Republic of Argentina, the Federative Republic of Brazil, the United
Mexican States, the Republic of Panama and the Republic of Venezuela
(the "Bonds") including delivery statements relating to contracts for the
purchase of certain such obligations and an irrevocable letter of credit
issued by a financial institution in the amount required for such purchases.
The Trustee thereafter credited the account of the Sponsor for Units of
the Trust representing the entire ownership of the Trust which Units are
being offered hereby.
The objective of the Trust is to provide a high level of current income
through investment in a fixed portfolio of U.S. dollar-denominated sovereign
debt obligations of Argentina, Brazil, Mexico, Panama and Venezuela which
have a maturity of approximately 30 years, if interest thereon is U.S.
source income. The Bonds contained in the Trust are high-yield, high-risk
bonds, commonly known as "junk bonds" and are subject to greater market
fluctuations and potential risk of loss of income and principal than are
investments in lower-yielding, higher-rated fixed-income securities. The
Trust has a relatively high concentration in the debt of each of the
aforementioned countries, and is therefore subject to greater risk than
would exist in a more diversified portfolio. Each of the countries has
experienced periods of economic uncertainty that have, at various times,
resulted in a high default rates on outstanding obligations, high
inflation and currency instability. The securities included in this
Trust should be viewed as speculative and an investor should review his
ability to assume the risks associated with speculative bonds. The Bonds are
not collateralized or secured by the U.S. government, U.S. government
securities or any other source. Therefore, the payment of income is dependent
upon the continuing ability of the issuer governments to meet their respective
obligations. THERE IS, OF COURSE, NO GUARANTEE THAT THE TRUST'S OBJECTIVE
WILL BE ACHIEVED.
With the deposit of the Bonds on the Initial Date of Deposit, the
Sponsor established a percentage relationship between the amounts of
Bonds in the Trust's portfolio. From time to time following the Initial
Date of Deposit, the Sponsor, pursuant to the Indenture, may deposit
additional Bonds in the Trust and Units may be continuously offered for
sale to the public by means of this Prospectus, resulting in a potential
increase in the outstanding number of Units of the Trust. Any deposit by
the Sponsor of additional Bonds will duplicate, as nearly as is
practicable, the original proportionate relationship and not the actual
proportionate relationship on the subsequent date of deposit, since the
two may differ. Any such difference may be due to the sale, redemption
or liquidation of any of the Bonds deposited in the Trust on the
Initial, or any subsequent, Date of Deposit. See "How May Bonds be
Removed from the Trust?" Since the prices of the underlying Bonds will
fluctuate daily, the ratio, on a market value basis, will also change
daily. The portion of Bonds represented by each Unit will not change as
a result of the deposit of additional Bonds in the Trust.
On the Initial Date of Deposit, each Unit of the Trust represented the
undivided fractional interest in the Bonds deposited in the Trust as set
forth under "Summary of Essential Information." To the extent that Units
of the Trust are redeemed, the aggregate value of the Bonds in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trust will increase. However, if additional
Units are issued by the Trust in connection with the deposit of
additional Bonds by the Sponsor, the aggregate value of the Bonds in the
Trust will be increased by amounts allocable to additional Units, and
the fractional undivided interest represented by each Unit of the Trust
will be decreased proportionately. See "How May Units be Redeemed?" The
Trust has a Mandatory Termination Date as set forth herein under
"Summary of Essential Information."
Page 4
Bond Portfolio Selection
The Sponsor of the Trust selected the Bonds for the Portfolio after
considering the Trust's investment objective as well as the credit
quality of the individual Bonds of the Portfolio. The following facts,
among others, were also considered: (a) the price of the Bonds relative
to other issues of similar quality and maturity; (b) the present rating
and credit quality of the issuers of the Bonds and the potential
improvement in the credit quality of such issuers; (c) the
diversification of the Bonds as to location of issuer; (d) the income to
the Unit holders of the Trust; (e) whether the Bonds were issued after
July 18, 1984; and (f) the stated maturity of the Bonds.
As of the Initial Date of Deposit for the Trust, all of the Bonds in the
Trust were rated "___" or better by Moody's Investors Service, Inc.,
("Moody's"), Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("Standard & Poor's") or Fitch Investors
Service, L.P. ("Fitch"). See "Description of Bond Ratings" and
"Portfolio." Subsequent to the Initial Date of Deposit, a Bond may cease
to be so rated. If this should occur, the Trust would not be required to
eliminate the Bond from the Trust, but such event may be considered in
the Sponsor's determination to direct the Trustee to dispose of such
investment. The Trust follows a buy and hold investment strategy in
contrast to the frequent portfolio changes of a managed fund based on
economic, financial and market analyses. The Trust may retain an
issuer's bonds despite adverse financial developments.
Risk Factors
High-Yield Obligations. An investment in Units of the Trust should be
made with an understanding of the risks that an investment in "high-
yield, high-risk," fixed-rate, foreign sovereign debt obligations or
"junk bonds" may entail, including increased credit risks and the risk
that the value of the Units will decline, and may decline precipitously,
with increases in interest rates. In recent years there have been wide
fluctuations in interest rates and thus in the value of fixed-rate, debt
obligations generally. Bonds such as those included in the Trust are,
under most circumstances, subject to greater market fluctuations and
risk of loss of income and principal than are investments in lower-
yielding, higher-rated securities, and their value may decline
precipitously because of increases in interest rates, not only because
the increases in rates generally decrease values, but also because
increased rates may indicate an economic slowdown and a decrease in the
value of assets generally that may adversely affect the credit of
issuers of high-yield, high-risk securities resulting in a higher
incidence of defaults among high-yield, high-risk securities. A slowdown
in the economy, or a development adversely affecting an issuer's
creditworthiness, may result in the issuer being unable to produce
sufficient cash flow to meet its interest and principal requirements.
For an issuer that has outstanding both senior commercial bank debt and
subordinated high-yield, high-risk securities, an increase in interest
rates will increase that issuer's interest expense insofar as the
interest rate on the bank debt is fluctuating. However, many leveraged
issuers enter into interest rate protection agreements to fix or cap the
interest rate on a large portion of their bank debt. This reduces
exposure to increasing rates, but reduces the benefit to the issuer of
declining rates. The Sponsor cannot predict future economic policies or
their consequences or, therefore, the course or extent of any similar
market fluctuations in the future.
The market for high-yield bonds is very specialized and investors in it
have been predominantly financial institutions. High-yield bonds are
generally not listed on a national securities exchange. Trading of high-
yield bonds, therefore, takes place primarily in over-the-counter
markets which consist of groups of dealer firms that are typically major
securities firms. Because the high-yield bond market is a dealer market,
rather than an auction market, no single obtainable price for a given
bond prevails at any given time. Prices are determined by negotiation
between traders. The existence of a liquid trading market for the Bonds
may depend on whether dealers will make a market in the Bonds. There can
be no assurance that a market will be made for any of the Bonds, that
any market for the Bonds will be maintained or of the liquidity of the
Bonds in any markets made. Not all dealers maintain markets in all high-
yield bonds. Therefore, since there are fewer traders in these bonds
than there are in "investment grade" bonds, the bid-offer spread is
usually greater for high-yield bonds than it is for investment grade
bonds. The price at which the Bonds may be sold to meet redemptions and
the value of the Trust will be adversely affected if trading markets for
the Bonds are limited or absent. If the rate of redemptions is great,
Page 5
the value of the Trust may decline to a level that requires liquidation
(see "Other Information-How May the Indenture be Amended or Terminated?").
Lower-rated securities tend to offer higher yields than higher-rated
securities with the same maturities because the creditworthiness of the
issuers of lower-rated securities may not be as strong as that of other
issuers. Moreover, if a Bond is recharacterized as equity by the
Internal Revenue Service for federal income tax purposes, the issuer's
interest deduction with respect to the Bond will be disallowed and this
disallowance may adversely affect the issuer's credit rating. Because
investors generally perceive that there are greater risks associated
with the lower-rated securities in the Trust, the yields and prices of
these securities tend to fluctuate more than higher-rated securities
with changes in the perceived quality of the credit of their issuers. In
addition, the market value of high-yield, high-risk, fixed-income
securities may fluctuate more than the market value of higher-rated
securities since high-yield, high-risk, fixed-income securities tend to
reflect short-term credit development to a greater extent than higher-
rated securities. Lower-rated securities generally involve greater risks
of loss of income and principal than higher-rated securities. Issuers of
lower-rated securities may possess fewer creditworthiness
characteristics than issuers of higher-rated securities and, especially
in the case of issuers whose obligations or credit standing have
recently been downgraded, may be subject to claims by debtholders, or
others which, if sustained, would make it more difficult for the issuers
to meet their payment obligations. High-yield, high-risk bonds are also
affected by variables such as interest rates, inflation rates and real
growth in the economy. Therefore, investors should consider carefully
the relative risks associated with investment in securities which carry
lower ratings.
The value of the Units reflects the value of the portfolio securities,
including the value (if any) of securities in default. Should the issuer
of any Bond default in the payment of principal or interest, the Trust
may incur additional expenses seeking payment on the defaulted Bond.
Because amounts (if any) recovered by the Trust in payment under the
defaulted Bond may not be reflected in the value of the Units until
actually received by the Trust, and depending upon when a Unit holder
purchases or sells his Units, it is possible that a Unit holder would
bear a portion of the cost of recovery without receiving any portion of
the payment recovered.
Obligations that are rated lower than BBB by Standard & Poor's or Fitch,
or Baa by Moody's, respectively, should be considered speculative as
such ratings indicate a quality of less than investment grade. Investors
should carefully review the objective of the Trust and consider their
ability to assume the risks involved before making an investment in the
Trust. See "Description of Bond Ratings" for a description of
speculative ratings issued by Standard & Poor's, Moody's or Fitch.
Foreign Issuers. All of the Bonds in the Trust are issued by foreign
governments. It is appropriate for investors in the Trust to consider
certain investment risks that distinguish investments in Bonds of
foreign issuers from those of domestic issuers. Those investment risks
include future political and economic developments, the possible
imposition of withholding taxes on interest income payable on the Bonds
held in the Portfolio, the possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls or the
adoption of other foreign governmental restrictions (including
expropriation, burdensome or confiscatory taxation and moratoriums)
which might adversely affect the payment or receipt of payment of
amounts due on the Bonds. Investors should realize that, although the
Trust invests in U.S. dollar denominated investments, the foreign
issuers which operate internationally are subject to currency risks. The
value of Bonds can be adversely affected by political or social
instability and unfavorable diplomatic or other negative developments.
In addition, because many foreign issuers are not subject to the
reporting requirements of the Securities Exchange Act of 1934, there may
be less publicly available information about the foreign issuer than a
U.S. domestic issuer. Foreign issuers also are not necessarily subject
to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S.
domestic issuers. However, the Sponsor anticipates that adequate
information will be available to allow the Portfolio Supervisor to
provide portfolio surveillance.
The portfolio of U. S. dollar-denominated sovereign debt obligations of
Argentina, Brazil, Mexico, Panama and Venezuela involves special risks.
These issuers have historically experienced, and may continue to
experience, periods of high rates of inflation, high interest rates,
exchange rate fluctuation, large amounts of external debt, balance of
payments and trade difficulties and extreme poverty and unemployment.
Page 6
The governmental authority that controls the repayment of a country's
debt may not be able or willing to repay the principal and/or interest
when due in accordance with the terms of the debt obligation. The
willingness or ability to repay the principal and interest due in a
timely manner may be affected by, among other factors, the country's
cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is
due, the relative size of the debt service burden to the economy as a
whole, the government debtor's policy towards the International Monetary
Fund and the political constraints to which the government may be
subject. Government debtors may default on their debt and may also be
dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be
conditioned on a debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's
obligations. Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may result
in the cancellation of such third parties' commitments to lend funds to
the government debtor, which may further impair such debtor's ability or
willingness to service its debts on a timely basis. Holders of
government debt, including the Trust, may be requested to participate in
the rescheduling of such debt and to extend further loans to government
debtors.
In the event of default, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other
government debt obligations in the event of default under their
commercial bank loan agreements. Government obligors such as Argentina,
Brazil, Mexico, Panama and Venezuela, as well as other developing and
emerging countries, are among the world's largest debtors to commercial
banks, other governments, international financial organizations and
other financial institutions. The issuers of the Bonds have, in the
past, experienced substantial difficulties in servicing their external
debt obligations, which led to defaults on certain obligations and the
restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, obtaining new credit to finance interest
payments and reducing and rescheduling interest and principal payments
by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to secured obligations, such
as Brady Bonds. Holders of the Bonds may be requested to participate in
the restructuring of such obligations and to extend further loans to
their issuers. There can be no assurance that such restructuring
arrangements would not adversely affect the Trust. Furthermore,
participants in the secondary market for such debt may be directly
involved in negotiating the terms of these arrangements and may
therefore have access to information not available to other market
participants.
The economies of Argentina, Brazil, Mexico, Panama and Venezuela may
differ favorably or unfavorably from the U.S. economy in such respects
as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency and
balance of payments position. The governments of these countries have
exercised and continue to exercise substantial influence over many
aspects of the private sector. In some cases, the government owns or
controls many companies, including some of the largest in the country.
Accordingly, government actions could have a significant effect on
economic conditions in an emerging country and on market condition,
prices and yields of the Bonds. Moreover, the economies of these
countries are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been
and may continue to be adversely affected by economic conditions in the
countries with which they trade. With respect to any of these countries,
there is the possibility of nationalization, expropriation or
confiscatory taxation, political changes, government regulation,
economic or social instability or diplomatic developments (including
war) which could affect adversely the economies of these countries or
the value of the Bonds.
