The Dow(sm) Target 5 Strategy, January 1999 Series
The Dow(sm) Target 10 Strategy, January 1999 Series
Target 25 Strategy, January 1999 Series
Target Small-Cap Strategy, January 1999 Series
Global Target 15 Strategy, January 1999 Series
(FT 288)
THIS PART I OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY THE PART II OF THE PROSPECTUS DATED JANUARY 4, 1999. BOTH PARTS I
AND II OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
The Trusts. FT 288 consists of the underlying separate unit investment
trusts set forth above. The various trusts are sometimes collectively
referred to herein as the "Trusts" and each as a "Trust." Each Trust
consists of a portfolio containing common stocks issued by companies
which provide income and are considered to have the potential for
capital appreciation (the "Equity Securities"). See "Schedule of
Investments" for each Trust.
The Dow(sm) Target 5 Strategy, January 1999 Series (the "Target 5
Strategy") consists of common stock of the five companies with the lowest
per share stock price of the ten companies in the Dow Jones Industrial
Average (sm) (the "DJIA") that have the highest dividend yield as of the
close of business on the business day prior to the date of this Prospectus
(the "Domestic Stock Selection Date"). The Dow (sm) Target 10 Strategy,
January 1999 Series (the "Target 10 Strategy") consists of common stock
of the ten companies in the DJIA that have the highest dividend yield as
of the Domestic Stock Selection Date.
Target 25 Strategy, January 1999 Series (the "Target 25 Strategy")
consists of common stocks of 25 companies selected from a pre-screened
subset of the stocks listed on the New York Stock Exchange ("NYSE") as
of the close of business two business days prior to the date of this
Prospectus (the "Target 25 Strategy Stock Selection Date").
The Target Small-Cap Strategy, January 1999 Series (the "Target Small-
Cap Strategy") consists of a portfolio of common stocks of small-
capitalization ("small-cap") companies selected from a pre-screened
subset of the common stocks listed on the NYSE, the American Stock
Exchange ("AMEX") or The Nasdaq Stock Market ("Nasdaq") as of two
business days prior to the date of this Prospectus (the "Target Small-
Cap Strategy Stock Selection Date").
The Global Target 15 Strategy, January 1999 Series (the "Global Target
15 Strategy") consists of common stock of the five companies with the
lowest per share stock price of the ten companies in each of the DJIA,
the Financial Times Industrial Ordinary Share Index ("FT Index") and the
Hang Seng Index, respectively, that have the highest dividend yield in
the respective index as of the Domestic Stock Selection Date in the case
of the DJIA stocks and three business days prior to the date of this
Prospectus (the "Foreign Stock Selection Date") in the case of the FT
Index and Hang Seng Index stocks.
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.
First Trust (registered trademark)
1-800-621-9533
The date of this Prospectus is January 4, 1999
Page 1
The objective of each Trust is to provide an above-average total return.
With the exception of the Target Small-Cap Strategy, each Trust seeks to
achieve its stated objective through a combination of capital
appreciation and dividend income. The Target Small-Cap Strategy seeks to
achieve its stated objective through capital appreciation. Units of the
Trusts have not been designed so that their prices will parallel or
correlate with movements in a particular index, indices or combination
of indices against which the Trusts are measured, and it is expected
that their prices will not do so. Each Trust has a mandatory termination
date ("Mandatory Termination Date") of approximately 13 months from the
date of this Prospectus as set forth under "Summary of Essential
Information." Investors in the Global Target 15 Strategy should note
that an investment in a portfolio which contains foreign equity
securities involves risks in addition to those normally associated with
an investment in a portfolio consisting solely of domestic equity
securities. Also, the reversion of Hong Kong to Chinese control on July
1, 1997 may adversely affect the Equity Securities of Hong Kong issuers
contained in the Global Target 15 Strategy. There is, of course, no
guarantee that a Trust's objective will be achieved.
Each Unit of a Trust represents an undivided interest in all Equity
Securities deposited therein. The Sponsor may deposit additional Equity
Securities or cash to create new Units after the Initial Date of Deposit
in the manner described in "What is the FT Series?" in Part II of this
Prospectus.
Unless otherwise indicated, all amounts herein are stated in U.S.
dollars. In the case of the common stocks which are components of the FT
Index or Hang Seng Index (the "Foreign Equity Securities"), amounts are
computed on the basis of the exchange rate for British pounds sterling
or Hong Kong dollars, as applicable, on the business day prior to the
Initial Date of Deposit.
Public Offering Price. The Public Offering Price per Unit of each Trust
is equal to the aggregate underlying U.S. dollar value of the Equity
Securities in such Trust (generally determined by the closing sale
prices of the listed Equity Securities and the ask prices of over-the-
counter traded Equity Securities) plus or minus a pro rata share of
cash, if any, in the Capital and Income Accounts of such Trust, plus an
initial sales charge equal to the difference between the maximum sales
charge for each Trust (2.75% of the Public Offering Price) and the
maximum remaining deferred sales charge (initially $.175 per Unit),
divided by the number of Units of such Trust outstanding. Subsequent to
the Initial Date of Deposit, the amount of the initial sales charge will
vary with changes in the aggregate value of the Equity Securities.
Commencing February 19, 1999, and on the twentieth day of each month
thereafter (or if such day is not a business day, on the preceding
business day) through November 19, 1999, a deferred sales charge of
$.0175 will also be assessed per Unit per month. Units purchased
subsequent to the initial deferred sales charge payment will be subject
to the initial sales charge and the remaining deferred sales charge
payments. The deferred sales charge will be paid from funds in the
Capital Account, if sufficient, or from the periodic sale of Equity
Securities. The total maximum sales charge assessed to Unit holders on a
per Unit basis will be 2.75% of the Public Offering Price (equivalent to
2.778% of the net amount invested, exclusive of the deferred sales
charge). A pro rata share of accumulated dividends, if any, in the
Income Account is included in the Public Offering Price. In addition, a
portion of the Public Offering Price during the initial offering period
also consists of Equity Securities in an amount sufficient to pay for
all or a portion of the costs incurred in establishing a Trust. The
organizational and offering costs will be deducted from the assets of a
Trust as of the close of the initial offering period. The minimum
purchase for each Trust is $1,000 ($500 for Individual Retirement
Accounts or other retirement plans), except for Rollover Unit holders
who are not subject to a minimum purchase amount. The sales charge for
each Trust is reduced on a graduated scale for sales involving at least
$50,000. See "Public Offering-How is the Public Offering Price
Determined?" in Part II of this Prospectus.
Estimated Net Annual Distributions. The estimated net annual dividend
distributions per Unit to Unit holders (based on the most recent
quarterly or semi-annual ordinary dividend declared with respect to the
Equity Securities which trade on the NYSE, AMEX or Nasdaq (the "Domestic
Equity Securities") and the most recent interim and final ordinary
dividend declared with respect to the Foreign Equity Securities and
converted into U.S. dollars, if applicable, at the offer side of the
exchange rate at the Evaluation Time) at the opening of business on the
Initial Date of Deposit was $.2442, $.2611, $.2731 and $.4286 for the
Target 5 Strategy, Target 10 Strategy, Target 25 Strategy and Global
Target 15 Strategy, respectively. This estimate will vary with changes
in a Trust's fees and expenses, in dividends received, in currency
Page 2
exchange rates, foreign withholding, and with the sale of Equity
Securities. There is no assurance that the estimated net annual dividend
distributions will be realized in the future. It should be noted that
dividend yield is not a criterion for selection for the Target Small-Cap
Strategy.
Dividend and Capital Distributions. Cash dividends received by a Trust
will be paid on each December 31 and June 30 to Unit holders of record
on December 15 and June 15, respectively, and again as part of the final
liquidation distribution in the case of "Rollover Unit holders" and
others. Distributions of funds in the Capital Account, if any, will be
made to Rollover Unit holders and others as part of the final
liquidation distribution, and in certain circumstances, earlier. Any
distribution of income and/or capital will be net of expenses of a
Trust. See "What is the Federal Tax Status of Unit Holders?" in Part II
of this Prospectus. Additionally, upon termination of a Trust, the
Trustee will distribute, upon surrender of Units, to each remaining Unit
holder (other than a Rollover Unit holder as defined below) his or her
pro rata share of such Trust's assets, less expenses, in the manner set
forth under "Rights of Unit Holders-How are Income and Capital
Distributed?" in Part II of this Prospectus. For distributions to
Rollover Unit holders, see "Special Redemption, Liquidation and
Investment in a New Trust." Any Unit holder may elect to have each
distribution of income or capital on his Units, other than the final
liquidating distribution, automatically reinvested in additional Units
of such Trust subject only to remaining deferred sales charge payments.
See "Rights of Unit Holders-How are Income and Capital Distributed?" in
Part II of this Prospectus.
Foreign Investors. If you are not a United States citizen or resident,
distributions from a Foreign Equity Security contained in the Global
Target 15 Strategy will generally not be subject to U.S. federal
withholding tax. See "What is the Federal Tax Status of Unit Holders?"
in Part II of this Prospectus. Such investors should consult their tax
advisor regarding the imposition of U.S. withholding on distributions.
Secondary Market for Units. Although not obligated to do so, the Sponsor
may maintain a market for Units and offer to repurchase the Units at
prices based on the aggregate underlying U.S. dollar value of the Equity
Securities, plus or minus cash, if any, in the Capital and Income
Accounts of such Trust. If a secondary market is not maintained, a Unit
holder may still redeem his Units through the Trustee. A Unit holder of
the Target 5 Strategy, Target 10 Strategy, Target 25 Strategy or Target
Small-Cap Strategy tendering 1,000 Units or more may request a
distribution of shares of Equity Securities (reduced by customary
transfer and registration charges) in lieu of payment in cash (an "In-
Kind Distribution"). See "Public Offering-Will There be a Secondary
Market?" and "Rights of Unit Holders-How May Units be Redeemed?" in Part
II of this Prospectus. Any deferred sales charge remaining on Units at
the time of their sale or redemption will be collected at that time.