In addition, the inter-relatedness of the economies in emerging
countries has deepened over the years, with the effect that economic
difficulties in one country often spread throughout a region or even
among all or most emerging country markets, an effect that may reduce
the effectiveness of any attempt by the Trust to reduce risk through
diversification. No assurance can be given that the Trust will not be
further adversely affected by these and similar events.
Page 7
Argentina. A six-year political commitment to prudent fiscal and
financial policies has weathered recession and elections, thus favorably
distinguishing Argentina from some other Latin American nations, and
reflecting the relative independence of economic policy from politics.
The achievement of price stability and financial predictability for the
first time in a generation constitutes the foundation of support for the
Convertibility Plan. The Convertibility Plan, which restricts the
government's economic policy flexibility, was adopted in 1991 as a means
of reestablishing the credibility and creditworthiness lost by decades
of financial mismanagement and broken promises. To maintain public
confidence in the commitment to the Convertibility Plan and in order to
compensate for the high debt and relatively shallow financial system
that are a legacy of Argentina's past, the government will be forced to
exercise greater fiscal and financial discipline than is required of
some other similarly-situated Latin American nations.
Lingering structural flaws in public finances, notably chronically high
tax evasion, a distortionary tax code and inefficient spending policies
in the provinces continue to challenge the Argentine government. A
sustainable reduction in tax evasion hinges in part on an improvement in
the justice system and better control of official corruption.
The positive aspects of Argentina's fiscal reform efforts are somewhat
offset by the country's vulnerable external finances. The net public
external debt burden is among the highest of rated sovereigns at an
estimated 138% of exports for 1997. Debt service alone absorbs 43.6% of
export earnings. Short-term debt is modest, but the public sector's
medium-term amortization schedule is heavy, and private sector
indebtedness is expected to grow. Balance of payments pressure, though
receding, is still a primary factor of Argentina's public indebtedness.
The current economic expansion of approximately 7% in both 1997 and 1998
should cut the unemployment rate to an expected 15% in early 1998. The
government is struggling with labor reform and privatization. Following
inconclusive negotiations regarding the loosening of labor laws,
particularly decentralizing collective bargaining and facilitating
dismissal, President Menem sought to change the laws by decree. However,
the Supreme Court declared the decree unconstitutional, and the issue is
now back in the hands of Congress. Long-term export potential and
competitiveness, as well as economic growth and creditworthiness, would
be reinforced by labor market reform.
Therefore, even as memories of fiscal chaos and hyperinflation recede in
the seventh year of the convertibility era, Argentina's economic and
credit prospects remain inextricably linked to the credibility of the
government's commitment to prudent fiscal policy.
Standard & Poor's rates Argentina's long term foreign currency at BB as
of April 1997.
Brazil. Brazil is the fifth largest country in the world and occupies
nearly half the land area of South America. As of December 31, 1995,
Brazil's estimated population was 155.8 million, the fifth largest in
the world. After two decades of military governments, in 1985 Brazil
made a successful transition to civilian authority and democratic
government. The current President, Fernando Cardoso, was elected in
October 1994 and has continued his advocacy of the Plano Real, an
economic stabilization program for Brazil and it's currency, the real.
In connection with the Plano Real, the Cardoso administration has
introduced a number of constitutional amendments and other measures
designed to effect fundamental changes in Brazil's public finances,
including, among others, reforms of the tax and social security systems,
modification or privatization of certain state monopolies, changes in
spending responsibilities of different levels of government and changes
in conditions of employment in the public sector. The administration has
also taken steps to further Brazil's economic liberalization process
through measures to further deregulate the economy, reduce the
government's fiscal deficit and encourage foreign capital investment.
During the week of November 10, 1997, the Brazilian government
imposed/announced a new austerity plan, aimed at saving the real, the
currency that has been central to reducing the annual inflation rate
from 2500% in 1993 to 5% in 1997. The austerity plan will raise taxes
and prices of everything from fuel to beer. It will lead to the
dismissal of 33,00 government workers and ban new hires. Intended to
ease concerns of investors, the retrenchment measures follow a move by
the Central Bank of Brazil to double short term interest rates to 46%.
The government is also stepping up efforts to privatize state run
industries and will attempt to accelerate the sale of $60 billion in
state assets.
Government measures are expected to lead to an economic slowdown, with
estimates for real growth in 1998 in the range of 0-1%. The announced
Page 8
tax increases and investment cutbacks will take about $18.6 billion out
of the economy, amounting to nearly 3% of annual output. These measures,
designed to stabilize the real and bring Brazil into the world economy
as a major player, will be particularly hard on a nation that has
managed to generate economic growth, even while enduring skyrocketing
inflation.
If the government is stable and disciplined enough to go along with the
austerity plan, Brazil will have enough resources to weather the most
recent financial crisis that spread there from panicked Asian markets.
Although Brazil's government lost about $10 billion in hard currency
reserves since late October 1997, it has about $52 billion with which to
defend the real. The investment community's vote of confidence for the
government austerity plan came in the form of the recent sale of an
electric utility to a Brazilian consortium at a premium of approximately
70% over the bidding floor in the privatization. Standard & Poor's rates
Brazil's long-term foreign currency at BB- as of April 2, 1997.
Mexico. Mexico's credit standing is constrained by the vulnerability of
the government's economic policy to political pressure. Mexico's new
pluralism is expected to improve overall governance. Such improvement
will depend on the commitment of President Zedillo's administration and
the Partido Revoluncionario Institutional (PRI) to achieve political
consensus toward a market-oriented economic policy. At the same time,
recent strengthening of economic and especially balance of payments
fundamentals, if sustained, could mitigate the credit impact of
potential setbacks along the way.
Mexico's landmark electoral reform was the first of several major
legislative initiatives the Mexican Congress will seek to secure broader
overall participation in government. Other upcoming issues include the
transparency and accountability of budgetary, privatization, auditing,
and other public-sector financial processes; a more explicit definition
of the powers of other branches and levels of government; and a
strengthening of the very weak judicial and law enforcement
apparatus. Sustained economic expansion would give Mexico a strong
foundation to support other necessary reforms. The achievement of 5%
annual growth would yield gains in real per capita income still at its
1994 level that could encourage public support for stringent reform and
an orthodox economic policy. A higher rate of domestic savings would
support growth and reduce external risks.
Mexico's banking system, still recovering from the most recent crisis,
is still ill-equipped to meet the needs of the economy. Slow resolution
of the banking crisis and blanket government backing will drive the
government's cost to about 12% of 1997 gross domestic product (GDP). A
gradual recovery in domestic credit in the context of conservative
capital, liquidity and lending standards would permit a partial rollback
of the government's guarantee for depositors and creditors. In addition,
Banco de Mexico's (Banxico) still weak credibility requires broader
political support for its autonomy, even in the face of the potential
volatility of the peso.
Conservative fiscal policy remains the cornerstone of Mexico's recovery
from the peso crisis. The 1998 budget deficit is expected to be close to
the government's projected 1.3% of gross domestic product, with net debt
declining to about 25% of GDP in 1997 from 39% in 1995. A manageable net
external debt burden, which has been halved since 1994 to an estimated
85% of exports in 1997, is owed primarily to a surge in exports.
A strong relationship with the United States has been beneficial for
Mexico. Close ties with the U.S. afford financial support, provide
special assistance on bilateral issues such as narcotics and trade, and
fuel exports and direct investment. Mexico has already repaid the $50
billion financial package it received from the U.S. and other nations
during the peso crisis in 1994, and it has regained access to the
international markets.
Standard & Poor's rates Mexico's long term foreign currency at BB as of
November 12, 1997.
Panama. Panama is distinguished by its strategic geographic location,
the presence of the Panama Canal and the Colon Free Trade Zone,
historically close ties with the United States and a unique monetary
regime anchored by the use of the U.S. dollar as legal tender. Since
winning the 1994 national elections, the coalition government of
President Ernesto Perez Balladares has implemented an ambitious agenda
of economic reforms intended to gradually eliminate the long-standing
inefficiencies that constrain Panama's development.
The defining feature of the Panamanian tax system has traditionally been
the abundance of tax incentives, exemptions and special regimes. The Tax
Page 9
Incentive Harmonization Law passed in June 1995 reduced the tax-
preferred status of the agricultural sector, compressed income tax
brackets, scaled back subsidized mortgage lending by public sector banks
and extended the reach of the capital gains tax. The law should
encourage investment in the medium term, but will have limited fiscal
impact, since it does not address the most important tax-induced
distortion, the exemption of services from the value-added tax (VAT).
Instead of extending the VAT, the government will target current
expenditure to moderate the fiscal deficit. The wage bill accounted for
over 45% of the government's total outlay in 1996. Attempts to modify
the public sector employment and compensation system are underway, but
are likely to be impeded by influential unions. The reform of the social
security agency which supplies pension benefits and universal health
coverage is also critical to the sustainability of Panama's fiscal
position. At the current pace, the social security system will be
showing cash deficits as early as 2005, with the current system already
showing an actuarial deficit of no less than $1.8 billion (over 20% of
the 1996 GDP). The government is currently struggling to reform this
system and is allowing the social security agency to diversify it's
assets, currently held in bank deposits, in an attempt to boost returns.
Given the relative inflexibility of current expenditure, the government
has frequently resorted to cuts in its infrastructure development to
achieve its fiscal objectives. Revenues from the privatization of public
enterprises and the sell off of other public assets, which could exceed
$1 billion through 2000, will be deposited in a fund whose proceeds will
finance infrastructure investment and, possibly, be used to retire the
public debt.
Under Panama's monetary system which uses the U.S. dollar as legal
tender, the link between money supply and domestic credit is weaker than
in other sovereigns, because the demand for credit can be met by
Panamanian banks or by foreign banks taking advantage of the country's
dollar economy. Panama's inability to alter its own monetary supply
makes the role of foreign banks, which can extend credit at times when
the supply of domestic money recedes, more important, because the
foreign banks' lending policies will mitigate or reinforce the effects
of economic cycles. Interest rates are therefore largely determined by
international rates. Because of Panama's unique monetary system, as of
1996, approximately 70% of the public sector debt is held by external
creditors. In 1989, the central government had a $1 billion overdraft at
the National Bank of Panama (the National Bank), contributing to the
near collapse of the National Bank, which reflected the difficulties of
making payments under the U.S. embargo at the height of the Noriega
period. Since then, the government formalized a repayment schedule and
has been buying back outstanding Brady Bonds with bonds created in
Panama's 1996 debt restructuring. The sales show investor confidence,
since the new bonds are not collateralized. The Torrijos-Carter Treaties
of 1977 provided for the return of ownership and control of the Panama
Canal. Operation and management of the Canal and its facilities has
gradually reverted and will be complete by December 31, 1999. The Panama
Canal continues to be the busiest waterway in the world, but it faces
increasing competition from land-only transhipment routes and from
prospective dry canals in Central America. The canal is the fastest way
to cross the continent, but it also the most expensive, and while its
efficiency remains unblemished, it is operating close to or above
capacity in recent years and will require an improvement of the
installations. Construction is already in progress, which will be paid
for by tolls.
Standard & Poor's rates Panama's long term foreign currency
at BB+ as of November 14, 1997.
Venezuela. Venezuela is characterized by growing external financial
flexibility, reflecting the near-term impact of high oil prices coupled
with increased oil output. Heavy investment is expected to underpin a
near doubling of oil output and exports over the next decade. The
government's austerity program is also expected to contribute to
Venezuela's financial picture, with growing central bank reserves
producing a projected decline in net public external debt to 26% of
exports in 1997 from 95% in 1995. Venezuela's improved external finances
should be sustainable over the medium term.
Approximately $2 billion in public sector assets were privatized in
1996, and the sale of aluminum and steel sector companies in 1997 and
1998 is expected. When coupled with rising investment in energy and
other sectors, including foreign direct investment, this privatization
will improve longer term growth prospects.
The Venezuelan government has taken the initial steps toward
restructuring the public sector. Recent reform of the severance payments
Page 10
system will cost about 15% of the GDP, but will ultimately allow for the
downsizing of the public sector. Steady increases of more than 50% in
tax compliance value-added tax receipts in the past two years and public
sector price increases will also reinforce public finances. Excessive
fixed expenditures on interest and personnel, a still-narrow tax base
and high levels of tax exemption are problems that still characterize
the structural flaws of the public finance system. Although the
aforementioned reforms and higher oil prices should support budgetary
balance, declining oil prices and increased social spending could
quickly reverse this improvement. Public finance reform is particularly
vulnerable to oil revenues, as Venezuela's is dependent upon oil for
nearly 50% of its fiscal revenues and 80% of its exports.
Moderate support for market-oriented economic policies in the context of
12% unemployment, the sharp shrinkage of purchasing power in the last
two years, and declining public services may weaken further as elections
in 1998 draw closer. This is exemplified by a 70% public sector wage
increase granted early in 1997. Reducing inflation will be complicated
by such wage increases and a likely depreciation of the Bolivar.
Inflation is expected to reach more than 40% by the end of 1997. The
government's need to accommodate popular pressure may threaten
budgetary, privatization and structural reforms.
Standard & Poor's rates Venezuela's long term foreign currency at B+ as
of June 5, 1997.
Liquidity. The Bonds in the Trust may not have been registered under the
Securities Act of 1933 and may not be exempt from the registration
requirements of the Act. Most of the Bonds will not be listed on a
securities exchange. Whether or not the Bonds are listed, the principal
trading market for the Bonds will generally be in the over-the-counter
market. As a result, the existence of a liquid trading market for the
Bonds may depend on whether dealers will make a market in the Bonds.
There can be no assurance that a market will be made for any of the
Bonds, that any market for the Bonds will be maintained or of the
liquidity of the Bonds in any markets made. The price at which the Bonds
may be sold to meet redemptions and the value of the Trust will be
adversely affected if trading markets for the Bonds are limited or
absent. The Trust may also contain non-exempt Bonds in registered form
which have been purchased on a private placement basis. Sales of these
Bonds may not be practicable outside the United States, but can
generally be made to U.S. institutions in the private placement market
which may not be as liquid as the general U.S. securities market. Since
the private placement market is less liquid, the prices received may be
less than would have been received had the markets been broader.
Exchange Controls. On the basis of the best information available to the
Sponsor at the present time none of the Bonds is subject to exchange
control restrictions under existing law which would materially interfere
with payment to the Trust of amounts due on the Bonds. However, there
can be no assurance that exchange control regulations might not be
adopted in the future which might adversely affect payments to the
Trust. In addition, the adoption of exchange control regulations and
other legal restrictions could have an adverse impact on the
marketability of the Bonds in the Trust and on the ability of the Trust
to satisfy its obligation to redeem Units tendered to the Trustee for
redemption.
Jurisdiction Over, and U.S. Judgments Concerning, Foreign Obligors. Non-
U.S. issuers of the Bonds will generally not have submitted to the
jurisdiction of U.S. courts for purposes of lawsuits relating to those
Bonds. If the Trust contains Bonds of such an issuer, the Trust as a
holder of those obligations may not be able to assert its rights in U.S.
courts under the documents pursuant to which the Bonds are issued. Even
if the Trust obtains a U.S. judgment against a foreign obligor, there
can be no assurance that the judgment will be enforced by a court in the
country in which the foreign obligor is located. In addition, a judgment
for money damages by a court in the United States if obtained, will
ordinarily be rendered only in U.S. dollars. It is not clear, however,
whether, in granting a judgment, the rate of conversion of the
applicable foreign currency into U.S. dollars would be determined with
reference to the due date or the date the judgment is rendered. Courts
in other countries may have rules that are similar to, or different
from, the rules of U.S. courts.
General. The Trust may consist of Bonds which, in many cases, do not
have the benefit of covenants which would prevent the issuer from
engaging in capital restructurings or borrowing transactions which could
have the effect of reducing the ability of the issuer to meet its debt
obligations and might result in the ratings of the Bonds and the value
of the underlying Trust portfolio being reduced. See "Rights of Unit
Page 11
Holders-How May Bonds be Removed from the Trust?" In addition, as the
Trust contains only _____ Bonds, a default by any one issuer will
negatively impact the amount of interest received by the Trust.
Certain of the Bonds in the Trust may have been acquired at a market
discount from par value at maturity. The coupon interest rates on the
discount bonds at the time they were purchased and deposited in the
Trust were lower than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly
issued comparable bonds increase, the market discount of previously
issued bonds will become greater, and if such interest rates for newly
issued comparable bonds decline, the market discount of previously
issued bonds will be reduced, other things being equal. Investors should
also note that the value of bonds purchased at a market discount will
increase in value faster than bonds purchased at a market premium if
interest rates decrease. Conversely, if interest rates increase, the
value of bonds purchased at a market discount will decrease faster than
bonds purchased at a premium. In addition, if interest rates rise, the
prepayment risk of higher yielding, premium bonds and the prepayment
benefit for lower yielding, discount bonds will be reduced. A discount
bond held to maturity will have a larger portion of its total return in
the form of capital gain and less in the form of interest income than a
comparable bond newly issued at current market rates. Market discount
attributable to interest changes does not indicate a lack of market
confidence in the issue. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any of the Bonds.
Certain of the Bonds in the Trust may be original issue discount bonds
or zero coupon bonds. Under current law, the original issue discount,
which is the difference between the stated redemption price at maturity
and the issue price of the Bonds, is deemed to accrue on a daily basis
and the accrued portion is treated as interest income for Federal income
tax purposes. On sale or redemption, any gain realized that is in excess
of the earned portion of original issue discount will be taxable as
capital gain unless the gain is attributable to market discount in which
case the accretion of market discount is taxable as ordinary income. See
"What is the Federal Tax Status of Unit Holders?" The current value of
an original discount bond reflects the present value of its stated
redemption price at maturity. The market value tends to increase in
greater increments as the Bonds approach maturity. The effect of owning
deep discount zero coupon bonds which do not make current interest
payments is that a fixed yield is earned not only on the original
investment, but also, in effect, on all earnings during the life of the
discount obligation. This implicit reinvestment of earnings at the same
rate eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the zero coupon
bonds are subject to substantially greater price fluctuations during
periods of changing interest rates than are securities of comparable
quality which make regular interest payments.
Certain of the Bonds in the Trust may have been acquired at a market
premium from par value at maturity. The coupon interest rates on the
premium bonds at the time they were purchased and deposited in the Trust
were higher than the current market interest rates for newly issued
bonds of comparable rating and type. If such interest rates for newly
issued and otherwise comparable bonds decrease, the market premium of
previously issued bonds will be increased, and if such interest rates
for newly issued comparable bonds increase, the market premium of
previously issued bonds will be reduced, other things being equal. The
current returns of bonds trading at a market premium are initially
higher than the current returns of comparable bonds of a similar type
issued at currently prevailing interest rates because premium bonds tend
to decrease in market value as they approach maturity when the face
amount becomes payable. Because part of the purchase price is thus
returned not at maturity but through current income payments, early
redemption of a premium bond at par or early prepayments of principal
will result in a reduction in yield. Redemption pursuant to call
provisions generally will, and redemption pursuant to sinking fund
provisions may, occur at times when the redeemed Bonds have an offering
side valuation which represents a premium over par or for original issue
discount Bonds a premium over the accreted value. To the extent that the
Bonds were deposited in the Trust at a price higher than the price at
which they are redeemed, this will represent a loss of capital when
compared to the original Public Offering Price of the Units. Because
premium bonds generally pay a higher rate of interest than bonds priced
at or below par, the effect of the redemption of premium bonds would be
to reduce Estimated Net Annual Unit Income by a greater percentage than
the par amount of such bonds bears to the total par amount of Bonds in
the Trust. Although the actual impact of any such redemptions that may
Page 12
occur will depend upon the specific Bonds that are redeemed, it can be
anticipated that the Estimated Net Annual Unit Income will be
significantly reduced after the dates on which such Bonds are eligible
for redemption. See "Rights of Unit Holders-How May Bonds be Removed
from the Trust?" and "Other Information-How May the Indenture be Amended
or Terminated?"
Because certain of the Bonds may from time to time under certain
circumstances be sold or redeemed or will mature in accordance with
their terms and because the proceeds from such events will be
distributed to Unit holders and will not be reinvested, no assurance can
be given that the Trust will retain for any length of time its present
size and composition. Neither the Sponsor nor the Trustee shall be
liable in any way for any default, failure or defect in any Bond.
Certain of the Bonds contained in the Trust may be subject to being
called or redeemed in whole or in part prior to their stated maturities
pursuant to optional redemption provisions, sinking fund provisions or
otherwise. A bond subject to optional call is one which is subject to
redemption or refunding prior to maturity at the option of the issuer. A
refunding is a method by which a bond issue is redeemed, at or before
maturity, by the proceeds of a new bond issue. A bond subject to sinking
fund redemption is one which is subject to partial call from time to
time at par or from a fund accumulated for the scheduled retirement of a
portion of an issue prior to maturity. The exercise of redemption or
call provisions will (except to the extent the proceeds of the called
Bonds are used to pay for Unit redemptions) result in the distribution
of principal and may result in a reduction in the amount of subsequent
interest distributions; it may also affect the Estimated Long-Term
Return and the Estimated Current Return on Units of the Trust.
Redemption pursuant to call provisions is more likely to occur, and
redemption pursuant to sinking fund provisions may occur, when the Bonds
have an offering side valuation which represents a premium over par or
for original issue discount bonds a premium over the accreted value.
Unit holders may recognize capital gain or loss upon any redemption or
call.
The contracts to purchase Bonds delivered to the Trustee represent
obligations by issuers or dealers to deliver Bonds to the Sponsor for
deposit in the Trust. Contracts are typically settled and the Bonds
delivered within a few business days subsequent to the Initial Date of
Deposit. The percentage of the aggregate principal amount of the Bonds
of the Trust relating to "when, as and if issued" Bonds or other Bonds
with delivery dates after the date of settlement for a purchase made on
the Initial Date of Deposit, if any, is indicated in the section for the
Trust entitled "Portfolio." Interest on "when, as and if issued" and
delayed delivery Bonds begins accruing to the benefit of Unit holders on
their dates of delivery. Because "when, as and if issued" Bonds have not
yet been issued, as of the Initial Date of Deposit the Trust is subject
to the risk that the issuers thereof might decide not to proceed with
the offering of such Bonds or that the delivery of such Bonds or the
delayed delivery Bonds may be delayed. If such Bonds, or replacement
bonds described below, are not acquired by the Trust or if their
delivery is delayed, the Estimated Long-Term Return and the Estimated
Current Return (if applicable) shown in "Special Trust Information" may
be reduced.
In the event of a failure to deliver any Bond that has been purchased
for the Trust under a contract, including those Bonds purchased on a
"when, as and if issued" basis ("Failed Bonds"), the Sponsor is
authorized under the Indenture to direct the Trustee to acquire other
specified bonds ("New Bonds") to make up the original corpus of the
Trust. The New Bonds must be purchased within twenty days after delivery
of the notice of the failed contract and the purchase price (exclusive
of accrued interest) may not exceed the amount of funds reserved for the
purchase of the Failed Bonds. The New Bonds (i) must satisfy the
criteria previously described for Bonds originally included in the
Trust, (ii) must have a fixed maturity date of at least seven years, but
not exceeding the maturity date of the Failed Bonds, (iii) must be
purchased at a price that results in a yield to maturity and in a
current return, in each case as of the Initial Date of Deposit, at least
equal to that of the Failed Bonds, (iv) shall not be "when, as and if
issued" bonds. Whenever a New Bond has been acquired for the Trust, the
Trustee shall, within five days thereafter, notify all Unit holders of
the Trust of the acquisition of the New Bond and shall, on the next
monthly distribution date which is more than 30 days thereafter, make a
pro rata distribution of the amount, if any, by which the cost to the
Trust of the Failed Bond exceeded the cost of the New Bond plus accrued
interest. Once the original corpus of the Trust is acquired, the Trustee
will have no power to vary the investment of the Trust, i.e., the
Trustee will have no managerial power to take advantage of market
variations to improve a Unit holder's investment.
Page 13
If the right of limited substitution described in the preceding
paragraph shall not be utilized to acquire New Bonds in the event of a
failed contract, the Sponsor shall refund the sales charge attributable
to such failed contract to all Unit holders of the Trust, and the
principal and accrued interest (at the coupon rate of the relevant Bond
to the date the Sponsor is notified of the failure) attributable to such
failed contract shall be distributed not more than thirty days after the
determination of such failure or at such earlier time as the Trustee in
its sole discretion deems to be in the interest of the Unit holders of
the Trust. Unit holders should be aware that at the time of the receipt
of such refunded principal they may not be able to reinvest such
principal in other securities at a yield equal to or in excess of the
yield which such principal would have earned to Unit holders had the
Failed Bond been delivered to the Trust. The portion of such interest
paid to a Unit holder which accrued after the expected date of
settlement for purchase of his Units will be paid by the Sponsor.
To the best knowledge of the Sponsor, there is no litigation pending as
of the Initial Date of Deposit in respect of any Bonds which might
reasonably be expected to have a material adverse effect upon the Trust.
At any time after the Initial Date of Deposit, litigation may be
initiated on a variety of grounds with respect to Bonds in the Trust.
Such litigation may affect the validity of such Bonds. In addition,
other factors may arise from time to time which potentially may impair
the ability of issuers to meet obligations undertaken with respect to
the Bonds.
Each Unit initially offered represents that fractional undivided
interest in the Trust as is set forth in the "Summary of Essential
Information" for the Trust. To the extent that any Units of the Trust
are redeemed by the Trustee, the fractional undivided interest in the
Trust represented by each unredeemed Unit will increase, although the
actual interest in the Trust represented by such fraction will remain
substantially unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by any Unit holder, which may include the
Sponsor, or until the termination of the Trust Agreement.
What are Estimated Long-Term Return and Estimated Current Return?
At the opening of business on the Initial Date of Deposit, the Estimated
Current Return and the Estimated Long-Term Return are as set forth in
"Summary of Essential Information." Estimated Current Return is computed
by dividing the Estimated Net Annual Interest Income per Unit by the
Public Offering Price. Any change in either the Estimated Net Annual
Interest Income per Unit or the Public Offering Price will result in a
change in the Estimated Current Return. The Public Offering Price will
vary in accordance with fluctuations in the prices of the underlying
Bonds and the Net Annual Interest Income per Unit will change as Bonds
are redeemed, paid, sold or exchanged in certain refundings or as the
expenses of the Trust change. Therefore, there is no assurance that the
Estimated Current Return indicated in "Summary of Essential Information"
will be realized in the future. Estimated Long-Term Return is calculated
using a formula which (1) takes into consideration and determines and
factors in the relative weightings of the market values, yields (which
takes into account the amortization of premiums and the accretion of
discounts) and estimated retirements of all of the Bonds in the Trust;
and (2) takes into account a compounding factor and the expenses and
sales charge associated with each Unit of the Trust. Since the market
values and estimated retirements of the Bonds and the expenses of the
Trust will change, there is no assurance that the Estimated Long-Term
Return indicated in "Summary of Essential Information" will be realized
in the future. Estimated Current Return and Estimated Long-Term Return
are expected to differ because the calculation of Estimated Long-Term
Return reflects the estimated date and amount of principal returned
while Estimated Current Return calculations include only Net Annual
Interest Income and Public Offering Price as of the Initial Date of
Deposit. Neither rate reflects the true return to Unit holders, which is
lower, because neither includes the effect of certain delays in the
distributions to Unit holders.