Special Redemption, Liquidation and Investment in a New Trust. The
Sponsor intends to create a separate series of trusts (the "New Trusts")
in conjunction with the termination of each Trust (approximately 13
months after the Initial Date of Deposit). The portfolio of the New
Trusts will contain equity securities of the companies which satisfy
each New Trust's investment strategy at the time such New Trust is
established. Unit holders may elect to have their proceeds reinvested
into a New Trust by notifying the Trustee of this election by the
Rollover Notification Date. Such a Unit holder's Units will be redeemed
In-Kind, the distributed Equity Securities sold, and the proceeds
reinvested into a New Trust at a reduced sales charge, provided such New
Trust is offered and Units are available. Cash not invested in a New
Trust will be distributed. Such Unit holders are "Rollover Unit
holders." Rollover Unit holders therefore will not receive a final
liquidation distribution, but will receive Units in a New Trust. See
"Summary of Essential Information" for each Trust. This exchange option
may be modified, terminated or suspended. See "Rights of Unit Holders-
Special Redemption, Liquidation and Investment in a New Trust" in Part
II of this Prospectus.
Termination. Commencing no later than the Mandatory Termination Date,
the Equity Securities will begin to be sold as prescribed by the
Sponsor. The Trustee will provide written notice of the termination to
Unit holders which will specify when certificates may be surrendered and
include a form to enable a Unit holder to elect an In-Kind Distribution,
if such Unit holder owns at least 1,000 Units of a Target 5 Strategy,
Target 10 Strategy, Target 25 Strategy or Target Small-Cap Strategy.
Unit holders not electing the "Rollover Option" or those not electing or
eligible for an In-Kind Distribution will receive a cash distribution
within a reasonable time after their respective Trust's termination. See
"Rights of Unit Holders-How are Income and Capital Distributed?" and
"Other Information-How May the Indenture be Amended or Terminated?" in
Part II of this Prospectus.
Page 3
Risk Factors. An investment in a Trust should be made with an
understanding of the risks associated therewith, including, among other
factors, the possible deterioration of either the financial condition of
the issuers or the general condition of the applicable stock market
(which have recently experienced substantial volatility and significant
declines), governmental, political, economic and fiscal policies of the
representative countries (especially Hong Kong following the July 1,
1997 reversion to Chinese control), volatile interest rates, economic
recession, the lack of adequate financial information concerning an
issuer and exchange control restrictions impacting foreign issuers.
An investment in the Global Target 15 Strategy will also be subject to
the risks of currency fluctuations associated with investments in
foreign Equity Securities trading in non-U.S. currencies. Recently, in
an effort to stabilize the prices of Hong Kong common stocks and the
Hong Kong dollar, the Hong Kong Monetary Authority has been actively
purchasing common stocks of Hong Kong companies. To the extent such
intervention by the Hong Kong Monetary Authority is eliminated or
reduced, Hong Kong stocks and the Hong Kong dollar could experience
volatility and be negatively affected.
An investment in the Target 5 Strategy may subject a Unit holder to
additional risk due to the relative lack of diversity in its portfolio
since the portfolio contains only five stocks. Therefore, Units of the
Target 5 Strategy may be subject to greater market risk than other
trusts which contain a more diversified portfolio of securities.
Each Trust is not actively managed and Equity Securities will not be
sold to take advantage of market fluctuations or changes in anticipated
rates of appreciation. Finally, each strategy has underperformed its
respective index or indices in certain years and is contrarian in
nature. The Trusts may not be appropriate investments for those who are
unable or unwilling to assume the risks involved generally with an
equity investment. Because of the contrarian nature of the Trusts and
the attributes of the common stocks which caused inclusion in the
portfolios, the Trusts may not be appropriate for investors seeking
either preservation of capital or high current income. The Trusts are
not designed to be a complete investment program for an investor. See
"What are Some Additional Considerations for Investors?-Risk Factors" in
Part II of this Prospectus.
Page 4
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-December 31, 1998
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
The Dow (sm) The Dow (sm) Target 25
Target 5 Target 10 Strategy
Strategy January Strategy January January
1999 Series 1999 Series 1999 Series
____________ ____________ ___________
<S> <C> <C> <C>
General Information
Initial Number of Units (1) 15,004 14,992 14,991
Fractional Undivided Interest in the Trust per Unit (1) 1/15,004 1/14,992 1/14,991
Public Offering Price:
Aggregate Offering Price Evaluation of Equity
Securities in Portfolio (2) $148,544 $148,423 $148,411
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 9.900 $ 9.900 $ 9.900
Maximum Sales Charge 2.75% of the Public Offering Price
per Unit (2.778% of the net amount invested, exclusive of
the deferred sales charge) (3) $ .275 $ .275 $ .275
Less Deferred Sales Charge per Unit $ (.175) $ (.175) $ (.175)
Public Offering Price per Unit (3) $ 10.000 $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (4) $ 9.725 $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying
value of Equity Securities less the deferred sales charge) (4) $ 9.725 $9.725 $9.725
Cash CUSIP Number 30264S 619 30264S 635 30264S 650
Reinvestment CUSIP Number 30264S 627 30264S 643 30264S 668
Security Code 56313 56315 56317
Trustee's Annual Fee and out-of-pocket expenses per Unit outstanding $ .0074 $ .0074 $ .0082
Evaluator's Annual Fee per Unit outstanding (5) $ .0025 $ .0025 $ .0025
Portfolio Supervisor's Annual Fee per Unit outstanding (6) $ .0025 $ .0025 $ .0025
Estimated Organizational and Offering Costs per Unit (7) $ .0130 $ .0140 $ .0225
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January 6, 1999
Rollover Notification Date January 1, 2000
Special Redemption and Liquidation Period January 15, 2000 to January 31, 2000
Mandatory Termination Date January 31, 2000
Discretionary Liquidation Amount A Trust may be terminated if the value of the Equity Securities is
less than the lower of $2,000,000 or 20% of the total value of Equity
Securities deposited in a Trust during the initial offering period.
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 1999.
Income Distribution Date (8) Last day of June and December, commencing June 30, 1999.
______________
<FN>
(1) As of the close of business on January 4, 1999, the number of Units
of a Trust may be adjusted so that the Public Offering Price per Unit
will equal approximately $10.00. Therefore, to the extent of any such
adjustment, the fractional undivided interest per Unit will increase or
decrease accordingly, from the amounts indicated above.
(2) Each Equity Security listed on a securities exchange is valued at
the last closing sale price on the relevant stock exchange (generally
4:00 p.m. Eastern time on the New York Stock Exchange, 11:30 a.m.
Eastern time on the London Stock Exchange and 3:30 a.m. Eastern time on
the Hong Kong Stock Exchange) on the business day prior to the Initial
Date of Deposit, or if no such price exists at the closing ask price
thereof. The aggregate value of the Foreign Equity Securities in the
Global Target 15 Strategy represents the U.S. dollar value based on the
offering side value of the currency exchange rate for the British pound
sterling or the Hong Kong dollar at the Evaluation Time on the business
day prior to the Initial Date of Deposit.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" contained herein and "Public
Offering" in Part II of this Prospectus for additional information
regarding these charges. On the business day prior to the Initial Date
of Deposit there will be no accumulated dividends in the Income Account.
Anyone ordering Units after such date will pay a pro rata share of any
accumulated dividends in such Income Account. The Public Offering Price
per Unit is based on the aggregate value of the Equity Securities
computed on the basis of the offering side value of the relevant
currency exchange rate (if applicable) expressed in U.S. dollars. The
Public Offering Price as shown reflects the value of the Equity
Securities at the Evaluation Time on the United States business day
prior to the Initial Date of Deposit and establishes the original
proportionate relationship amongst the individual securities. No sales
to investors will be executed at this price. Additional Equity
Securities may be deposited during the day of the Initial Date of
Deposit which will be valued generally as of 4:00 p.m. Eastern time and
sold to investors at a Public Offering Price per Unit based on this
valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and during the initial offering period
include estimated organizational and offering costs per Unit. After the
initial offering period, the Sponsor's Repurchase Price and Redemption
Price per Unit will not include such estimated organizational and
offering costs. See "Rights of Unit Holders-How May Units be Redeemed?"
in Part II of this Prospectus.
(5) 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.
(6) The Portfolio Supervisor's Annual Fee is payable to an affiliate of
the Sponsor. In addition, the Sponsor may be reimbursed by the Trustee
for bookkeeping and other administrative expenses currently at a maximum
annual rate of $.0010 per Unit.
(7) Investors will bear all or a portion of the costs incurred in
organizing their respective Trust (including costs of preparing the
registration statement, the Trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of each Trust portfolio, 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). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and will be deducted from the assets of the Trusts at the
end of the initial offering period (approximately one month). See
"Public Offering" in Part II of this Prospectus and "Statements of Net
Assets."
(8) At the Rollover Notification Date for Rollover Unit holders or upon
termination of a Trust for other Unit holders, amounts in the Income
Account (which consist of dividends on the Equity Securities) will be
included in amounts distributed to or on behalf of Unit holders.
Distributions from the Capital Account will be made monthly payable on
the last day of the month to Unit holders of record on the fifteenth day
of such month if the amount available for distribution equals at least
$1.00 per 100 Units. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made as part of the final liquidation
distribution.
</FN>
</TABLE>
Page 5
Summary of Essential Information
At the Opening of Business on the Initial Date of Deposit
of the Equity Securities-December 31, 1998
Sponsor: Nike Securities L.P.
Trustee: The Chase Manhattan Bank
Evaluator: First Trust Advisors L.P.
<TABLE>
<CAPTION>
Target Small-Cap Global Target 15
Strategy, January Strategy, January
1999 Series 1999 Series
______________ ______________
<S> <C> <C>
General Information
Initial Number of Units (1) 15,002 15,048
Fractional Undivided Interest in the Trust per Unit (1) 1/15,002 1/15,048
Public Offering Price:
Aggregate Offering Price Evaluation of Equity Securities in Portfolio (2) $148,524 $148,973
Aggregate Offering Price Evaluation of Equity Securities per Unit $ 9.900 $ 9.900
Maximum Sales Charge 2.75% of the Public Offering Price per Unit (2.778%
of the net amount invested, exclusive of the deferred sales charge) (3) $ .275 $ .275
Less Deferred Sales Charge per Unit $ (.175) $ (.175)
Public Offering Price per Unit (3) $ 10.000 $ 10.000
Sponsor's Initial Repurchase Price per Unit (4) $ 9.725 $ 9.725
Redemption Price per Unit (based on aggregate underlying
value of Equity Securities less the deferred sales charge) (4) $ 9.725 $ 9.725
Cash CUSIP Number 30264S 676 30264S 692
Reinvestment CUSIP Number 30264S 684 30264S 700
Security Code 56319 56321
Trustee's Annual Fee and out-of-pocket expenses per Unit outstanding $ .0082 $ .0171
Evaluator's Annual Fee per Unit outstanding (5) $ .0025 $ .0025
Portfolio Supervisor's Annual Fee per Unit outstanding (6) $ .0025 $ .0025
Estimated Organizational and Offering Costs per Unit (7) $ .0225 $ .0150
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
First Settlement Date January 6, 1999
Rollover Notification Date January 1, 2000
Special Redemption and Liquidation Period January 15, 2000 to January 31, 2000
Mandatory Termination Date January 31, 2000
Discretionary Liquidation Amount The Trust may be terminated if the value of the Equity Securities is
less than the lower of $2,000,000 or 20% of the total value of Equity
Securities deposited in the Trust during the initial offering period.