Record Dates for the distribution of interest under the semi-annual
distribution plan are the fifteenth day of June and December with the
Distribution Dates being the last day of the month in which the related
Record Date occurs. It is anticipated that an amount equal to
approximately one-half of the amount of net annual interest income per
Unit will be distributed on or shortly after each Distribution Date to
Unit holders of record on the preceding Record Date. See "Summary of
Essential Information" for the Trust.
Record Dates for monthly distributions of interest are the fifteenth day
of each month. The Distribution Dates for distributions of interest
under the monthly plan is the last day of each month in which the
related Record Date occurs. All Unit holders will receive the first
distribution of interest regardless of the plan of distribution chosen
Page 14
and all Unit holders will receive such distributions, if any, from the
Principal Account as are made as of the Record Dates for monthly
distributions.
How is Accrued Interest Treated?
Accrued interest is the accumulation of unpaid interest on a bond from
the last day on which interest thereon was paid. Interest on Bonds
generally is paid semi-annually, although the Trust accrues such
interest daily. Because of this, the Trust always has an amount of
interest earned but not yet collected by the Trustee. For this reason,
with respect to sales settling subsequent to the First Settlement Date,
the Public Offering Price of Units will have added to it the
proportionate share of accrued interest to the date of settlement. Unit
holders will receive on the next distribution date of the Trust the
amount, if any, of accrued interest paid on their Units.
In an effort to reduce the amount of accrued interest which would
otherwise have to be paid in addition to the Public Offering Price in
the sale of Units to the public, the Trustee will advance the amount of
accrued interest as of the First Settlement Date and the same will be
distributed to the Sponsor as the Unit holder of record as of the First
Settlement Date. Consequently, the amount of accrued interest to be
added to the Public Offering Price of Units will include only accrued
interest from the First Settlement Date to the date of settlement, less
any distributions from the Interest Account subsequent to the First
Settlement Date. See "Rights of Unit Holders-How are Interest and
Principal Distributed?"
Because of the varying interest payment dates of the Bonds, accrued
interest at any point in time will be greater than the amount of
interest actually received by the Trust and distributed to Unit holders.
Therefore, there will always remain an item of accrued interest that is
added to the value of the Units. If a Unit holder sells or redeems all
or a portion of his Units, he will be entitled to receive his
proportionate share of the accrued interest from the purchaser of his
Units. Since the Trustee has the use of the funds held in the Interest
Account for distributions to Unit holders and since such Account is non-
interest-bearing to Unit holders, the Trustee benefits thereby.
Are Unit Holders Compensated for Foreign Withholding Tax Risks?
Certain of the Bonds are subject to non-U.S. ("foreign") withholding
taxes. Certain issuers of Bonds which are subject to foreign withholding
taxes have generally agreed, subject to certain exceptions, to make
additional payments ("Additional Payments") which together with other
payments are intended to compensate the holder of the Bond for the
imposition of certain withholding taxes. However, both the calculation
of the Additional Payment and whether the Additional Payment compensates
the holder of the Bond for any related penalties, interest or other
Page 14
charges imposed in connection with any applicable foreign withholding
taxes are likely to differ from Bond to Bond. Moreover, the Additional
Payment is itself treated as taxable income to Unit holders for U.S.
income tax purposes. The Additional Payment may not be based upon a
"gross-up" formula which would otherwise compensate an investor for the
tax liability triggered by the receipt of the Additional Payment. For
any of these reasons, an investor may not be adequately compensated for
the actual foreign withholding tax liabilities incurred. If the Trust
obtains a certificate from an issuer evidencing payment of foreign
withholding taxes with respect to a Bond, the Trust will so notify Unit
holders. A Unit holder is required to include in his gross income the
entire amount of interest paid on his pro rata portion of the Bond
including the amount of tax withheld therefrom and the amount of any
Additional Payment. However, if the foreign tax withheld constitutes an
income tax for which U.S. foreign tax credits may be taken, the Unit
holder may be able to obtain applicable foreign tax credits (subject to
statutory limitations) or deductions. (See "What is the Federal Tax
Status of Unit Holders?")
What is the Federal Tax Status of Unit Holders?
For purposes of the following discussion and opinion, it is assumed that
interest on the Bonds is included in gross income for Federal income tax
purposes and that the Bonds are debt for Federal income tax purposes.
In the opinion of Chapman and Cutler, Counsel for the Sponsor, under
existing law:
(1) The Trust is not an association taxable as a corporation for
Federal income tax purposes.
(2) Each Unit holder of the Trust is considered to be the owner of a
pro rata portion of each of the Trust assets under subpart E, subchapter
J of chapter 1 of the Internal Revenue Code of 1986 (hereinafter the
"Code"). Each Unit holder will be considered to have received his pro
rata share of income derived from each Trust asset when such income is
Page 15
considered to be received by the Trust. Each Unit holder will also be
required to include in taxable income for Federal income tax purposes,
original issue discount with respect to his interest in any Bonds held
by the Trust at the same time and in the same manner as though the Unit
holder were the direct owner of such interest.
(3) Each Unit holder will have a taxable event when a Bond of the
Trust is disposed of whether by sale, liquidation, redemption, or
payment at maturity or otherwise, or when the Unit holder redeems or
sells his Units. The Unit holder's tax basis in his Units will equal his
tax basis in his pro rata portion of all of the assets of the Trust.
Such basis is determined (before the adjustments described below) by
apportioning the tax basis for the Units among each of the Trust's
assets according to value as of the valuation date nearest the date of
acquisition of the Units. Unit holders must reduce the tax basis of
their Units for their share of accrued interest received, if any, on
Bonds delivered after the date the Unit holders pay for their Units to
the extent that such interest accrued on such Bonds before the date the
Trust acquired ownership of the Bonds (and the amount of this reduction
may exceed the amount of accrued interest paid to the sellers) and,
consequently, such Unit holders may have an increase in taxable gain or
reduction in capital loss upon the disposition of such Units. Gain or
loss upon the sale or redemption of Units is measured by comparing the
proceeds of such sale or redemption with the adjusted basis of the
Units. If the Trustee disposes of Bonds (whether by sale, exchange,
payment on maturity, redemption or otherwise), gain or loss is
recognized to the Unit holder (subject to various non-recognition
provisions of the Code). The amount of any such gain or loss is measured
by comparing the Unit holder's pro rata share of the total proceeds from
such disposition with his basis for his fractional interest in the asset
disposed of. The basis of each Unit and of each Bond which was issued
with original issue discount (or which has market discount) must be
increased by the amount of accrued original issue discount (and market
discount, if the Unit holder elects to include market discount in income
as it accrues) and the basis of each Unit and of each Bond which was
purchased by the Trust at a premium must be reduced by the annual
amortization of bond premium which the Unit holder has properly elected
to amortize under Section 171 of the Code. The tax basis reduction
requirements of the Code relating to amortization of bond premium may,
under some circumstances, result in the Unit holder realizing a taxable
gain when his Units are sold or redeemed for an amount equal to or less
than his original cost. Original issue discount is effectively treated
as interest for Federal income tax purposes and the amount of original
issue discount in this case is generally the difference between the
bond's purchase price and its stated redemption price at maturity. A
Unit holder will be required to include in gross income for each taxable
year the sum of his daily portions of original issue discount as such
original issue discount accrues and will in general be subject to
Federal income tax with respect to the total amount of such original
issue discount that accrues for such year even though the income is not
distributed to the Unit holders during such year, unless the original
issue discount on a Bond is less than a "de minimis" amount as
determined under Treasury Regulations. To the extent the amount of such
discount is less than the respective "de minimis" amount, such discount
shall be treated as zero. In general, original issue discount accrues
daily under a constant interest rate method which takes into account the
semi-annual compounding of accrued interest. Unit holders should consult
their tax advisers regarding the Federal income tax consequences and
accretion of original issue discount.
Each Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him. 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 (similar
limitations also apply to estates and trusts). Unit holders may be
required to treat some or all of the expenses paid by the Trust as
miscellaneous itemized deductions subject to this limitation.
If a Unit holder's tax basis of his pro rata portion in any Bonds held
by the Trust exceeds the amount payable by the issuer of the Bonds with
Page 16
respect to such pro rata interest upon maturity of the Bond, such excess
would be considered premium which may be amortized by the Unit holder at
the Unit holder's election as provided in Section 171 of the Code. Unit
holders should consult their tax advisors regarding whether such
election should be made and the manner of amortizing premium.
Certain of the Bonds in the Trust may have been acquired with "original
issue discount." In the case of any Bonds in the Trust acquired with
"original issue discount" that exceeds a "de minimis" amount as
specified in the Code, such discount is includable in taxable income of
the Unit holders on an accrual basis computed daily, without regard to
when payments of interest on such Bonds are received. The Code provides
a complex set of rules regarding the accrual of original issue discount.
These rules provide that original issue discount generally accrues on
the basis of a constant compound interest rate over the term of the
Bonds. Unit holders should consult their tax advisers as to the amount
of original issue discount which accrues.
Special original issue discount rules apply if the purchase price of the
Bond by the Trust exceeds its original issue price plus the amount of
original issue discount which would have previously accrued based upon
its issue price (its "adjusted issue price"). Similarly these special
rules would apply to a Unit holder if the tax basis of his pro rata
portion of a Bond issued with original issue discount exceeds his pro
rata portion of its adjusted issue price. Unit holders should also
consult their tax advisers regarding these special rules.
It is possible that a Bond that has been issued at an original issue
discount may be characterized as a "high-yield discount obligation"
within the meaning of Section 163(e)(5) of the Code. To the extent that
such an obligation is issued at a yield in excess of six percentage
points over the applicable Federal rate, a portion of the original issue
discount on such obligation will be characterized as a distribution on
stock (e.g., dividends) for purposes of the dividends received deduction
which is available to certain corporations with respect to certain
dividends received by such corporation.
If a Unit holder's tax basis in his pro rata portion of Bonds is less
than the allocable portion of such Bond's stated redemption price at
maturity (or, if issued with original issue discount, the allocable
portion of its "revised issue price"), such difference will constitute
market discount unless the amount of market discount is "de minimis" as
specified in the Code. Market discount accrues daily computed on a
straight line basis, unless the Unit holder elects to calculate accrued
market discount under a constant yield method. Unit holders should
consult their tax advisers as to the amount of market discount which
accrues.
Accrued market discount is generally includable in taxable income to the
Unit holders as ordinary income for Federal tax purposes upon the
receipt of serial principal payments on the Bonds, on the sale, maturity
or disposition of such Bonds by the Trust, and on the sale by a Unit
holder of Units, unless a Unit holder elects to include the accrued
market discount in taxable income as such discount accrues. If a Unit
holder does not elect to annually include accrued market discount in
taxable income as it accrues, deductions for any interest expenses
incurred by the Unit holder which is incurred to purchase or carry his
Units will be reduced by such accrued market discount. In general, the
portion of any interest expense which was not currently deductible would
ultimately be deductible when the accrued market discount is included in
income. Unit holders should consult their tax advisers regarding whether
an election should be made to include market discount in income as it
accrues and as to the amount of interest expense which may not be
currently deductible.
The tax basis of a Unit holder with respect to his interest in a Bond is
increased by the amount of original issue discount (and market discount,
if the Unit holder elects to include market discount, if any, on the
Bonds held by the Trust in income as it accrues) thereon properly
included in the Unit holder's gross income as determined for Federal
income tax purposes and reduced by the amount of any amortized premium
which the Unit holder has properly elected to amortize under Section 171
of the Code. A Unit holder's tax basis in his Units will equal his tax
basis in his pro rata portion of all of the assets of the Trust.
A Unit holder will recognize taxable capital gain (or loss) when all or
part of his pro rata interest in a Bond is disposed of in a taxable
transaction for an amount greater (or less) than his tax basis therefor.
As previously discussed, gain realized on the disposition of the
interest of a Unit holder in any Bond deemed to have been acquired with
market discount will be treated as ordinary income to the extent the
gain does not exceed the amount of accrued market discount not
previously taken into income. Any capital gain or loss arising from the
Page 17
disposition of a Bond by the Trust or the disposition of Units by a Unit
holder will be short-term capital gain or loss unless the Unit holder
has held his Units for more than one year in which case such capital
gain or loss will be long-term. 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 presently subject to
a maximum stated marginal tax rate of 28%. On August 5, 1997 the
President signed the Taxpayer Relief Act of 1997 (the "1997 Act") a
budget bill (the "bill"). The 1997 Act reduces the maximum stated
marginal tax rate for certain capital gains for investments held for 18
months to 20% (10% in the case of certain taxpayers in the lowest
bracket). Net capital gain that is not taxed at the maximum marginal
stated tax rate of 20% (or 10%) as described in the preceding sentence
is generally subject to a maximum marginal stated tax rate of 28%. The
date on which a Unit is acquired (i.e., the "trade date") is excluded
for purposes of determining the holding period of the Unit. In addition,
it should be noted that various 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
tax basis reduction requirements of the Code relating to amortization of
bond premium may, under some circumstances, result in the Unit holder
realizing taxable gain when his or her Units are redeemed for an amount
equal to or less than his original cost.