Income Distribution Record Date Fifteenth day of June and December, commencing June 15, 1999.
Income Distribution Date (8) Last day of June and December, commencing June 30, 1999.
______________
<FN>
(1) As of the close of business on January 4, 1999, the number of Units
of the Trust may be adjusted so that the Public Offering Price per Unit
will equal approximately $10.00. Therefore, to the extent of any such
adjustment, the fractional undivided interest per Unit will increase or
decrease accordingly, from the amounts indicated above.
(2) Each Equity Security listed on a securities exchange is valued at
the last closing sale price on the relevant stock exchange (generally
4:00 p.m. Eastern time on the New York Stock Exchange, 11:30 a.m.
Eastern time on the London Stock Exchange and 3:30 a.m. Eastern time on
the Hong Kong Stock Exchange) on the business day prior to the Initial
Date of Deposit, or if no such price exists at the closing ask price
thereof. The aggregate value of the Foreign Equity Securities in the
Global Target 15 Trust represents the U.S. dollar value based on the
offering side value of the currency exchange rate for the British pound
sterling or the Hong Kong dollar at the Evaluation Time on the business
day prior to the Initial Date of Deposit.
(3) The maximum sales charge consists of an initial sales charge and a
deferred sales charge. See "Fee Table" contained herein and "Public
Offering" in Part II of this Prospectus for additional information
regarding these charges. On the business day prior to the Initial Date
of Deposit there will be no accumulated dividends in the Income Account.
Anyone ordering Units after such date will pay a pro rata share of any
accumulated dividends in such Income Account. The Public Offering Price
per Unit is based on the aggregate value of the Equity Securities
computed on the basis of the offering side value of the relevant
currency exchange rate (if applicable) expressed in U.S. dollars. The
Public Offering Price as shown reflects the value of the Equity
Securities at the Evaluation Time on the United States business day
prior to the Initial Date of Deposit and establishes the original
proportionate relationship amongst the individual securities. No sales
to investors will be executed at this price. Additional Equity
Securities may be deposited during the day of the Initial Date of
Deposit which will be valued generally as of 4:00 p.m. Eastern time and
sold to investors at a Public Offering Price per Unit based on this
valuation.
(4) The Sponsor's Initial Repurchase Price per Unit and the Redemption
Price per Unit set forth above and during the initial offering period
include estimated organizational and offering costs per Unit. After the
initial offering period, the Sponsor's Repurchase Price and Redemption
Price per Unit will not include such estimated organizational and
offering costs. See "Rights of Unit Holders-How May Units be Redeemed?"
in Part II of this Prospectus.
(5) 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.
(6) The Portfolio Supervisor's Annual Fee is payable to an affiliate of
the Sponsor. In addition, the Sponsor may be reimbursed by the Trustee
for bookkeeping and other administrative expenses currently at a maximum
annual rate of $.0010 per Unit.
(7) Investors will bear all or a portion of the costs incurred in
organizing their respective 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 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). Estimated
organizational and offering costs are included in the Public Offering
Price per Unit and will be deducted from the assets of the Trusts at the
end of the initial offering period (approximately one month). See
"Public Offering" in Part II of this Prospectus and "Statements of Net
Assets."
(8) At the Rollover Notification Date for Rollover Unit holders or upon
termination of the Trust for other Unit holders, amounts in the Income
Account (which consist of dividends on the Equity Securities) will be
included in amounts distributed to or on behalf of Unit holders.
Distributions from the Capital Account will be made monthly payable on
the last day of the month to Unit holders of record on the fifteenth day
of such month if the amount available for distribution equals at least
$1.00 per 100 Units. Notwithstanding, distributions of funds in the
Capital Account, if any, will be made as part of the final liquidation
distribution.
</FN>
</TABLE>
Page 6
FEE TABLES
These Fee Tables are intended to help you to understand the costs and
expenses that you will bear directly or indirectly. See "Public
Offering" and "The FT Series-What are the Expenses and Charges?" in Part
II of this Prospectus. Although the Trusts have a term of approximately
13 months and are unit investment trusts rather than mutual funds, this
information is presented to permit a comparison of fees, assuming, upon
the termination of each Trust, the principal amount and distributions
are rolled over into a New Trust subject only to the deferred sales
charge.
<TABLE>
<CAPTION>
THE DOW (SM) THE DOW (SM) TARGET 25
TARGET 5 STRATEGY TARGET 10 STRATEGY STRATEGY
JANUARY 1999 SERIES JANUARY 1999 SERIES JANUARY 1999 SERIES
___________________ ___________________ ___________________
<S> <C> <C> <C> <C> <C> <C>
UNIT HOLDER TRANSACTION EXPENSES
Initial sales charge imposed on purchase
(as a percentage of public offering price) 1.00%(a) $.100 1.00%(a) $.100 1.00%(a) $.100
Deferred sales charge
(as a percentage of public offering price) 1.75%(b) .175 1.75%(b) .175 1.75%(b) .175
________ ________ ________ _______ _______ ______
2.75% $.275 2.75% $.275 2.75% $.275
======== ======== ======== ======= ======= ======
Maximum Sales Charge imposed on Reinvested Dividends 1.75%(c) $.175 1.75%(c) $.175 1.75%(c) $.175
ORGANIZATIONAL AND OFFERING COSTS
Estimated Organizational and Offering Costs
(as a percentage of public offering price) .130%(d) $.0130 .140%(d) $.0140 .225%(d) $.0225
======== ======== ======== ======= ======= ======
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Trustee's fee, portfolio supervision, bookkeeping, .115% $.0115 .115% $.0115 .115% $.0115
administrative and evaluation fees
Other operating expenses .029% .0029 .029% .0029 .017% .0017
________ ________ ________ ________ ________ _______
Total .144% $.0144 .144% $.0144 .132% $.0132
======== ======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
TARGET SMALL-CAP GLOBAL TARGET
STRATEGY 15 STRATEGY
JANUARY 1999 SERIES JANUARY 1999 SERIES
____________________ ____________________
<S> <C> <C> <C> <C>
UNIT HOLDER TRANSACTION EXPENSES
Initial sales charge imposed on purchase
(as a percentage of public offering price) 1.00%(a) $.100 1.00%(a) $.100
Deferred sales charge
(as a percentage of public offering price) 1.75%(b) .175 1.75%(b) .175
________ _______ ________ ________
2.75% $.275 2.75% $.275
======== ======= ======== ========
Maximum Sales Charge imposed on Reinvested Dividends 1.75%(c) $.175 1.75%(c) $.175
ORGANIZATIONAL AND OFFERING COSTS
Estimated Organizational and Offering Costs
(as a percentage of public offering price) .225%(d) $.0225 .150%(d) $.0150
======== ======= ======== ========
ESTIMATED ANNUAL TRUST OPERATING EXPENSES
(as a percentage of average net assets)
Trustee's fee, portfolio supervision, bookkeeping,
administrative and evaluation fees
.115% $.0115 .116% $.0115
Other operating expenses .017% .0017 .106% .0106
________ _______ ________ ________
Total .132% $.0132 .222% $.0221
======== ======= ======== ========
</TABLE>
Page 7
An investor would pay the following expenses on a $1,000 investment,
assuming the estimated operating expense ratio and a 5% annual return on
the investment throughout the periods.
<TABLE>
<CAPTION>
EXAMPLES
________
The Dow (sm) The Dow (sm)
Target 5 Strategy Target 10 Strategy Target 25 Strategy
January 1999 Series January 1999 Series January 1999 Series
___________________ ___________________ ___________________
<S> <C> <C> <C>
1 Year $ 30 $ 30 $ 31
3 Years $ 72 $ 72 $ 75
5 Years $117 $118 $121
10 Years $240 $241 $248
</TABLE>
<TABLE>
<CAPTION>
Target Small-Cap Global Target
Strategy 15 Strategy
January 1999 Series January 1999 Series
___________________ ___________________
<S> <C> <C>
1 Year $ 31 $ 31
3 Years $ 75 $ 75
5 Years $121 $121
10 Years $248 $250
The above examples assume reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations applicable to mutual
funds. For purposes of the examples, the deferred sales charge imposed
on reinvestment of dividends is not reflected until the year following
payment of the dividend; the cumulative expenses would be higher if
sales charges on reinvested dividends were reflected in the year of
reinvestment. The examples should not be considered a representation of
past or future expenses or annual rate of return; the actual expenses
and annual rate of return may be more or less than those assumed for
purposes of the example.
________________
<FN>
(a) The initial sales charge would exceed 1.00% if the Public Offering
Price exceeds $10.00 per Unit.
(b) The actual fee is $.0175 per month per Unit, irrespective of
purchase or redemption price deducted over a ten-month period for each
Trust. If the Unit price exceeds $10.00 per Unit, the deferred sales
charge will be less than 1.75%. If the Unit price is less than $10.00
per Unit, the deferred sales charge will exceed 1.75%. Units purchased
subsequent to the initial deferred sales charge payment will be subject
to the initial sales charge and to the remaining deferred sales charge
payments.
(c) Reinvested Dividends will be subject only to the deferred sales
charge remaining at the time of reinvestment. See "Rights of Unit
Holders-How are Income and Capital Distributed?" in Part II of this
Prospectus.
(d) Investors will bear all or a portion of the costs incurred in
organizing their respective Trust (including costs of preparing the
registration statement, the trust indenture and other closing documents,
registering Units with the Securities and Exchange Commission and
states, the initial audit of each Trust portfolio, legal fees and the
initial fees and expenses of the Trustee). Estimated organizational and
offering costs are included in the Public Offering Price per Unit and
will be deducted from the assets of the Trust at the end of the initial
offering period.
</FN>
</TABLE>
Page 8
REPORT OF INDEPENDENT AUDITORS
The Sponsor, Nike Securities L.P., and Unit Holders
FT 288
We have audited the accompanying statements of net assets, including the
schedules of investments, of FT 288, comprised of The Dow (sm) Target 5
Strategy, January 1999 Series ; The Dow (sm) Target 10 Strategy, January
1999 Series; Target 25 Strategy, January 1999 Series; Target Small-Cap
Strategy, January 1999 Series and Global Target 15 Strategy, January 1999
Series as of the opening of business on December 31, 1998. These statements
of net assets are the responsibility of the Trusts' Sponsor. Our
responsibility is to express an opinion on these statements of net
assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
statements of net assets. Our procedures included confirmation of the
letter of credit allocated among the Trusts on December 31, 1998. An
audit also includes assessing the accounting principles used and
significant estimates made by the Sponsor, as well as evaluating the
overall presentation of the statements of net assets. We believe that
our audit of the statements of net assets provides a reasonable basis
for our opinion.
In our opinion, the statements of net assets referred to above present
fairly, in all material respects, the financial position of FT 288,
comprised of The Dow (sm) Target 5 Strategy, January 1999 Series; The
Dow (sm) Target 10 Strategy, January 1999 Series; Target 25 Strategy,
January 1999 Series; Target Small-Cap Strategy, January 1999 Series and
Global Target 15 Strategy, January 1999 Series at the opening of business
on December 31, 1998 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 31, 1998
Page 9
Statements of Net Assets
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
The Dow (sm) The Dow (sm) Target 25
Target 5 Strategy Target 10 Strategy Strategy
January January January
1999 Series 1999 Series 1999 Series
_____________ ____________ ___________
<S> <C> <C> <C>
NET ASSETS
Investment in Equity Securities represented
by purchase contracts (1) (2) $148,544 $148,423 $148,411
Less accrued organizational and offering costs (3) (195) (210) (337)
Less liability for deferred sales charge (4) (2,626) (2,624) (2,623)
________ ________ ________
Net assets $145,723 $145,589 $145,451
======== ======== ========
Units outstanding 15,004 14,992 14,991
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,044 $149,922 $149,911
Less sales charge (5) (4,126) (4,123) (4,123)
Less estimated organizational and offering costs (3) (195) (210) (337)
________ ________ ________
Net assets $145,723 $145,589 $145,451
======== ======== ========
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $1,000,000 issued by The
Chase Manhattan Bank, which will be allocated among each of the five
Trusts in FT 288, has been deposited with the Trustee as collateral,
covering the monies necessary for the purchase of the Equity Securities
pursuant to purchase contracts for such Equity Securities.
(3) A portion of the Public Offering Price consists of Equity Securities
in an amount sufficient to pay for all or a portion of the costs
incurred in establishing the Trusts. These costs have been estimated at
$.0130, $.0140 and $.0225 per Unit for the Target 5 Strategy, Target 10
Strategy and Target 25 Strategy, respectively, based upon the expected
number of Units to be created of each respective Trust. A distribution
will be made at the end of the initial offering period to an account
maintained by the Trustee from which the organizational and offering
cost obligation of the investors to the Sponsor will be satisfied. To
the extent the number of Units issued is larger or smaller than the
estimate, the actual distribution per Unit at the end of the initial
offering period may differ from that set forth above.
(4) Represents the amount of mandatory distributions from a Trust ($.175
per Unit), payable to the Sponsor in ten equal monthly installments
beginning on February 19, 1999 and on the twentieth day of each month
thereafter (or if such date is not a business day, on the preceding
business day) through November 19, 1999. If Units are redeemed prior to
November 19, 1999 the remaining amount of the deferred sales charge
applicable to such Units will be payable at the time of redemption.
(5) The aggregate cost to investors in a Trust includes a maximum total
sales charge computed at the rate of 2.75% of the Public Offering Price
(equivalent to 2.778% of the net amount invested, exclusive of the
deferred sales charge), assuming no reduction of sales charge as set
forth under "Public Offering-How is the Public Offering Price
Determined?" in Part II of the Prospectus.
</FN>
</TABLE>
Page 10
Statements of Net Assets
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Target Small-Cap Global Target 15
Strategy, January Strategy, January
1999 Series 1999 Series
_______________ _________________
<S> <C> <C>
NET ASSETS
Investment in Equity Securities represented
by purchase contracts (1) (2) $148,524 $148,973
Less accrued organizational and offering costs (3) (338) (226)
Less liability for deferred sales charge (4) (2,625) (2,633)
________ ________
Net assets $145,561 $146,114
======== ========
Units outstanding 15,002 15,048
ANALYSIS OF NET ASSETS
Cost to investors (5) $150,025 $150,478
Less sales charge (5) (4,126) (4,138)
Less estimated organizational and offering costs (3) (338) (226)
________ ________
Net assets $145,561 $146,114
======== ========
<FN>
NOTES TO STATEMENTS OF NET ASSETS
(1) Aggregate cost of the Equity Securities listed under "Schedule of
Investments" for each Trust is based on their aggregate underlying value.
(2) An irrevocable letter of credit totaling $1,000,000 issued by The
Chase Manhattan Bank, which will be allocated among each of the five
Trusts in FT 288, has been deposited with the Trustee as collateral,
covering the monies necessary for the purchase of the Equity Securities
pursuant to purchase contracts for such Equity Securities.
(3) A portion of the Public Offering Price consists of Equity Securities
in an amount sufficient to pay for all or a portion of the costs
incurred in establishing the Trusts. These costs have been estimated at
$.0225 and $.0150 per Unit based upon the expected number of Units to be
created of the Target Small-Cap Strategy and Global Target 15 Strategy,
respectively. A distribution will be made at the end of the initial
offering period to an account maintained by the Trustee from which the
organizational and offering cost obligation of the investors to the
Sponsor will be satisfied. To the extent the number of Units issued is
larger or smaller than the estimate, the actual distribution per Unit at
the end of the initial offering period may differ from that set forth
above.
(4) Represents the amount of mandatory distributions from a Trust ($.175
per Unit), payable to the Sponsor in ten equal monthly installments
beginning on February 19, 1999 and on the twentieth day of each month
thereafter (or if such date is not a business day, on the preceding
business day) through November 19, 1999. If Units are redeemed prior to
November 19, 1999 the remaining amount of the deferred sales charge
applicable to such Units will be payable at the time of redemption.
(5) The aggregate cost to investors in a Trust includes a maximum total
sales charge computed at the rate of 2.75% of the Public Offering Price
(equivalent to 2.778% of the net amount invested, exclusive of the
deferred sales charge), assuming no reduction of sales charge as set
forth under "Public Offering-How is the Public Offering Price
Determined?" in Part II of the Prospectus.
</FN>
</TABLE>
Page 11
Schedule of Investments
THE DOW (SM) TARGET 5 STRATEGY, JANUARY 1999 SERIES
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Equity Current
of Ticker Symbol and Name of Offering Value per Securities to Dividend
Shares Issuer of Equity Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________ ____________ _________ _____________ _________
<C> <S> <C> <C> <C> <C>
650 CAT Caterpillar Inc. 20% $45.688 $ 29,697 2.63%
536 DD E.I. du Pont de Nemours & Company 20% 55.438 29,715 2.53%
593 GT Goodyear Tire & Rubber Company 20% 50.125 29,724 2.39%
678 IP International Paper Company 20% 43.813 29,705 2.28%
545 MO Philip Morris Companies, Inc. 20% 54.500 29,703 3.23%
_____ _________
Total Investments 100% $148,544
===== =========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on December 31, 1998. The Trust has a mandatory termination date
of January 31, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the Equity
Securities on December 30, 1998, the business day prior to the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The aggregate
underlying value of the Equity Securities on the Initial Date of Deposit
was $148,544. Cost and loss to Sponsor relating to the Equity
Securities sold to the Trust were $151,017 and $2,473, respectively.
(3) Current Dividend Yield for each Equity Security was calculated by
annualizing the last quarterly or semi-annual ordinary dividend declared
on that Equity Security and dividing the result by that Equity
Security's closing sale price on the business day prior to the Initial
Date of Deposit.
</FN>
</TABLE>
Page 12
Schedule of Investments
THE DOW (SM) TARGET 10 STRATEGY, JANUARY 1999 SERIES
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Equity Current
of Ticker Symbol and Name of Offering Value per Securities to Dividend
Shares Issuer of Equity Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________ ____________ _________ ______________ _________
<C> <S> <C> <C> <C> <C>
325 CAT Caterpillar Inc. 10% $ 45.688 $ 14,849 2.63%
176 CHV Chevron Corporation 10% 84.188 14,817 2.90%
268 DD E.I. du Pont de Nemours & Company 10% 55.438 14,857 2.53%
205 EK Eastman Kodak Company 10% 72.438 14,850 2.43%
204 GM General Motors Corporation 10% 72.938 14,879 2.74%
296 GT Goodyear Tire & Rubber Company 10% 50.125 14,837 2.39%
339 IP International Paper Company 10% 43.813 14,853 2.28%
203 MMM Minnesota Mining & Manufacturing
Company 10% 73.188 14,857 3.01%
138 JPM J.P. Morgan & Company, Inc. 10% 107.250 14,800 3.69%
272 MO Philip Morris Companies, Inc. 10% 54.500 14,824 3.23%
______ ________
Total Investments 100% $148,423
====== ========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on December 31, 1998. The Trust has a mandatory termination date
of January 31, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the Equity
Securities on December 30, 1998, the business day prior to the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The aggregate
underlying value of the Equity Securities on the Initial Date of Deposit
was $148,423. Cost and loss to Sponsor relating to the Equity
Securities sold to the Trust were $149,385 and $962, respectively.
(3) Current Dividend Yield for each Equity Security was calculated by
annualizing the last quarterly or semi-annual ordinary dividend declared
on that Equity Security and dividing the result by that Equity
Security's closing sale price on the business day prior to the Initial
Date of Deposit.