The 1997 Tax Act treats certain transactions designed to eliminate or
reduce risk of loss and opportunities for gain (e.g. short sales,
offsetting notional principal contracts, futures or forwards contracts,
or similar transactions) as constructive sales for purposes of
recognition of gain (but not loss). Unit holders should consult their
own tax advisers with regard to any such constructive sales rules and
the effect of the 1997 Tax Act on their investment in a Unit.
If the Unit holder disposes of a Unit, he is deemed thereby to have
disposed of his entire pro rata interest in all Trust assets including
his pro rata portion of all of the Bonds represented by the Unit. This
may result in a portion of the gain, if any, on such sale being taxable
as ordinary income under the market discount rules (assuming no election
was made by the Unit holder to include market discount in income as it
accrues) as previously discussed.
A Unit holder who is a foreign investor (i.e., an investor other than a
U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust) will not be subject to United States Federal income taxes,
including withholding taxes, on interest income (including any original
issue discount) on, or any gain from the sale or other disposition of,
his pro rata interest in any Bond or the sale of his Units provided that
all of the following conditions are met: (i) the interest income or gain
is not effectively connected with the conduct by the foreign investor of
a trade or business within the United States (ii) if the interest is
United States source income (which is the case for most securities
issued by United States issuers), and the Bond is issued after July 18,
1984 then the foreign investor does not own, directly or indirectly, 10%
or more of the total combined voting power of all classes of voting
stock of the issuer of the Bond and the foreign investor is not a
controlled foreign corporation related (within the meaning of Section
864(d)(4) of the Code) to the issuer of the Bond, (iii) with respect to
any gain, the foreign investor (if an individual) is not present in the
United States for 183 days or more during his or her taxable year and
(iv) the foreign investor provides all certification which may be
required of his status (foreign investors may contact the Sponsor to
obtain a Form W-8 which must be filed with the Trustee and refiled every
three calendar years thereafter). Foreign investors should consult their
tax advisers with respect to United States tax consequences of ownership
of Units.
It should be noted that payments to the Trust of interest on the Bonds
of foreign governments may be subject to foreign withholding taxes and
Unit holders should consult their tax advisers regarding the potential
tax consequences relating to the payment of any such withholding taxes
by the Trust. Any interest withheld as a result thereof may nevertheless
be treated as income to the Unit holders. Because, under the grantor
trust rules, an investor is deemed to have paid directly his share of
foreign taxes that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax
purposes with respect to such taxes. In addition, the Bonds may provide
for Additional Payments to investors intended to compensate them for any
foreign tax liability. (See "Are Unit Holders Compensated for Foreign
Withholding Tax Risks?") Any such Additional Payments received by the
Trust would constitute taxable income to Unit holders. Investors should
consult their tax advisers with respect to foreign withholding taxes and
foreign tax credits.
Page 18
It should be noted that the Tax Act included a provision which
eliminates the exemption from United States taxation, including
withholding taxes, for certain "contingent interest." The provision
applies to interest received after December 31, 1993. No opinion is
expressed herein regarding the potential applicability of this provision
and whether United States taxation or withholding taxes could be imposed
with respect to income derived from the Units as a result thereof. Unit
holders and prospective investors should consult with their tax advisers
regarding the potential effect of this provision on their investment in
Units.
Each Unit holder (other than a foreign investor who has properly
provided the certifications described above) will be requested to
provide the Unit holder's taxpayer identification number to the trustee
and to certify that the Unit holder has not been notified that payments
to the Unit holder are subject to back-up withholding. If the proper
taxpayer identification number and appropriate certification are not
provided when requested, distributions by the Trust to such Unit holder
including amounts received upon the redemption of the Units will be
subject to back-up withholding.
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, the Trust is not an association taxable
as a corporation and the income of the Trust will be treated as the
income of the Unit holders under the existing income tax laws of the
State and City of New York.
The foregoing discussion relates only to United States Federal and New
York State and City income taxes; Unit holders may be subject to
foreign, state and local taxation in other jurisdictions (including a
foreign investor's country of residence). Unit holders should consult
their tax advisers regarding potential state, local, or foreign taxation
with respect to the Units.
Why are Investments in the Trust Suitable for Retirement Plans?
Units of the Trust may be well suited for purchase by Individual
Retirement Accounts, Keogh Plans, pension funds and other tax-deferred
retirement plans. Generally, the Federal income tax relating to capital
gains and income received in each of the foregoing plans is deferred
until distributions are received. Distributions from such plans are
generally treated as ordinary income but may, in some cases, be eligible
for special averaging or tax-deferred rollover treatment. Investors
considering participation in any such plan should review specific tax
laws related thereto and should consult their attorneys or tax advisers
with respect to the establishment and maintenance of any such plan. Such
plans are offered by brokerage firms and other financial institutions.
Fees and charges with respect to such plans may vary.
What are the Expenses and Charges?
With the exception of bookkeeping and other administrative services
provided to the Trust, for which the Sponsor may be reimbursed in the
amount set forth under "Summary of Essential Information," the Sponsor
will not receive any fees in connection with its activities relating to
the Trust. Certain of the expenses incurred in establishing the Trust,
including the cost of the initial preparation of documents relating to
the Trust, Federal and state registration fees, the initial fees and
expenses of the Trustee, legal expenses and any other out-of-pocket
expenses may be paid by the Sponsor, and may, in part, be paid by the
Trustee.
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 Trust. Such fee is based on the number of
Units outstanding in the Trust on January 1 of each year except for the
year or years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding at the
end of such month. In providing such supervisory services, the Portfolio
Supervisor may purchase research services from a variety of sources
which may include underwriters or dealers of the Trust.
The Evaluator will receive an evaluation fee as set forth in "Summary of
Essential Information." The Trustee pays certain expenses of the Trust
for which it is reimbursed by the Trust. After the first year the
Trustee will receive for its ordinary recurring services to the Trust a
fee as indicated in "Special Trust Information" for the Trust. During
the first year the Trustee has agreed to lower its fee and, to the
extent necessary, pay expenses of the Trust in the amount, if any,
stated under "Special Trust Information" for the Trust. 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 pays certain expenses of the Trust
for which it is reimbursed by the Trust. The Trustee will receive for
its ordinary recurring services to the Trust an annual fee as set forth
Page 19
in "Summary of Essential Information." Such fee will be based upon the
largest aggregate number of Units of the Trust outstanding at any time
during the year. For a discussion of the services performed by the
Trustee pursuant to its obligations under the Indenture, reference is
made to the material set forth under "Rights of Unit Holders."
The Trustee's and above described fees are payable monthly on or before
each Distribution Date from the Interest Account of the Trust to the
extent funds are available and then from the Principal Account of the
Trust. Since the Trustee has the use of the funds being held in the
Principal and Interest Accounts for future distributions, payment of
expenses and redemptions and since such Accounts are non-interest-
bearing to Unit holders, the Trustee benefits thereby. Part of the
Trustee's compensation for its services to the Trust is expected to
result from the use of these funds. However, the Trustee may bear from
its own resources certain expenses relating to the Trust, including
organization costs.
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 and
supervisory services, such individual fees may exceed the actual costs
of providing such services for the Trust, but at no time will the total
amount received for such services rendered to all unit investment trusts
of which Nike Securities L.P. is the Sponsor in any calendar year exceed
the actual cost to the Sponsor or its affiliate of supplying such
services in such year.
Expenses incurred in establishing the Trust, including costs of
preparing the registration statement, the trust indenture and other
closing documents, registering Units with the Securities and Exchange
Commission and states, the initial audit of the Trust portfolio, legal
fees, the initial fees and expenses of the Trustee and any other non-
material out-of-pocket expenses, will be paid by the Trust and charged
off over a period not to exceed five years from the Initial Date of
Deposit. The following additional charges are or may be incurred by the
Trust: all expenses (including legal and annual auditing expenses) of
the Trustee incurred by or in connection with its responsibilities under
the Indenture, except in the event of negligence, bad faith or willful
misconduct on its part; the expenses and costs of any action undertaken
by the Trustee to protect the Trust and the rights and interests of the
Unit holders; fees of the Trustee for any extraordinary services
performed under the Indenture; indemnification of the Trustee for any
loss, liability or expense incurred by it without negligence, bad faith
or willful misconduct on its part, arising out of or in connection with
its acceptance or administration of the Trust; indemnification of the
Sponsor for any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct in acting as Depositor of
the Trust; all taxes and other government charges imposed upon the Bonds
or any part of the Trust (no such taxes or charges are being levied or
made or, to the knowledge of the Sponsor, contemplated); and
expenditures incurred in contacting Unit holders upon termination of the
Trust. The above expenses and the Trustee's annual fee, when paid or
owing to the Trustee, are secured by a lien on the Trust. In addition,
the Trustee is empowered to sell Bonds of the Trust in order to make
funds available to pay all these amounts if funds are not otherwise
available in the Interest and Principal Accounts of the Trust.
Unless the Sponsor determines that such an audit is not required, the
Indenture requires the accounts of the Trust shall be audited on an
annual basis at the expense of the Trust by independent auditors
selected by the Sponsor. So long as the Sponsor is making a secondary
market for Units, the Sponsor shall bear the cost of such annual audits
to the extent such cost exceeds $0.005 per Unit. Unit holders of the
Trust covered by an audit may obtain a copy of the audited financial
statements from the Trustee upon request.
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 determined by adding to
the Evaluator's determination of the aggregate offering price of the
Bonds in the Trust a sales charge of 4.9% of the Public Offering Price
(equivalent to 5.152% of the net amount invested). Also added to the
Public Offering Price is a proportionate share of interest accrued but
unpaid on the Bonds after the First Settlement Date to the date of
settlement. See "How Is Accrued Interest Treated?" During the initial
Page 20
offering period, the Sponsor's Repurchase Price is equal to the
Evaluator's determination of the aggregate offering price of the Bonds
in the Trust.
The applicable sales charge is reduced by a discount as indicated below
for volume purchases:
<TABLE>
<CAPTION>
Total Dollar Amount Discount
of Transaction per Unit
___________________ ________
<S> <C>
$ 100,000 to $499,999 0.25%
$ 500,000 to $999,999 0.50%
$1,000,000 or more 0.75%
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Underwriter, broker/dealer, bank or other selling agent. This reduced
sales charge structure will apply on all purchases of Units in the Trust
by the same person on any one day from the Underwriter or any one
broker/dealer, bank or other selling agent. For purposes of calculating
the applicable sales charge, purchases of Units in the Trust will not be
aggregated with any other purchases by the same person of units in any
series of tax-exempt or other unit investment trusts sponsored by Nike
Securities L.P. Additionally, Units purchased in the name of the spouse
of a purchaser or in the name of a child of such purchaser under 21
years of age will be deemed for the purposes of calculating the
applicable sales charge to be additional purchases by the purchaser. The
reduced sales charges will also be applicable to a trustee or other
fiduciary purchasing securities for a single trust or single fiduciary
account. In addition, 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,
broker/dealers, banks or other selling agents and their subsidiaries and
vendors providing services to the Sponsor may purchase Units of the
Trust during the initial and secondary offering periods at the Public
Offering Price less the concession the Sponsor typically allows
broker/dealers.
Units may be purchased in the primary or secondary market at the Public
Offering Price less the concession the Sponsor typically allows to
broker/dealers and other selling agents for purchases (see "Public
Offering-How are Units Distributed?") by investors who purchase Units
through registered investment advisers, certified financial planners and
registered broker-dealers who in each case either charge periodic fees
for financial planning, investment advisory or asset management
services, or provide such services in connection with the establishment
of an investment account for which a comprehensive "wrap fee" charge is
imposed.
The Public Offering Price of Units of the Trust for secondary market
purchases will be determined by adding to the Evaluator's determination
of the aggregate bid price of the Bonds in the Trust the appropriate
sales charge determined in accordance with the schedule set forth below,
based upon the number of years remaining to the maturity of each Bond in
the portfolio of the Trust, adjusting the total to reflect the amount of
any cash held in or advanced to the principal account of the Trust and
dividing the result by the number of Units of the Trust then
outstanding. The maximum sales charge on Units will be ___% of the
Public Offering Price (equivalent to ____% of the net amount invested).
For purposes of computation, Bonds will be deemed to mature on their
expressed maturity dates unless (a) the Bonds have been called for
redemption or funds or securities have been placed in escrow to redeem
them on an earlier call date, in which case such call date will be
deemed to be the date upon which they mature; or (b) such Bonds are
subject to a "mandatory tender," in which case such mandatory tender
will be deemed to be the date upon which they mature.
The effect of this method of sales charge computation will be that
different sales charge rates will be applied to each of the various
Bonds in the Trust based upon the maturities of such bonds, in
accordance with the following schedule:
Page 21
<TABLE>
<CAPTION>
Secondary Offering Period
Sales Charge
_________________________
Percentage Percentage
of Public of Net
Offering Amount
Years to Maturity Price Invested
_________________ __________ __________
<S> <C> <C>
Less than 1 1.00% 1.010%
1 but less than 2 1.50 1.523
2 but less than 3 2.00 2.041
3 but less than 4 2.50 2.564
4 but less than 5 3.00 3.093
5 but less than 6 3.50 3.627
6 but less than 7 4.00 4.167
7 but less than 8 4.50 4.712
8 or more 5.00 5.263
</TABLE>
There will be no reduction of the sales charges for volume purchases for
secondary market transactions. A dealer will receive from the Sponsor a
dealer concession of 70% of the total sales charges for Units sold by
such dealer and dealers will not be eligible for additional concessions
for Units sold pursuant to the above schedule.