</FN>
</TABLE>
Page 13
Schedule of Investments
TARGET 25 STRATEGY, JANUARY 1999 SERIES
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Equity Current
of Ticker Symbol and Offering Value per Securities Dividend
Shares Name and Issuer of Equity Securities (1) Price Share to Trust (2) Yield (3)
______ _______________________________________ ___________ _______ ___________ _________
<C> <S> <C> <C> <C> <C>
669 ABY Abitibi Consolidated, Inc. (4) 4% $ 8.875 $ 5,937 4.51%
339 BHI Baker-Hughes, Inc. 4% 17.500 5,933 2.63%
160 BMS Bemis Company 4% 37.125 5,940 2.37%
125 CBE Cooper Industries, Inc. 4% 47.375 5,922 2.79%
192 DE Deere & Company 4% 30.938 5,940 2.84%
84 ETN Eaton Corporation 4% 70.563 5,927 2.49%
227 FSS Federal Signal Corporation 4% 26.188 5,945 2.71%
193 FO Fortune Brands, Inc. 4% 30.750 5,935 2.86%
242 GY Gencorp, Inc. 4% 24.563 5,944 2.44%
76 GIS General Mills, Inc. 4% 78.063 5,933 2.82%
166 HRS Harris Corporation 4% 35.813 5,945 2.68%
174 K Kellogg Company 4% 34.125 5,938 2.75%
101 PPG PPG Industries, Inc. 4% 58.875 5,946 2.45%
239 PLL Pall Corporation 4% 24.813 5,930 2.50%
132 RYN Rayonier, Inc. 4% 45.000 5,940 2.76%
114 RLM Reynolds Metals Company 4% 51.938 5,921 2.70%
173 SNA Snap-On, Inc. 4% 34.313 5,936 2.56%
219 SON Sonoco Products Company 4% 27.125 5,940 2.65%
166 SUN Sunoco, Inc. 4% 35.688 5,924 2.80%
137 TNB Thomas & Betts Corporation 4% 43.438 5,951 2.58%
201 MRO USX-Marathon Group 4% 29.625 5,955 2.84%
206 UCL Unocal Corporation 4% 28.813 5,936 2.78%
228 WCS Wallace Computer Services, Inc. 4% 26.000 5,928 2.46%
155 WMK Weis Markets, Inc. 4% 38.313 5,939 2.61%
110 WHR Whirlpool Corporation 4% 53.875 5,926 2.52%
______ _________
Total Investments 100% $148,411
====== =========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on December 31, 1998. The Trust has a mandatory termination date
of January 31, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of the Equity
Securities on December 30, 1998, the business day prior to the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The aggregate
underlying value of the Equity Securities on the Initial Date of Deposit
was $148,411. Cost and loss to Sponsor relating to the Equity
Securities sold to the Trust were $149,282 and $871, respectively.
(3) Current Dividend Yield for each Equity Security was calculated by
annualizing the last quarterly or semi-annual ordinary dividend declared
on that Equity Security and dividing the result by that Equity
Security's closing sale price on the business day prior to the Initial
Date of Deposit.
(4) This Equity Security represents the common stock of a foreign
company which trades directly on a United States national securities
exchange.
</FN>
</TABLE>
Page 14
Schedule of Investments
TARGET SMALL-CAP STRATEGY, JANUARY 1999 SERIES
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Number Percentage Market Cost of Equity
of Ticker Symbol and of Aggregate Value per Securities
Shares Name of Issuer of Equity Securities (1) Offering Price Share to Trust (2)
______ _______________________________________ ____________ _______ ____________
<C> <S> <C> <C> <C>
175 AEIS Advanced Energy Industries, Inc. 2.76% $23.438 $ 4,102
55 ADVS Advent Software, Inc. 1.75% 47.125 2,592
102 ALO Alpharma, Inc. (Class A) 2.41% 35.063 3,576
149 BHW Bell & Howell Company 3.76% 37.438 5,578
253 CUBE C-Cube Microsystems, Inc. 4.34% 25.500 6,451
79 CAER Caere Corporation 0.71% 13.438 1,062
134 CPN Calpine Corporation 2.28% 25.313 3,392
85 CPRT Copart, Inc. 1.60% 28.000 2,380
65 DMMC DM Management Company 0.74% 16.813 1,093
196 EDMC Education Management Corporation 2.97% 22.500 4,410
57 FPIC FPIC Insurance Group, Inc. 1.77% 46.250 2,636
144 FOSL Fossil, Inc. 2.68% 27.688 3,987
50 GDX/A Genovese Drug Stores, Inc. (Class A) 0.96% 28.438 1,422
117 HGR Hanger Orthopedic Group, Inc. 1.65% 20.938 2,450
70 ISCA International Speedway Corporation (Class A) 1.92% 40.750 2,852
169 JEC Jacobs Engineering Group, Inc. 4.59% 40.313 6,813
70 KNDL Kendle International, Inc. 1.15% 24.375 1,706
100 LFG LandAmerica Financial Group, Inc. 3.73% 55.375 5,537
68 LSTR Landstar System, Inc. 1.95% 42.500 2,890
140 MMGR Medical Manager Corporation 2.85% 30.250 4,235
126 MTRS Metris Companies, Inc. 4.10% 48.375 6,095
117 MPO MotivePower Industries, Inc. 2.52% 32.000 3,744
116 NCS NCI Building Systems, Inc. 2.22% 28.375 3,292
116 NCOG NCO Group, Inc. 3.36% 43.000 4,988
153 NMGC NeoMagic Corporation 2.34% 22.750 3,481
91 ORBKF Orbotech Ltd. (3) 2.77% 45.250 4,118
142 ORLY O'Reilly Automotive, Inc. 4.45% 46.500 6,603
89 PERI Periphonics Corporation 0.77% 12.938 1,151
402 PYX Playtex Products, Inc. 4.28% 15.813 6,357
166 PMB Premier Bancshares, Inc. 2.85% 25.500 4,233
69 RCMT RCM Technologies, Inc. 1.11% 23.875 1,647
221 RI Ruby Tuesday, Inc. 3.03% 20.375 4,503
143 TSG The SABRE Group Holdings, Inc. (Class A) 4.26% 44.250 6,328
107 STNRF Steiner Leisure Limited (3) 2.19% 30.438 3,257
105 SUT Superior TeleCom, Inc. 3.29% 46.500 4,883
184 WATR Tetra Tech, Inc. 3.38% 27.250 5,014
215 TWMC Trans World Entertainment Corporation 2.75% 19.000 4,085
133 VCAI Veterinary Centers of America, Inc. 1.81% 20.188 2,685
143 ZAP Zapata Corporation 1.14% 11.875 1,698
71 ZRAN Zoran Corporation 0.81% 16.875 1,198
______ ________
Total Investments 100% $148,524
====== ========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on December 31, 1998. The Trust has a mandatory termination date
of January 31, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired (generally determined by the closing sale prices of listed
Equity Securities and the ask prices of over-the-counter traded Equity
Securities on December 30, 1998, the business day preceding the Initial
Date of Deposit). The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. The aggregate
underlying value of the Equity Securities on the Initial Date of Deposit
was $148,524. Cost and loss to Sponsor relating to the Equity Securities
sold to the Trust were $149,860 and $1,336, respectively.
(3) This Equity Security represents the common stock of a foreign
company which trades directly on a United States national securities
exchange.
</FN>
</TABLE>
Page 15
Schedule of Investments
GLOBAL TARGET 15 STRATEGY, JANUARY 1999 SERIES
FT 288
At the Opening of Business on the
Initial Date of Deposit-December 31, 1998
<TABLE>
<CAPTION>
Percentage
Number of Aggregate Market Cost of Equity Current
of Offering Value per Securities to Dividend
Shares Name of Issuer of Equity Securities (1) Price Share the Trust (2) Yield (3)
______ _______________________________________ ___________ ________ _____________ ________
<C> <S> <C> <C> <C> <C>
DJIA COMPANIES:
_______________
217 Caterpillar Inc. 6.65% $45.688 $ 9,914 2.63%
179 E.I. du Pont de Nemours & Company 6.66% 55.438 9,923 2.53%
198 Goodyear Tire & Rubber Company 6.66% 50.125 9,925 2.39%
226 International Paper Company 6.65% 43.813 9,902 2.28%
182 Philip Morris Companies, Inc. 6.66% 54.500 9,919 3.23%
FT INDEX COMPANIES:
___________________
1,832 Blue Circle Industries Plc 6.37% 5.179 9,489 4.74%
1,476 British Airways Plc 6.71% 6.772 9,995 5.07%
1,423 Marks & Spencer Plc 6.55% 6.859 9,760 4.38%
1,176 Royal & Sun Alliance Plc 6.47% 8.200 9,644 4.81%
1,766 Tate & Lyle Plc 6.56% 5.530 9,767 5.53%
HANG SENG INDEX COMPANIES:
_________________________
13,000 Amoy Properties Limited 6.53% 0.749 9,734 8.28%
17,000 Henderson Investment Ltd. 6.81% 0.597 10,150 5.19%
13,500 Hongkong & Shanghai Hotel 6.73% 0.742 10,021 4.87%
7,000 Hysan Development Company Ltd. 7.07% 1.504 10,528 5.45%
7,000 Wharf Holdings Ltd. 6.92% 1.472 10,302 6.84%
______ ________
Total Investments 100% $148,973
====== ========
______________
<FN>
(1) All Equity Securities are represented by regular way contracts to
purchase such Equity Securities for the performance of which an
irrevocable letter of credit has been deposited with the Trustee. The
purchase contracts for the Equity Securities were entered into by the
Sponsor on December 30 and December 31, 1998. The Trust has a mandatory
termination date of January 31, 2000.
(2) The cost of the Equity Securities to the Trust represents the
aggregate underlying value with respect to the Equity Securities
acquired-generally determined by the closing sale prices of the Equity
Securities on the applicable exchange (converted into U.S. dollars at
the offer side of the exchange rate at the Evaluation Time) at the close
of business on December 30, 1998, the business day prior to the Initial
Date of Deposit. The valuation of the Equity Securities has been
determined by the Evaluator, an affiliate of the Sponsor. Such aggregate
underlying value of the Equity Securities on the business day prior to
the Initial Date of Deposit was $148,973. Cost and loss to Sponsor
relating to the Equity Securities sold to the Trust were $151,396
and $2,423, respectively.
(3) Current Dividend Yield for each Equity Security was calculated by
adding together the most recent interim and final ordinary dividends
declared in the case of the FT Index Companies and the Hang Seng Index
Companies, or annualizing the last quarterly or semi-annual ordinary
dividend declared in the case of the DJIA Companies, and dividing the
result by that Equity Security's closing sale price at the close of
business on the business day prior to the Initial Date of Deposit.
Generally, United Kingdom and Hong Kong companies pay one interim and
one final dividend per fiscal year while United States companies usually
pay dividends quarterly or semi-annually.
</FN>
</TABLE>
Page 16
This page is intentionally left blank.
Page 17
This page is intentionally left blank.
Page 18
This page is intentionally left blank.
Page 19
FIRST TRUST (registered trademark)
The Dow (sm) Target 5 Strategy, January 1999 Series
The Dow (sm) Target 10 Strategy, January 1999 Series
Target 25 Strategy, January 1999 Series
Target Small-Cap Strategy, January 1999 Series
Global Target 15 Strategy, January 1999 Series
Prospectus
Part I
Nike Securities L.P.
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
24-Hour Pricing Line:
1-800-446-0132
THIS PART ONE MUST BE
ACCOMPANIED BY PART TWO.
When Units of the Trusts are no longer available, or for investors who
will reinvest into subsequent series of the Trusts, this Prospectus may
be used as a preliminary prospectus for a future series; in which case
investors should note the following:
INFORMATION CONTAINED HEREIN IS SUBJECT TO AMENDMENT. A REGISTRATION
STATEMENT RELATING TO SECURITIES OF A FUTURE SERIES 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.
THE 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
SUCH STATE.
January 4, 1999
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 20
Part II of II
TARGET Strategy SERIES
FT Series
Prospectus Part II
Dated January 4, 1999
THIS PART II OF THE PROSPECTUS MAY NOT BE DISTRIBUTED UNLESS ACCOMPANIED
BY PART I. BOTH PARTS OF THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE
REFERENCE.
FURTHER DETAIL REGARDING CERTAIN OF THE INFORMATION PROVIDED IN THE
PROSPECTUS IN THE FORM OF AN "INFORMATION SUPPLEMENT" MAY BE OBTAINED BY
CALLING THE TRUSTEE AT 1-800-682-7520.
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 consists of the underlying separate unit investment trusts
set forth in Part I of this Prospectus. These underlying trusts are
designated herein as the "Target 5 Strategy," "Target 10 Strategy,"
"Target 25 Strategy," "Target Small-Cap Strategy" and "Global Target 15
Strategy" and may sometimes be referred to individually as a "Trust" and
collectively as the "Trusts." The Target 5 Strategy, Target 10 Strategy,
Target 25 Strategy and Target Small-Cap Strategy may sometimes be
referred to individually as a "Domestic Trust" and collectively as the
"Domestic Trusts" while the Global Target 15 Strategy may sometimes be
referred to as the "International Trust." Each Trust was created under
the laws of the State of New York pursuant to a Trust Agreement (the
"Indenture"), dated the Initial Date of Deposit, with Nike Securities
L.P., as Sponsor, The Chase Manhattan Bank, as Trustee and First Trust
Advisors L.P., as Portfolio Supervisor and Evaluator.
On the Initial Date of Deposit, the Sponsor deposited with the Trustee
confirmations of contracts for the purchase of common stocks issued by
companies which provide income and are considered to have the potential
for capital appreciation (the "Equity Securities"), together with an
irrevocable letter or letters of credit of a financial institution in an
amount at least equal to the purchase price of such Equity Securities.
In exchange for the deposit of securities or contracts to purchase
securities in a Trust, the Trustee delivered to the Sponsor documents
evidencing the entire ownership of such Trust.
With the deposit of the Equity Securities on the Initial Date of
Deposit, the Sponsor established a percentage relationship between the
amounts of Equity Securities in a Trust's portfolio, as set forth in
Part I of this Prospectus under "Schedule of Investments" for each
Trust. Following the Initial Date of Deposit, the Sponsor, pursuant to
the Indenture, may deposit additional Equity Securities in a Trust or
cash (including a letter of credit) with instructions to purchase
additional Equity Securities in a Trust. Units may be continuously
offered for sale to the public by means of this Prospectus, resulting in
a potential increase in the out-
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.
First Trust (registered trademark)
1-800-621-9533
Page 1
standing number of Units of such Trust. Any deposit by the Sponsor of
additional Equity Securities or the purchase of additional Equity
Securities pursuant to a cash deposit will duplicate, as nearly as is
practicable, the original proportionate relationship and not the actual
proportionate relationship on the subsequent Date of Deposit, since the
two may differ due to the sale, redemption or liquidation of any of the
Equity Securities deposited in a Trust on the Initial, or any
subsequent, Date of Deposit. See "Rights of Unit Holders-How May Equity
Securities be Removed from a Trust?" Since the prices of the underlying
Equity Securities will fluctuate daily, the ratio, on a market value
basis, will also change daily. The portion of Equity Securities
represented by each Unit will not change as a result of the deposit of
additional Equity Securities in a Trust. If the Sponsor deposits cash,
however, existing and new investors may experience a dilution of their
investment and a reduction in their anticipated income because of
fluctuations in the prices of the Equity Securities between the time of
the cash deposit and the purchase of the Equity Securities and because
such Trust will pay the associated brokerage fees. To minimize this
effect, the Trusts will try to purchase the Equity Securities as close
to the evaluation time as possible. An affiliate of the Trustee may
receive these brokerage fees or 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 a Trust with respect to acquiring Equity
Securities for a Trust. In acting in such capacity, the Sponsor or its
affiliate will be subject to the restrictions under the Investment
Company Act of 1940, as amended.
To the extent that Units of a Trust are redeemed, the aggregate value of
the Equity Securities in such Trust will be reduced, and the undivided
fractional interest represented by each outstanding Unit of such Trust
will increase. However, if additional Units are issued by a Trust in
connection with the deposit of additional Equity Securities or cash by
the Sponsor, the aggregate value of the Equity Securities in such Trust
will be increased by amounts allocable to additional Units, and the
fractional undivided interest represented by each Unit of such Trust
will be decreased proportionately. See "Rights of Unit Holders-How May
Units be Redeemed?"
What are the Expenses and Charges?
With the exception of brokerage fees discussed above and bookkeeping and
other administrative services provided to the Trusts, for which the
Sponsor may be reimbursed in amounts as set forth under "Summary of
Essential Information" in Part I of this Prospectus, the Sponsor will
not receive any fees in connection with its activities relating to the
Trusts.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee as set forth under "Summary of Essential
Information" in Part I of this Prospectus for providing portfolio
supervisory services for the Trusts. Such fee is based on the number of
Units outstanding in a Trust on January 1 of each year, except for the
year or years in which an initial offering period occurs in which case
the fee for a month is based on the number of Units outstanding at the
end of such month. In providing such supervisory services, the Portfolio
Supervisor may purchase research services from a variety of sources
which may include dealers of the Trusts.
First Trust Advisors L.P., in its capacity as the Evaluator for the
Trusts, will receive an annual evaluation fee as set forth under
"Summary of Essential Information" in Part 1 of this Prospectus for
providing evaluation services for the Trusts. Such fee is based on the
number of Units outstanding in a Trust on January 1 of each year, except
for the year or years in which an initial offering period occurs in
which case the fee for a month is based on the largest number of Units
in a Trust outstanding during the period for which the compensation is
paid.
The Trustee pays certain expenses of a Trust for which it is reimbursed
by such Trust. The Trustee will receive for its ordinary recurring
services to a Trust an annual fee as indicated in the "Summary of
Essential Information" in Part I of this Prospectus. Such fee will be
based upon the largest number of Units of such Trust outstanding during
the calendar year, except during the initial offering period, in which
case the fee is calculated based on the largest number of Units in a
Trust outstanding during the period for which the compensation is paid.
For a discussion of the services performed by the Trustee pursuant to
its obligations under the Indenture, see "Rights of Unit Holders."
The fees described above are payable from the Income Account of a Trust
to the extent funds are available, and then from the Capital Account of
such Trust. Since funds being held in the Capital and Income Accounts
Page 2
are for payment of expenses and redemptions and since such Accounts are
noninterest-bearing to Unit holders, the Trustee benefits thereby. Part
of the Trustee's compensation for its services to a Trust is expected to
result from the use of these funds. Because the above fees are generally
calculated based on the largest aggregate number of Units of the Trusts
outstanding during a calendar year, the per Unit amounts set forth under
"Summary of Essential Information" will be higher during any year in
which redemptions of Units occur.
Each of the above mentioned fees may be increased without approval of
the Unit holders by amounts not exceeding proportionate increases under
the category "All Services Less Rent of Shelter" in the Consumer Price
Index published by the United States Department of Labor. In addition,
with respect to the fees payable to the Sponsor or an affiliate of the
Sponsor for providing bookkeeping and other administrative services,
supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for a Trust, but at
no time will the total amount received for such services rendered to all
unit investment trusts of which Nike Securities L.P. is the Sponsor in
any calendar year exceed the actual cost to the Sponsor or its affiliate
of supplying such services in such year.
The following additional charges are or may be incurred by a Trust: a
quarterly fee payable by the Target 5 Strategy and the Target 10
Strategy for a license from Dow Jones & Company, Inc. for the use by the
Trust of certain trademarks and trade names of Dow Jones & Company,
Inc.; all legal expenses of the Trustee incurred by or in connection
with its responsibilities under the Indenture; the expenses and costs of
any action undertaken by the Trustee to protect a 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 a Trust; any
offering costs incurred after the end of the initial offering period;
indemnification of the Sponsor for any loss, liability or expense
incurred without gross negligence, bad faith or willful misconduct in
acting as Depositor of a Trust; foreign custodial and transaction fees,
if any, in the case of the International Trusts; all taxes and other
government charges imposed upon the Equity Securities or any part of a
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on a Trust. In addition, the Trustee is empowered to sell Equity
Securities in a Trust in order to make funds available to pay all these
amounts if funds are not otherwise available in the Income and Capital
Accounts of a Trust. Since the Equity Securities are all common stocks
and the income stream produced by dividend payments is unpredictable,
the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of a Trust. As described above,
if dividends are insufficient to cover expenses, it is likely that
Equity Securities will have to be sold to meet Trust expenses. These
sales may result in capital gains or losses to Unit holders. See "What
is the Federal Tax Status of Unit Holders?"