On the Initial Date of Deposit, the Public Offering Price is as
indicated in the "Summary of Essential Information." In addition to
fluctuations in the amount of interest accrued but unpaid on Bonds in
the Trust, the Public Offering Price at any time during the initial
offering period will vary from the Public Offering Price stated herein
in accordance with fluctuations in the prices of the underlying Bonds.
The aggregate price of the Bonds in the Trust is determined by whomever
from time to time is acting as evaluator (the "Evaluator"), on the basis
of bid prices or offering prices as is appropriate, (1) on the basis of
current market prices for the Bonds obtained from dealers or brokers who
customarily deal in bonds comparable to those held by the Trust; (2) if
such prices are not available for any of the Bonds, on the basis of
current market prices for comparable bonds; (3) by determining the value
of the Bonds by appraisal; or (4) by any combination of the above.
During the initial public offering period, a determination of the
aggregate price of the Bonds in the Trust is made by the Evaluator on an
offering price basis, as of the close of trading on the New York Stock
Exchange on each day on which it is open, effective for all sales made
subsequent to the last preceding determination. For secondary market
purposes, the Evaluator will be requested to make such a determination,
on a bid price basis, as of the close of trading on the New York Stock
Exchange on each day on which it is open, effective for all sales,
purchases or redemptions made subsequent to the last preceding
determination.
The Public Offering Price of the Units during the initial offering
period is equal to the offering price per Unit of the Bonds in the Trust
plus the applicable sales charge. After the completion of the initial
offering period, the secondary market Public Offering Price will be
equal to the bid price per Unit of the Bonds in the Trust plus the
applicable sales charge. The offering price of Bonds in the Trust may be
expected to be greater than the bid price of such Bonds by approximately
1-3% of the aggregate principal amount of such Bonds.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made three business days following such order or shortly thereafter. See
"Rights of Unit Holders-How May Units Be Redeemed?" for information
regarding the ability to redeem Units ordered for purchase.
Page 22
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 Bonds are deposited by the Sponsor, Units will be offered to
the public at the Public Offering Price, computed as described above, by
the Sponsor and through broker/dealers and others. The initial offering
period may be up to approximately 360 days. During this period, the
Sponsor may deposit additional Bonds in the Trust and create additional
Units. Upon completion of the initial offering, Units repurchased in the
secondary market (see "Will There Be a Secondary Market?") may be
offered by this Prospectus at the secondary market public offering price
determined in the manner described above.
It is the intention of the Sponsor to qualify Units of the Trust for
sale in a number of states. Sales initially will be made to
broker/dealers and other selling agents at prices which represent a
concession or agency commission of 3.2% of the Public Offering Price per
Unit.
However, resales of Units of the Trust 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 are making Units of the Trust available to their customers on an
agency basis. A portion of the sales charge paid by these customers is
retained by or remitted to the banks in the amounts indicated in the
second preceding sentence. Under the Glass-Steagall Act, banks are
prohibited from underwriting 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.
A comparison of estimated current returns and estimated long-term
returns with the returns on various investments is one element to
consider in making an investment decision. The Sponsor may from time to
time in its advertising and sales materials compare the then current
estimated returns on the Trust and returns over specified periods on
other similar Trusts sponsored by Nike Securities L.P. with returns on
investments such as U.S. Government bonds, bank CDs and money market
accounts or money market funds, each of which has investment
characteristics that may differ from those of the Trust. U.S. Government
bonds, for example, are backed by the full faith and credit of the U.S.
Government and bank CDs and money market accounts are insured by an
agency of the federal government. Money market accounts and money market
funds provide stability of principal, but pay interest at rates that
vary with the condition of the short-term debt market. The investment
characteristics of the Trust are described more fully elsewhere in this
Prospectus.
What are the Sponsor's and Underwriter's Profits?
The Sponsor of the Trust will receive a gross sales commission equal to
4.9% of the Public Offering Price of the Units of the Trust (equivalent
to 5.152% of the net amount invested), less any reduced sales charge for
quantity purchases as described under "Public Offering-How is the Public
Offering Price Determined?" See "Underwriting" for information regarding
the receipt of excess gross sales commissions by the Sponsor from the
Underwriter and additional concessions available to the Underwriter,
broker/dealers and others. In addition, the Sponsor may be considered to
have realized a profit or the Sponsor may be considered to have
sustained a loss, as the case may be for the Trust, in the amount of any
difference between the cost of the Bonds to the Trust (which is based on
the Evaluator's determination of the aggregate offering price of the
underlying Bonds of the Trust on the Initial Date of Deposit as well as
subsequent dates of deposit) and the cost of such Bonds to the Sponsor.
See "Underwriting" and Note 1 of "Notes to Portfolio." Such profits or
losses may be realized or sustained by the Sponsor with respect to Bonds
which were acquired by the Sponsor from underwriting syndicates of which
it was a member. During the initial offering period, the Underwriter
also may realize profits or sustain losses from the sale of Units to
broker/dealers or as a result of fluctuations after the Initial Date of
Deposit or subsequent dates of deposit in the offering prices of the
Bonds and hence in the Public Offering Price received by the Sponsor.
In maintaining a market for the Units, the Sponsor and the Underwriter
will also realize profits or sustain losses in the amount of any
difference between the price at which Units are purchased (based on the
bid prices of the Bonds in the Trust) and the price at which Units are
resold (which price is also based on the bid prices of the Bonds in the
Page 23
Trust and includes a maximum sales charge of ___%) or redeemed. The
secondary market public offering price of Units may be greater or less
than the cost of such Units to the Sponsor or the Underwriter.
Will There be a Secondary Market?
After the initial offering period, although not obligated to do so, the
Sponsor and the Underwriter intend to maintain a market for the Units
and continuously to offer to purchase Units at prices, subject to change
at any time, based upon the aggregate bid price of the Bonds in the
portfolio of the Trust plus interest accrued to the date of settlement.
All expenses incurred in maintaining a secondary market, other than the
fees of the Evaluator, the other expenses of the Trust 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 OR HER
UNITS, HE OR SHE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET
PRICES PRIOR TO MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE.
Prospectuses relating to certain other bond funds indicate an intention,
subject to change, on the part of the respective sponsors of such funds
to repurchase units of those funds on the basis of a price higher than
the BID prices of the securities in the funds. Consequently, depending
upon the prices actually paid, the repurchase price of other sponsors
for units of their funds may be computed on a somewhat more favorable
basis than the repurchase price offered by the Sponsor for Units of the
Trust in secondary market transactions. As in this Trust, the purchase
price per unit of such bond funds will depend primarily on the value of
the securities in the portfolio of the fund.
RIGHTS OF UNIT HOLDERS
How are Certificates 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 is 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.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Interest and Principal Distributed?
Interest from the Trust after deduction of amounts sufficient to
reimburse the Trustee, without interest, for any amounts advanced and
paid to the Sponsor as the Unit holder of record as of the First
Settlement Date (see "How is Accrued Interest Treated?") will be
distributed on or shortly after the last day of each month on a pro rata
basis to Unit holders of record as of the preceding Record Date who are
entitled to distributions at that time under the plan of distribution
chosen. All distributions for the Trust will be net of applicable
expenses for the Trust.
Page 24
The pro rata share of cash in the Principal Account of the Trust will be
computed as of the fifteenth day of each month, and distributions to the
Unit holders of the Trust as of such Record Date will be made on or
shortly after the last day of each month. Proceeds from the disposition
of any of the Bonds of the Trust received after such Record Date and
prior to the following Distribution Date will be held in the Principal
Account of the Trust and not distributed until the next Distribution
Date. The Trustee is not required to make a distribution from the
Principal Account of the Trust unless the amount available for
distribution shall equal at least $.01 per Unit.
The Trustee will credit to the Interest Account of the Trust all
interest received by the Trust, including that part of the proceeds of
any disposition of Bonds which represents accrued interest. Other
receipts will be credited to the Principal Account of the Trust. The
distribution to the Unit holders of the Trust as of each Record Date
will be made on the following Distribution Date or shortly thereafter
and shall consist of an amount substantially equal to such portion of
the holder's pro rata share of the estimated annual income of the Trust
after deducting estimated expenses. Except through an advancement of its
own funds, the Trustee has no cash for distribution to Unit holders
until it receives interest payments on the Bonds in the Trust. The
Trustee shall be reimbursed, without interest, for any advances from
funds in the Interest Account of the Trust on the ensuing Record Date.
Persons who purchase Units between a Record Date and a Distribution Date
will receive their first distribution on the second Distribution Date
after the purchase under the applicable plan of distribution. The
Trustee is not required to pay interest on funds held in the Principal
or Interest Account of the Trust (but may itself earn interest thereon
and therefore benefit from the use of such funds).
As of the fifteenth day of each month, the Trustee will deduct from the
Interest Account of the Trust and, to the extent funds are not
sufficient therein, from the Principal Account of the Trust, amounts
necessary to pay the expenses of the Trust. The Trustee also may
withdraw from said accounts such amounts, if any, as it deems necessary
to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the
Trust's assets until such time as the Trustee shall return all or any
part of such amounts to the appropriate account. In addition, the
Trustee may withdraw from the Interest Account and the Principal Account
of the Trust such amounts as may be necessary to cover redemption of
Units of the Trust by the Trustee.
PURCHASERS OF UNITS WHO DESIRE TO RECEIVE DISTRIBUTIONS ON A SEMI-ANNUAL
BASIS MAY ELECT TO DO SO AT THE TIME OF PURCHASE DURING THE INITIAL
PUBLIC OFFERING PERIOD. THOSE NOT SO INDICATING WILL BE DEEMED TO HAVE
CHOSEN THE MONTHLY DISTRIBUTION PLAN. However, all Unit holders
purchasing Units during the initial public offering period and prior to
the first Record Date will receive the first distribution of interest.
Thereafter, Record Dates for monthly distributions will be the fifteenth
day of each month and Record Dates for semi-annual distributions will be
the fifteenth day of June and December. Distributions will be made on
the last day of the month of the respective Record Date.
The plan of distribution selected by a Unit holder will remain in effect
until changed. Unit holders purchasing Units in the secondary market
will initially receive distributions in accordance with the election of
the prior owner. Each year, approximately six weeks prior to the end of
May, the Trustee will furnish each Unit holder a card to be returned to
the Trustee not more than thirty nor less than ten days before the end
of such month. Unit holders desiring to change the plan of distribution
in which they are participating may so indicate on the card and return
same, together with their certificate, to the Trustee. If the card and
certificate are returned to the Trustee, the change will become
effective as of June 16 of that year. If the card and certificate are
not returned to the Trustee, the Unit holder will be deemed to have
elected to continue with the same plan for the following twelve months.
How Can Distributions to Unit Holders be Reinvested?
Universal Distribution Option. Unit holders may elect participation in a
Universal Distribution Option which permits a Unit holder to direct the
Trustee to distribute principal and interest payments to any other
investment vehicle of which the Unit holder has an EXISTING account. For
example, at a Unit holder's direction, the Trustee would distribute
automatically on the applicable distribution date interest income,
capital gains or principal on the participant's Units to, among other
investment vehicles, a Unit holder's checking, bank savings, money
market, insurance, reinvestment or any other account. All such
distributions, of course, are subject to the minimum investment and
Page 25
sales charges, if any, of the particular investment vehicle to which
distributions are directed. The Trustee will notify the participant of
each distribution pursuant to the Universal Distribution Option. The
Trustee will distribute directly to the Unit holder any distributions
which are not accepted by the specified investment vehicle. A
participant may at any time, by so notifying the Trustee in writing,
elect to terminate his participation in the Universal Distribution
Option and receive directly future distributions on his Units.
What Reports Will Unit Holders Receive?
The Trustee shall furnish Unit holders of the Trust in connection with
each distribution a statement of the amount of interest, 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 time after
the end of each calendar year, the Trustee will furnish to each person
who at any time during the calendar year was a Unit holder of the Trust
of record, a statement as to (1) the Interest Account: interest received
by the Trust (including amounts representing interest received upon any
disposition of Bonds of the Trust), deductions for payment of applicable
taxes and for fees and expenses of the Trust, redemption of Units and
the balance remaining after such distributions and deductions, expressed
both as a total dollar amount and as a dollar amount representing the
pro rata share of each Unit outstanding on the last business day of such
calendar year; (2) the Principal Account: the dates of disposition of
any Bonds of the Trust and the net proceeds received therefrom
(excluding any portion representing interest and the premium
attributable to the exercise of the right, if applicable, to obtain
Permanent Insurance), deduction for payment of applicable taxes and for
fees and expenses of the Trust, redemptions of Units, and the balance
remaining after such distributions and deductions, expressed both as a
total dollar amount and as a dollar amount representing the pro rata
share of each Unit outstanding on the last business day of such calendar
year; (3) the Bonds held and the number of Units of the Trust
outstanding on the last business day of such calendar year; (4) the
Redemption Price per Unit based upon the last computation thereof made
during such calendar year; and (5) the amounts actually distributed
during such calendar year from the Interest Account and from the
Principal Account of the Trust, separately stated, expressed both as
total dollar amounts and as dollar amounts representing the pro rata
share of each Unit outstanding.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Bonds in their 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 unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, 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 such 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.
Accrued interest to the settlement date paid on redemption shall be
withdrawn from the Interest Account of the Trust or, if the balance
therein is insufficient, from the Principal Account of the Trust. All
other amounts paid on redemption shall be withdrawn from the Principal
Account of the Trust.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Bonds in the Trust while the Public Offering Price of Units during the
initial offering period will be determined on the basis of the offering
price of the Bonds of the Trust as of the close of trading on the New
York Stock Exchange on the date any such determination is made. On the
Page 26
Initial Date of Deposit the Public Offering Price per Unit (which is
based on the offering prices of the Bonds in the Trust and includes the
sales charge) exceeded the Unit value at which Units could have been
redeemed (based upon the current BID prices of the Bonds in the Trust)
by the amount shown under "Summary of Essential Information." The
Redemption Price per Unit is the pro rata share of each Unit determined
by the Trustee on the basis of (1) the cash on hand in the Trust or
moneys in the process of being collected, (2) the value of the Bonds in
the Trust based on the bid prices of the Bonds, and (3) accrued interest
on the bonds, less (a) amounts representing taxes or other governmental
charges payable out of the Trust, (b) the accrued expenses of the Trust
and (c) cash held for distribution to Unit holders of record as of a
date prior to the evaluation then being made. The Evaluator may
determine the value of the Bonds in the Trust (1) on the basis of
current bid prices of the Bonds obtained from dealers or brokers who
customarily deal in bonds comparable to those held by the Trust, (2) on
the basis of bid prices for bonds comparable to any Bonds for which bid
prices are not available, (3) by determining the value of the Bonds by
appraisal, or (4) by any combination of the above.
The difference between the bid and offering prices of such Bonds may be
expected to average 1-3% of the principal amount. In the case of
actively traded bonds, the difference may be as little as 1/2 of 1% and,
in the case of inactively traded bonds, such difference usually will not
exceed 4%. Therefore, the price at which Units may be redeemed could be
less than the price paid by the Unit holder. At the opening of business
on the Initial Date of Deposit, the aggregate current offering price of
such Bonds per Unit exceeded the Redemption Price per Unit (based upon
current bid prices of such Bonds) by the amount indicated in the
"Summary of Essential Information."
The Trustee is empowered to sell underlying Bonds in the Trust in order
to make funds available for redemption. To the extent that Bonds are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Bonds would not otherwise be sold and
might result in lower prices than might otherwise be realized.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or an emergency exists, as a result of which
disposal or evaluation of the Bonds 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.
How May Units be Purchased by the Sponsor or Underwriter?
The Trustee shall notify the Sponsor and Underwriter of any tender of
Units for redemption. If the Sponsor's or Underwriter'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 next succeeding 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 or Underwriter may be tendered to the Trustee for redemption
as any other Units.
The offering price of any Units acquired by the Sponsor or Underwriter
will be in accord with the Public Offering Price described in the then
currently effective prospectus describing such Units. Any profit or loss
resulting from the resale or redemption of such Units will belong to the
Sponsor or Underwriter.
How May Bonds be Removed from the Trust?
The Trustee, in its sole discretion, is empowered to sell underlying
Bonds of a Trust in order to make funds available for the redemption of
Units of such Trust or to provide for the payment of expenses of such
Trust for which funds are not available. The Depositor shall maintain
with the Trustee a current list of Bonds held in each Trust designated
to be sold for such purposes. As described in the following paragraph,
the Trustee may also sell Bonds in the Trust which are in default in the
payment of principal or interest or in significant risk of such default
where, in the Sponsor's opinion, such sale is in the best interests of
Unit holders or no other alternative exists. In addition, at the
Sponsor's request, the Trustee shall sell Bonds of a Trust if factors
arise which, in the Sponsor's opinion, adversely affect the tax or
Page 27
exchange control status of the Bonds. See "How May Units be Redeemed?"
The Trustee may from time to time, retain and pay compensation to the
Sponsor (or an affiliate of the Sponsor) to act as agent for the Trust
with respect to selling Bonds from the Trust. In acting in such
capacity, the Sponsor or its affiliate will be held subject to the
restrictions under the Investment Company Act of 1940, as amended.
If any default in the payment of principal or interest on any Bond
occurs and no provision for payment is made therefor, within thirty
days, the Trustee is required to notify the Sponsor thereof. If the
Sponsor fails to instruct the Trustee to sell or to hold such Bond
within thirty days after notification by the Trustee to the Sponsor of
such default, the Trustee may, in its discretion, sell the defaulted
Bond and not be liable for any depreciation or loss thereby incurred.
The Sponsor shall instruct the Trustee to reject any offer made by an
issuer of any of the Bonds to issue new obligations in exchange and
substitution for any Bonds pursuant to a refunding or refinancing plan,
except that the Sponsor may instruct the Trustee to accept such an offer
or to take any other action with respect thereto as the Sponsor may deem
proper if the issuer is in default with respect to such Bonds or in the
written opinion of the Sponsor the issuer will probably default in
respect to such Bonds in the foreseeable future. Any obligations so
received in exchange or substitution will be held by the Trustee subject
to the terms and conditions in the Indenture to the same extent as Bonds
originally deposited thereunder. Within five days after the deposit of
obligations in exchange or substitution for underlying Bonds, the
Trustee is required to give notice thereof to each Unit holder of the
affected Trust, identifying the Bonds eliminated and the Bonds
substituted therefor. Except as stated in this paragraph and under "What
is the FT Series?" for Failed Bonds, the acquisition by the Trust of any
securities other than the Bonds initially deposited is prohibited.
INFORMATION AS TO UNDERWRITER, SPONSOR, TRUSTEE AND EVALUATOR
Who is the Underwriter?
First Miami Securities, Inc. is
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 FT Series (formerly known as The First Trust Special
Situations Trust), The First Trust Insured Corporate Trust, The First
Trust of Insured Municipal Bonds, The First Trust GNMA, Templeton Growth
and Treasury Trust, Templeton Foreign Fund & U.S. Treasury Securities
Trust, and The Advantage Growth and Treasury Securities Trust. First
Trust introduced the first insured unit investment trust in 1974 and to
date more than $9 billion in First Trust unit investment trusts have
been deposited. The Sponsor's employees include a team of professionals
with many years of experience in the unit investment trust industry. The
Sponsor is a member of the National Association of Securities Dealers,
Inc. and Securities Investor Protection Corporation and has its
principal offices at 1001 Warrenville Road, Lisle, Illinois 60532;
telephone number (630) 241-4141. As of December 31, 1996, the total
partners' capital of Nike Securities L.P. was $9,005,203 (audited).
(This paragraph relates only to the Sponsor and not to the Trust or to
any series thereof or to any broker/dealers. 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.)
Page 28
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trust may
call the Customer Service Help Line at 1-800-682-7520. The Trustee is
subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the portfolio or the Insurance Policy.
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 thirty 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 the Trustee may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the 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 Bonds. In the event of the failure of the Sponsor
to act under the Indenture, the Trustee may act thereunder and shall not
be liable for any action taken by it in good faith under the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Bonds or upon the interest
thereon or upon it as Trustee under the Indenture or upon or in respect
of the Trust which the Trustee may be required to pay under any present
or future law of the United States of America or of any other taxing
authority having jurisdiction. In addition, the Indenture contains other
customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become 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 Muller Data Corporation, 395 Hudson Street, New York,
New York 10014. 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
Page 29
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), provided that
the Indenture is not amended to increase the number of Units of the
Trust issuable thereunder or to permit the deposit or acquisition of
securities either in addition to or in substitution for any of the Bonds
initially deposited in the Trust, except for the substitution of certain
refunding securities for Bonds or New Bonds for Failed Bonds. In the
event of any amendment, the Trustee is obligated to notify promptly all
Unit holders of the substance of such amendment.
The Trust may be liquidated at any time by consent of 100% of the Unit
holders of the Trust or by the Trustee when the value of the Trust, as
shown by any evaluation, is less than 20% of the aggregate principal
amount of the Bonds initially deposited in the Trust during the primary
offering period or by the Trustee in the event that Units of the Trust
not yet sold aggregating more than 60% of the Units of the Trust are
tendered for redemption by the underwriters, including the Sponsor. If
the Trust is liquidated because of the redemption of unsold Units of the
Trust by the underwriters, the Sponsor will refund to each purchaser of
Units of the Trust the entire sales charge paid by such purchaser. The
Indenture will terminate upon the redemption, sale or other disposition
of the last Bond held thereunder, but in no event shall it continue
beyond ____________, 20__. In the event of termination, written notice
thereof will be sent by the Trustee to all Unit holders of the Trust.
Within a reasonable period after termination, the Trustee will sell any
Bonds remaining in the Trust and, after paying all expenses and charges
incurred by the Trust, will distribute to each Unit holder of the Trust
(including the Sponsor if it then holds any Units), upon surrender for
cancellation of his Certificate for Units, his pro rata share of the
balances remaining in the Interest and Principal Accounts of the Trust,
all as provided in the Indenture.
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, 2 Wall Street, New York, New York 10005, will
act as counsel for the Trustee and as special counsel for the Trust for
New York tax matters.
Experts
The statement of net assets, including the portfolio, of the Trust on
the Initial Date of Deposit appearing in this Prospectus and
Registration Statement has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and is included in
reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
UNDERWRITING
The Underwriter named below has purchased Units in the following amount:
<TABLE>
<CAPTION>
Number
Name Address of Units
______ _________ ________
<S> <C> <C>
UNDERWRITER
First Miami Securities, Inc. 20660 W. Dixie Highway, North Miami Beach, FL 33180
========
</TABLE>
Page 30
On the Initial Date of Deposit, the Underwriter of the Trust became the
owner of the Units of the Trust and entitled to the benefits thereof, as
well as the risks inherent therein.
The Underwriter Agreement provides that a public offering of the Units
of the Trust will be made at the Public Offering Price described in the
prospectus. Units may also be sold to or through dealers and other
selling agents during the initial offering period and in the secondary
market at prices representing a concession or agency commission as
described in "Public Offering-How are Units Distributed?"
The Underwriter has agreed to underwrite additional Units of the Trust
as they become available. The Sponsor will receive from the Underwriter
the difference between the gross sales commission and 3.7% of the Public
Offering Price per Unit, which is retained by the Underwriter.
From time to time the Sponsor may implement programs under which
Underwriter and dealers of the Trust may receive nominal awards from the
Sponsor for each of their registered representatives who have sold a
minimum number of UIT Units during a specified time period. In addition,
at various times the Sponsor may implement other programs under which
the sales force of 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 the Sponsor,
an amount not exceeding the total applicable sales charges on the sales
generated by such person at the public offering price during such
programs. Also, the Sponsor in its discretion may from time to time
pursuant to objective criteria established by the Sponsor pay fees to
the Underwriter or qualifying dealers for certain services or activities
which are primarily intended to result in sales of Units of the Trust.
Such payments are made by the Sponsor out of its own assets, and not out
of the assets of the Trust. These programs will not change the price
Unit holders pay for their Units or the amount that the Trust will
receive from the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns on the Trust and returns over
specified periods on other similar Trusts sponsored by Nike Securities
L.P. with returns on other taxable investments such as corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ from
those of the Trust. U.S. Government bonds, for example, are backed by
the full faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of the Trust are
described more fully elsewhere in this Prospectus.
Information on percentage changes in the dollar value of Units, on the
basis of changes in Unit price may be included from time to time in
advertisements, sales literature, reports and other information
furnished to current or prospective Unit holders. Total return figures
are not averaged, and may not reflect deduction of the sales charge,
which would decrease the return. Average annualized return figures
reflect deduction of the maximum sales charge. No provision is made for
any income taxes payable.
Past performance may not be indicative of future results. The Trust's
portfolio is not managed. Unit price and return fluctuate with the value
of the common stocks in the Trust's portfolio, so there may be a gain or
loss when Units are sold.
Trust performance may be compared to performance on a total return basis
with the Dow Jones Industrial Average, the S&P 500 Composite Stock Price
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 the Trust's relative performance for
any future period.
Page 31
The Latin American Government Income Trust
<TABLE>
<CAPTION>
Special Trust Information
Monthly Semi-Annually
_______ _____________
<S> <C> <C>
Calculation of Estimated Net Annual Unit Income
Estimated Annual Interest Income per Unit $ $
Less: Estimated Annual Expense per Unit $ $
Estimated Net Annual Interest Income per Unit $ $
Calculation of Interest Distribution per Unit
Estimated Net Annual Interest Income per Unit $ $
Divided by 12 and 2, respectively $ $
Estimated Daily Rate of Net Interest Accrual per Unit $ $
Estimated Current Return Based on Public Offering Price (1) % %
Estimated Long-Term Return Based on Public Offering Price (1) % %
CUSIP
_________________
<FN>
(1) The Estimated Current Return is calculated by dividing the Estimated
Net Annual Interest Income per Unit by the Public Offering Price. The
Estimated Net Annual Interest Income per Unit will vary with changes in
fees and expenses of the Trustee, the Portfolio Supervisor and the
Evaluator and with the principal prepayment, redemption, maturity,
exchange or sale of Bonds while the Public Offering Price will vary with
changes in the offering price of the underlying Bonds; therefore, there
is no assurance that the present Estimated Current Return indicated
above will be realized in the future. The Estimated Long-Term Return is
calculated using a formula which (1) takes into consideration, and
determines and factors in the relative weightings of the market values,
yields (which take into account the amortization of premiums and the
accretion of discounts) and estimated retirements of all of the Bonds in
the Trust; and (2) takes into account a compounding factor and the
expenses and sales charge associated with each Unit of the Trust. Since
the market values and estimated retirements of the Bonds and the
expenses of the Trust will change, there is no assurance that the
present Estimated Long-Term Return indicated above will be realized in
the future. Estimated Current Return and Estimated Long-Term Return are
expected to differ because the calculation of the Estimated Long-Term
Return reflects the estimated date and amount of principal returned
while the Estimated Current Return calculations include only Net Annual
Interest Income and Public Offering Price. Neither rate reflects the
true return to Unit holders, which is lower, because neither includes
the effect of certain delays in distributions to Unit holders. The above
figures are based on estimated per Unit cash flows. Estimated cash flows
will vary with changes in fees and expenses, with changes in current
interest rates, and with the principal prepayment, redemption, maturity,
call, exchange or sale of the underlying Bonds. The estimated cash flows
for this Trust may be obtained from the Sponsor at no charge.