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as
"capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). Unit holders should consult their tax advisors in
determining the Federal, state, local and any other tax consequences of
the purchase, ownership and disposition of Units in a Trust. It is
assumed for the discussion and opinions given below, that each Equity
Security is equity for Federal income tax purposes. Trusts which contain
FT Index stocks will report as gross income earned by U.S. Unit holders
their pro rata share of dividends received by such Trust as well as
their pro rata share of the associated Tax Credit Amount (as defined in
"United Kingdom Taxation" below), notwithstanding that it is not certain
that U.S. Unit holders will receive any refund of U.K. taxes.
The Sponsor has been advised by the Trustee that a U.S. Unit holder may
not be able to obtain directly any Treaty Payments (as described in
"United Kingdom Taxation" below) to which he or she is entitled under
the U.S.-U.K. Treaty, but that the U.K. Inland Revenue has approved a
special procedure whereby the trustees of funds such as the Global
Target 15 Strategy may be entitled to claim Treaty Payments on behalf of
U.S. investors. To the extent the Trustee obtains Treaty Payments, U.S.
Unit holders will report as gross income earned their pro rata portion
of dividends received by such Trusts as well as the amount of the
associated tax credit. Because, under the grantor trust rules, an
investor is deemed to have paid directly his or her share of foreign tax
credits that have been paid or accrued, if any, an investor may be
entitled to a foreign tax credit or deduction for United States tax
Page 3
purposes with respect to such taxes. Investors should consult their tax
advisors with respect to foreign withholding taxes and foreign tax
credits. In addition, IRAs and other plans addressed below under "Are
Investments in the Trusts Eligible for Retirement Plans?" should note
that they are not eligible to claim any Treaty Payment (as defined below
under United Kingdom Taxation). For purposes of the following discussion
and opinion, it is assumed that each Equity Security is equity for
federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. Each Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of the assets of a Trust under the Code; and
the income of such Trust will be treated as income of the Unit holders
thereof under the Code. Each Unit holder will be considered to have
received his or her pro rata share of the income derived from each
Equity Security when such income is considered to be received by a Trust.
2. Each Unit holder will be considered to have received all of the
dividends paid on his or her pro rata portion of each Equity Security
when such dividends are considered to be received by a Trust regardless
of whether such dividends are used to pay a portion of the deferred
sales charge. Unit holders will be taxed in this manner regardless of
whether distributions from a Trust are actually received by the Unit
holder or are automatically reinvested. See "How are Income and Capital
Distributed?-Distribution Reinvestment Option."
3. Each Unit holder will have a taxable event when a Trust disposes
of an Equity Security (whether by sale, taxable exchange, liquidation,
redemption, or otherwise) or upon the sale or redemption of Units by
such Unit holder (except to the extent an In-Kind Distribution of stock
is received by such Unit holder as described below). The price a Unit
holder pays for his or her Units, generally including sales charges, is
allocated among his or her pro rata portion of each Equity Security held
by a Trust (in proportion to the fair market values thereof on the
valuation date nearest the date the Unit holder purchases his or her
Units) in order to determine his or her tax basis for his or her pro
rata portion of each Equity Security held by such Trust. Unit holders
should consult their own tax advisors with regard to the calculation of
basis. For Federal income tax purposes, a Unit holder's pro rata portion
of dividends, as defined by Section 316 of the Code, paid by a
corporation with respect to an Equity Security held by a Trust is
taxable as ordinary income to the extent of such corporation's current
and accumulated "earnings and profits." A Unit holder's pro rata portion
of dividends paid on such Equity Security which exceeds such current and
accumulated earnings and profits will first reduce a Unit holder's tax
basis in such Equity Security, and to the extent that such dividends
exceed a Unit holder's tax basis in such Equity Security shall generally
be treated as capital gain. In general, the holding period for such
capital gain will be determined by the period of time a Unit holder has
held his or her Units.
4. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Equity Securities held by a
Trust will generally be considered a capital gain (except in the case of
a dealer or a financial institution). A Unit holder's portion of loss,
if any, upon the sale or redemption of Units or the disposition of
Equity Securities held by a Trust will generally be considered a capital
loss (except in the case of a dealer or a financial institution). Unit
holders should consult their tax advisors regarding the recognition of
gains and losses for Federal income tax purposes. In particular, a
Rollover Unit holder should be aware that a Rollover Unit holder's loss,
if any, incurred in connection with the exchange of Units for Units in
the next new series of a Trust (the "New Trusts"), (the Sponsor intends
to create a separate New Trust in conjunction with the termination of
each of the Trusts) will generally be disallowed with respect to the
disposition of any Equity Securities pursuant to such exchange to the
extent that such Unit holder is considered the owner of substantially
identical securities under the wash sale provisions of the Code taking
into account such Unit holder's deemed ownership of the securities
underlying the Units in a New Trust in the manner described above, if
Page 4
such substantially identical securities are acquired within a period
beginning 30 days before and ending 30 days after such disposition.
However, any gains incurred in connection with such an exchange by a
Rollover Unit holder would be recognized. Unit holders should consult
their tax advisors regarding the recognition of gains and losses for
Federal income tax purposes.
Deferred Sales Charge. Generally, the tax basis of a Unit holder
includes sales charges, and such charges are not deductible. A portion
of the sales charge for each Trust is deferred. It is possible that for
federal income tax purposes, a portion of the deferred sales charge may
be treated as interest which should be deductible by a Unit holder
subject to limitations on the deduction of investment interest. In such
case, the non-interest portion of the deferred sales charge should be
added to the Unit holder's tax basis in his or her Units. The deferred
sales charge could cause the Unit holder's Units to be considered to be
debt-financed under Section 246A of the Code which would result in a
small reduction of the dividends-received deduction. In any case, the
income (or proceeds from redemption) a Unit holder must take into
account for federal income tax purposes is not reduced by amounts
deducted to pay the deferred sales charge. Unit holders should consult
their own tax advisors as to the income tax consequences of the deferred
sales charge.
Dividends Received Deduction. A corporation that owns Units will
generally be entitled to a 70% dividends received deduction with respect
to such Unit holder's pro rata portion of dividends received by a Trust
(to the extent such dividends are taxable as ordinary income, as
discussed above, and are attributable to domestic corporations) in the
same manner as if such corporation directly owned the Equity Securities
paying such dividends (other than corporate Unit holders, such as "S"
corporations, which are not eligible for the deduction because of their
special characteristics and other than for purposes of special taxes
such as the accumulated earnings tax and the personal holding
corporation tax). However, a corporation owning Units should be aware
that Sections 246 and 246A of the Code impose additional limitations on
the eligibility of dividends for the 70% dividends received deduction.
These limitations include a requirement that stock (and therefore Units)
must generally be held at least 46 days (as determined under Section
246(c) of the Code). Final regulations have been issued which address
special rules that must be considered in determining whether the 46-day
holding period requirement is met. Moreover, the allowable percentage of
the deduction will be reduced from 70% if a corporate Unit holder owns
certain stock (or Units) the financing of which is directly attributable
to indebtedness incurred by such corporation.
To the extent dividends received by a Trust are attributable to foreign
corporations, a corporation that owns Units will not be entitled to the
dividends received deduction with respect to its pro rata portion of
such dividends, since the dividends received deduction is generally
available only with respect to dividends paid by domestic corporations.
It should be noted that various legislative proposals that would affect
the dividends received deduction have been introduced. Unit holders
should consult with their tax advisors with respect to the limitations
on and possible modifications to the dividends received deduction.
Limitations on Deductibility of Trust Expenses by Unit Holders. Each
Unit holder's pro rata share of each expense paid by a Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him or her. It should be noted that as a
result of the Tax Reform Act of 1986, certain miscellaneous itemized
deductions, such as investment expenses, tax return preparation fees and
employee business expenses will be deductible by an individual only to
the extent they exceed 2% of such individual's adjusted gross income.
Unit holders may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions subject to this limitation.
Unit holders should consult their tax advisors regarding the limitations
on the deductibility of Trust expenses.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by a
Trust or Disposition of Units. As discussed above, a Unit holder may
recognize taxable gain (or loss) when an Equity Security is disposed of
by a Trust or if the Unit holder disposes of a Unit (although losses
incurred by Rollover Unit holders may be subject to disallowance, as
discussed above). The Internal Revenue Service Restructuring and Reform
Act of 1998 (the "1998 Tax Act") provides that for taxpayers other than
corporations, net capital gain (which is defined as net long-term
capital gain over net short-term capital loss for the taxable year)
realized from property (with certain exclusions) is subject to a maximum
marginal stated tax rate of 20% (10% in the case of certain taxpayers in
the lowest tax bracket). Capital gain or loss is long-term if the
holding period for the asset is more than one year, and is short-term if
the holding period for the asset is one year or less. The date on which
a Unit is acquired (i.e., the "trade date") is excluded for purposes for
determining the holding period of the Unit. Capital gains realized from
Page 5
assets held for one year or less are taxed at the same rates as ordinary
income.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered
into after April 30, 1993. Unit holders and prospective investors should
consult with their tax advisors regarding the potential effect of this
provision on their investment in Units.
If the Unit holder disposes of a Unit, he or she is deemed thereby to
have disposed of his or her entire pro rata interest in all assets of
the Trust involved, including his or her pro rata portion of all the
Equity Securities represented by the Unit.
The Taxpayer Relief Act of 1997 (the "1997 Act") includes provisions
that treat certain transactions designed to reduce or eliminate risk of
loss and opportunities for gain (e.g., short sales, offsetting notional
principal contracts, futures or forward contracts, or similar
transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unit
holders should consult their own tax advisors with regard to any such
constructive sales rules.