</FN>
</TABLE>
Trustee's Annual Fee $ and $ per Unit, exclusive of expenses of the
Trust, for those portions of the Trust under the monthly and semi-annual
plans, respectively, commencing ____________, 1997.
Distributions
First distribution of $ and $ per Unit under the monthly and semi-
annual distribution plans, respectively, will be paid on _________________
to Unit holders of record on ________________.
Regular monthly distributions of $ per Unit will begin on ______________
to monthly Unit holders of record on ________________.
A partial distribution of $ per Unit will be paid on ________________
to semi-annual Unit holders of record on ________________.
Regular semi-annual distributions of $ per Unit will begin on
________________.to semi-annual Unit holders of record on ________________.
Page 32
What is The Latin American Government Income Trust?
The Latin American Government Income Trust consists of _____
obligations. _____ obligations representing __% of the aggregate
principal amount of the Bonds in the Trust consist of U.S. dollar-
denominated sovereign debt obligations of Argentina, Brazil, Mexico,
Panama and Venezuela. _____ obligations representing _____ percent of
the aggregate principal amount of the Bonds in the Trust were purchased
at a premium over par value. _____ percent of the Bonds are subject to
optional call or redemption provisions within five years from the
Initial Date of Deposit. See "Notes to Portfolio" for additional
information on redemption provisions. __%, __% and __% of the aggregate
principal amount of the Bonds in the Trust will mature in 20__, 20__ and
20__, respectively. See "What is The FT Series?"
<TABLE>
<CAPTION>
Number Portfolio
of Issues Country of Issuer Percentage
_________ _________________ __________
<S> <C> <C>
Argentina 20%
Brazil 20%
Mexico 20%
Panama 20%
Venezuela 20%
</TABLE>
Page 33
The Latin American Government Income Trust
Portfolio
At the Opening of Business
On the Initial Date of Deposit of the Bonds-____________, 1997
<TABLE>
<CAPTION>
Aggregate Issue and County of Issuer Represented by Redemption Cost to
Principal Sponsor's Contracts to Purchase Bonds (1) Rating Provisions (3) the Trust
__________ _________________________________________ _______ ______________ _________
<C> <S> <C> <C> <C>
$ $
_________ _________
$ $
========= =========
______________
<FN>
See "Notes to Portfolio" on page __.
</FN>
</TABLE>
Page 34
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
The Latin American Government Income Trust
We have audited the accompanying statement of net assets, including the
portfolio, of FT 232, comprised of The Latin American Government Income
Trust, as of the opening of business on ____________, 1997. This
statement of net assets is the responsibility of the Trust's Sponsor.
Our responsibility is to express an opinion on this statement of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of net assets is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement
of net assets. Our procedures included confirmation of the letter of
credit held by the Trustee and deposited in the Trust on ____________,
1997. An audit also includes assessing the accounting principles used
and significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statement of net assets. We believe that our
audit of the statement of net assets provides a reasonable basis for our
opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of FT 232,
comprised of The Latin American Government Income Trust, at the opening
of business on ____________, 1997 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
____________, 1997
Page 35
Statement of Net Assets
THE LATIN AMERICAN GOVERNMENT INCOME TRUST
FT 232
At the Opening of Business on the
Initial Date of Deposit-____________, 1997
<TABLE>
<CAPTION>
NET ASSETS
<S> <C>
Delivery statements relating to Sponsor's contracts to purchase bonds (1)(2) $
Accrued interest on underlying bonds (2)(3)
Organizational and offering costs (4)
________
Less distributions payable (3) ( )
Less accrued organizational and offering costs (4) ( )
_________
Net assets $
=========
Outstanding units
ANALYSIS OF NET ASSETS
Cost to investors (5) $
Less gross commissions (5) ( )
_________
Net assets $
=========
<FN>
NOTES TO STATEMENT OF NET ASSETS
(1) The aggregate offering price of the Bonds in the Trust at the
opening of business on the Initial Date of Deposit and the cost to the
Trust are the same. The offering price is determined by the Evaluator.
(2) Pursuant to delivery statements relating to contracts to purchase
Bonds, an irrevocable letter of credit has been deposited in the Trust
as collateral. The amount of available letter of credit and the amount
expected to be utilized for the Trust is shown below. The amount
expected to be utilized is (a) the cost to the Trust of the principal
amount of the Bonds to be purchased, (b) accrued interest on those Bonds
to the Initial Date of Deposit, and (c) accrued interest on those Bonds
from the Initial Date of Deposit to the expected dates of delivery of
the Bonds.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Accrued
Aggregate Accrued Interest to
Letter of Credit Offering Interest to Expected
To be Price of Date of Dates of
Trust Available Utilized Bonds Deposit Delivery
_____ _________ ________ _________ ___________ ___________
<S> <C> <C> <C> <C> <C>
The Latin American Government Income Trust $ $ $ $ $
</TABLE>
(3) The Trustee will advance to the Trust the amount of net interest
accrued to ____________, 1997, the First Settlement Date, for
distribution to the Sponsor as the Unit holder of record.
(4) The Trust (and therefore Unit holders) shall bear all or a portion
of its estimated organization and offering costs which will be deferred
and charged off over a period not to exceed five years from the Initial
Date of Deposit. The estimated organizational and offering costs are
based on ________ Units of the Trust expected to be issued. To the
extent the number of Units issued is larger or smaller, the estimate
will vary.
(5) The aggregate cost to investors and the aggregate gross underwriting
commissions of 4.9% are computed assuming no reduction of sales charge
for quantity purchases.
Page 36
NOTES TO PORTFOLIO
The following Notes to Portfolio pertain to the information contained in
the Trust Portfolio on page 29.
(1) Sponsor's contracts to purchase Bonds were entered into on
____________, 1997. All contracts to purchase Bonds are expected to be
settled on or prior to ____________, 1997 unless otherwise indicated.
Other information regarding the Bonds in the Trust on the Initial Date
of Deposit is as follows:
<TABLE>
<CAPTION>
Aggregate Annual
Offering Cost of Profit Or Interest
Price of Bonds to (Loss) to Bid Price Income
Trust Bonds Sponsor Sponsor of Bonds to Trust
_____ _________ ________ _________ _________ ________
<S> <C> <C> <C> <C> <C>
The Latin American Government Income Trust $ $ $ $ $
</TABLE>
Neither Cost of Bonds to Sponsor nor Profit or (Loss) to Sponsor
reflects underwriting profits or losses received or incurred by the
Sponsor through its participation in underwriting syndicates. The
Offering and Bid Prices of Bonds were determined by Muller Data
Corporation.
(2) Rating by Standard & Poor's. Such ratings were obtained from a
corporate bond information reporting service.
(3) There is shown under this heading the year in which each issue of
Bonds initially is redeemable and the redemption price for that year.
Issues of Bonds are redeemable at declining prices (but not below par
value) in subsequent years. Certain of the Bonds may also be redeemed in
whole or in part other than by operation of the stated redemption
provisions under certain circumstances specified in the instruments
setting forth the terms and provisions of such Bonds. Such redemption
provisions may result in a redemption price less than the value of the
Bonds on the Initial Date of Deposit. Redemption pursuant to call
provisions generally will occur at times when the redeemed Bonds have an
offering side valuation which represents a premium over par. To the
extent that the Bonds were deposited in the Trust at a price higher than
the price at which they are redeemed, this will represent a loss of
capital when compared with the original Public Offering Price of the
Units. Conversely, to the extent that the Bonds were acquired at a price
lower than the redemption price, this will represent an increase in
capital when compared to the original Public Offering Price of the
Units. Distributions will generally be reduced by the amount of the
income which would otherwise have been paid with respect to redeemed
Bonds and there will be distributed to Unit holders the principal amount
and any premium received on such redemption (except to the extent the
proceeds of the redeemed Bonds are used to pay for Unit redemptions).
The Estimated Current Return and the Estimated Long-Term Return in this
event may be affected by such redemptions.
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard &
Poor's rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a
specific debt obligation. This assessment may take into consideration
obligors such as guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other
circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
_______________
* As published by the rating companies.
Page 37
III. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangements under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher rated categories.
BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposure to adverse conditions.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of
the project being financed by the bonds being rated and indicates that
payment of debt service requirements is largely or entirely dependent
upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his/her
own judgment with respect to such likelihood and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of
bonds and other fixed income securities. It focuses on events and trends
which place companies and government units under special surveillance by
S&P's 180-member analytical staff. These may include mergers, voter
referendums, actions by regulatory authorities, or developments gleaned
from analytical reviews. Unless otherwise noted, a rating decision will
be made within 90 days. Issues appear on Credit Watch where an event,
situation, or deviation from trends occurred and needs to be evaluated
as to its impact on credit ratings. A listing, however, does not mean a
rating change is inevitable. Since S&P continuously monitors all of its
ratings, Credit Watch is not intended to include all issues under
review. Thus, rating changes will occur without issues appearing on
Credit Watch.
Moody's. A brief description of the applicable Moody's rating symbols
and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat large than in Aaa securities. Their market value is
virtually immune to all but money market influences, with the occasional
exception of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be
influenced to some degree by economic performance during a sustained
Page 38
period of depressed business conditions, but, during periods of
normalcy, A-rated bonds frequently move in parallel with Aaa and Aa
obligations, with the occasional exception of oversupply in a few
specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible
upgrading in quality, and additionally, afford the investor an
opportunity to gauge more precisely the relative attractiveness of
offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. The market value of Baa-rated bonds is more
sensitive to changes in economic circumstances, and aside from
occasional speculative factors applying to some bonds of this class, Baa
market valuations will move in parallel with Aaa, Aa, and A obligations
during periods of economic normalcy, except in instances of oversupply.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at
the high end of its category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Con.(- - -) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation
experience, (c) rentals which begin when facilities are completed, or
(d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Fitch Investors Service, L.P. A brief description of the applicable
Fitch rating symbols and their meanings follows:
AAA - These bonds are considered to be investment grade and of the
highest quality. The obligor has an extraordinary ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - These bonds are considered to be investment grade and of high
quality. The obligor's ability to pay interest and repay principal,
which is very strong, is somewhat less than for AAA-rated securities or
more subject to possible change over the term of the issue.
A - These bonds are considered to be investment grade and of good
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.
BBB - These bonds are considered to be investment grade and of
satisfactory quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings.
BB - These bonds are considered speculative and of low investment grade.
The obligor's ability to pay interest and repay principal is not strong
and is considered likely to be affected over time by adverse economic
changes.
B - These bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest over
the life of the issue and repay principal when due.
A "+" or a "-" sign after a rating symbol indicates relative standing in
its rating.
Page 39
CONTENTS:
Summary of Essential Information 3
The Latin American Government Income Trust
FT 232:
What is The FT Series? 4
Bond Portfolio Selection 5
Risk Factors 5
What are Estimated Long-Term Return and
Estimated Current Return? 13
How is Accrued Interest Treated? 14
Are Unit Holders Compensated for Foreign
Withholding Tax Risks? 14
What is the Federal Tax Status of Unit Holders? 15
Why are Investments in the Trust Suitable for
Retirement Plans? 18
What are the Expenses and Charges? 19
Public Offering:
How is the Public Offering Price Determined? 20
How are Units Distributed? 22
What are the Sponsor's and Underwriter's Profits? 23
Will There be a Secondary Market? 23
Rights of Unit Holders:
How are Certificates Issued and Transferred? 23
How are Interest and Principal Distributed? 24
How Can Distributions to Unit Holders be
Reinvested? 25
What Reports Will Unit Holders Receive? 25
How May Units be Redeemed? 25
How May Units be Purchased by the Sponsor
or Underwriter? 26
How May Bonds be Removed from the Trust? 27
Information as to Underwriter, Sponsor,
Trustee and Evaluator:
Who is the Underwriter? 27
Who is the Sponsor? 28
Who is the Trustee? 28
Limitations on Liabilities of Sponsor and Trustee 28
Who is the Evaluator? 29
Other Information:
How May the Indenture be Amended
or Terminated? 29
Legal Opinions 29
Experts 30
Underwriting 30
The Latin American Government Income Trust 32
Portfolio 34
Report of Independent Auditors 35
Statement of Net Assets 36
Notes to Statement of Net Assets 36
Notes to Portfolio 37
Description of Bond Ratings 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,
AS AMENDED, AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
THE LATIN AMERICAN GOVERNMENT INCOME TRUST
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
____________, 1997
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
MEMORANDUM
Re: FT 232
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 FT
220, which is the current fund, and FT 232, 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 FT
220 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 232 has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Lisle
and State of Illinois on December 4, 1997.
FT 232
(Registrant)
By: NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to the Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
NAME TITLE* DATE
Robert D. Van Kampen Director of
Nike Securities December 4, 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 FT 232 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 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).
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