Special Tax Consequences of In-Kind Distributions Upon Redemption of
Units, Termination of a Trust and Investment in a New Trust. As
discussed in "Rights of Unit Holders-How are Income and Capital
Distributed?", under certain circumstances a Unit holder who owns at
least 1,000 Units of a Domestic Trust may request an In-Kind
Distribution upon the redemption of Units or the termination of such
Trust. The Unit holder requesting an In-Kind Distribution will be liable
for expenses related thereto (the "Distribution Expenses") and the
amount of such In-Kind Distribution will be reduced by the amount of the
Distribution Expenses. See "Rights of Unit Holders-How are Income and
Capital Distributed?" As previously discussed, prior to the redemption
of Units or the termination of a Trust, a Unit holder is considered as
owning a pro rata portion of each of such Domestic Trust's assets for
Federal income tax purposes. The receipt of an In-Kind Distribution will
result in a Unit holder receiving an undivided interest in whole shares
of stock plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind
Distribution with respect to each Equity Security owned by a Domestic
Trust will depend on whether or not a Unit holder receives cash in
addition to Equity Securities. An "Equity Security" for this purpose is
a particular class of stock issued by a particular corporation. A Unit
holder will not recognize gain or loss if a Unit holder only receives
Equity Securities in exchange for his or her pro rata portion in the
Equity Securities held by a Domestic Trust. However, if a Unit holder
also receives cash in exchange for a fractional share of an Equity
Security held by a Domestic Trust, such Unit holder will generally
recognize gain or loss based upon the difference between the amount of
cash received by the Unit holder and his or her tax basis in such
fractional share of an Equity Security held by such Trust.
Because a Domestic Trust will own many Equity Securities, a Unit holder
who requests an In-Kind Distribution will have to analyze the tax
consequences with respect to each Equity Security owned by such Domestic
Trust. The amount of taxable gain (or loss) recognized upon such
exchange will generally equal the sum of the gain (or loss) recognized
under the rules described above by such Unit holder with respect to each
Equity Security owned by such Trust. Unit holders who request an In-Kind
Distribution are advised to consult their tax advisors in this regard.
As discussed in "Rights of Unit Holders-Special Redemption, Liquidation
and Investment in a New Trust," a Unit holder may elect to become a
Rollover Unit holder. To the extent a Rollover Unit holder exchanges his
or her Units for Units of a New Trust in a taxable transaction, such
Unit holder will recognize gains, if any, but generally will not be
entitled to a deduction for any losses recognized upon the disposition
of any Equity Securities pursuant to such exchange to the extent that
such Unit holder is considered the owner of substantially identical
securities under the wash sale provisions of the Code taking into
account such Unit holder's deemed ownership of the securities underlying
the Units in such New Trust in the manner described above, if such
substantially identical securities were acquired within a period
beginning 30 days before and ending 30 days after such disposition under
the wash sale provisions contained in Section 1091 of the Code. In the
event a loss is disallowed under the wash sale provisions, special rules
contained in Section 1091(d) of the Code apply to determine the Unit
holder's tax basis in the securities acquired. Rollover Unit holders are
advised to consult their tax advisors.
Page 6
Computation of the Unit Holder's Tax Basis. Initially, a Unit holder's
tax basis in his or her Units will generally equal the price paid by
such Unit holder for his or her Units. The cost of the Units is
allocated among the Equity Securities held in a Trust in accordance with
the proportion of the fair market values of such Equity Securities on
the valuation date nearest to the date the Units are purchased in order
to determine such Unit holder's tax basis for his or her pro rata
portion of each Equity Security.
A Unit holder's tax basis in his or her Units and his or her pro rata
portion of an Equity Security held by a Trust will be reduced to the
extent dividends paid with respect to such Equity Security are received
by a Trust which are not taxable as ordinary income as described above.
General. Each Unit holder will be requested to provide the Unit holder's
taxpayer identification number to the Trustee and to certify that the
Unit holder has not been notified that payments to the Unit holder are
subject to back-up withholding. If the proper taxpayer identification
number and appropriate certification are not provided when requested,
distributions by a Trust to such Unit holder (including amounts received
upon the redemption of Units) will be subject to back-up withholding.
Distributions by a Trust (other than those that are not treated as
United States source income, if any) will generally be subject to United
States income taxation and withholding in the case of Units held by non-
resident alien individuals, foreign corporations or other non-United
States persons. Such persons should consult their tax advisors.
In general, income that is not effectively connected to the conduct of a
trade or business within the United States that is earned by non-U.S.
Unit holders and derived from dividends of foreign corporations will not
be subject to U.S. withholding tax provided that less than 25 percent of
the gross income of the foreign corporation for a three-year period
ending with the close of its taxable year preceding payment was not
effectively connected to the conduct of a trade or business within the
United States. In addition, such earnings may be exempt from U.S.
withholding pursuant to a specific treaty between the United States and
a foreign country. Non-U.S. Unit holders should consult their own tax
advisors regarding the imposition of U.S. withholding on distributions
from the Trusts.
It should be noted that payments to the Trusts of dividends on Equity
Securities that are attributable to foreign corporations may be subject
to foreign withholding taxes and Unit holders should consult their tax
advisors regarding the potential tax consequences relating to the
payment of any such withholding taxes by the Trusts. Any dividends
withheld as a result thereof will nevertheless be treated as income to
the Unit holders. Because, under the grantor trust rules, an investor is
deemed to have paid directly his or her 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 income tax purposes with
respect to such taxes. The 1997 Act imposes a required holding period
for such credits. Investors should consult their tax advisors with
respect to foreign withholding taxes and foreign tax credits.
At the termination of the Trust, the Trustee will furnish to each Unit
holder a statement containing information relating to the dividends
received by the Trust on the Equity Securities, the gross proceeds
received by the Trust from the disposition of any Equity Security
(resulting from redemption or the sale of any Equity Security) and the
fees and expenses paid by the Trust. The Trustee will also furnish
annual information returns to Unit holders and to the Internal Revenue
Service.
Unit holders desiring to purchase Units for tax-deferred plans and IRAs
should consult their broker for details on establishing such accounts.
Units may also be purchased by persons who already have self-directed
plans established. See "Are Investments in the Trusts Eligible for
Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trusts for New York tax matters, under the existing income tax laws of
the State of New York, each Trust is not an association taxable as a
corporation and the income of each Trust will be treated as the income
of the Unit holders thereof.
The foregoing discussion relates only to the tax treatment of U.S. Unit
holders ("U.S. Unit holders") with regard to United States federal and
certain aspects of New York State and City income taxes. Unit holders
may be subject to taxation in New York or in other jurisdictions and
should consult their own tax advisors in this regard. As used herein,
the term "U.S. Unit holder" means an owner of a Unit in the Trusts that
(a) is (i) for United States federal income tax purposes a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the
income of which is subject to United States federal income taxation
regardless of its source or (b) does not qualify as a U.S. Unit holder
in paragraph (a) but whose income from a Unit is effectively connected
Page 7
with such Unit holder's conduct of a United States trade or business.
The term also includes certain former citizens of the United States
whose income and gain on the Units will be taxable. Unit holders should
consult their tax advisors regarding potential foreign, state or local
taxation with respect to the Units.
UNITED KINGDOM TAXATION
Tax Consequences of Ownership of Ordinary Shares. In the opinion of
Linklaters & Paines, United Kingdom special counsel to the Sponsor,
based on the terms of the Global Target 15 Strategy as described herein
and on certain representations made by special U.S. counsel to the
Sponsor, the following summary accurately describes the U.K. tax
consequences to certain U.S. Unit holders who beneficially hold Units in
the Global Target 15 Strategy as capital assets. This summary is based
upon current U.S. law, U.K. taxation law and Inland Revenue practice in
the U.K., the U.S./U.K. convention relating to income and capital gains
(the "Treaty") and the U.S./U.K. convention relating to estate and gift
taxes (the "Estate Tax Treaty"). The summary is a general guide only and
is subject to any changes in U.K. or U.S. law or the practice relating
thereto, and in the Treaty or Estate Tax Treaty occurring after the date
of this Prospectus which may affect (including possibly on a retroactive
basis) the tax consequences described herein. Accordingly, Unit holders
should consult their own tax advisors as to the U.K. tax consequences
applicable to their particular circumstances of ownership of the Units
in the Global Target 15 Strategy.
Taxation of Dividends. Where a U.K. resident individual receives a
dividend from a U.K. company (other than a foreign income dividend (see
below)), such individual is generally entitled to a tax credit, which
may be offset against such individual's U.K. taxes or, in certain
circumstances, repaid. Under the Treaty, a U.S. Unit holder who is
resident in the U.S. for the purposes of the Treaty may, in appropriate
circumstances, be entitled to a repayment of that tax credit, but any
such repayment is subject to U.K. withholding tax at the rate of 15% of
the sum of the dividend and the credit.
For dividends paid before April 6, 1999, the tax credit, before such
withholding, is equal to one quarter of the dividend (the "Tax Credit
Amount"). Although such a U.S. Unit holder who held shares directly in a
company resident in the U.K. for the purposes of the Treaty could
generally claim a refund of a portion of the Tax Credit Amount
attributable to the dividend (a "Treaty Payment") pursuant to the terms
of the Treaty, the ability of such a U.S. Unit holder who holds Units in
the Global Target 15 Strategy to claim such a Treaty Payment relating to
the dividends received on the Equity Securities listed in the FT Index
is unclear where dividend payments are made directly to an entity such
as the Global Target 15 Strategy. Any claim for such a Treaty Payment
would have to be supported by evidence of such U.S. Unit holder's
entitlement to the relevant dividend. There is no established procedure
for proving such entitlement where the U.K. company pays the dividend to
an entity such as the Global Target 15 Strategy unless a specific
procedure is negotiated in advance with the U.K. Inland Revenue (see
"What is the Federal Tax Status of Unit Holders?"). In the absence of
agreeing to such a special procedure, U.S. Unit holders should note that
they may not in practice be able to claim a Treaty Payment relating to
the dividends received on the Equity Securities listed in the FT Index
held in the Global Target 15 Strategy from the U.K. Inland Revenue.
For dividends paid on or after April 6, 1999, the tax credit is to be
reduced to one-ninth of the dividend. U.S. Unit holders should note that
it will not therefore be possible to claim a Treaty Payment in respect
of dividends paid on or after April 6, 1999 on the Equity Securities
listed in the FT Index held in the Global Target 15 Strategy.
A U.K. company may elect to pay a dividend as a foreign income dividend
rather than as an ordinary dividend. If a company, the shares of which
are held in the Global Target 15 Strategy, pays a foreign income
dividend, no tax credit will be attributable to such dividend.
Accordingly, a U.S. Unit holder would not be entitled to any repayment
of a tax credit under the Treaty. No election to pay a dividend as a
foreign income dividend may be made in respect of dividends paid by a
U.K. company on or after April 6, 1999.
Taxation of Capital Gains. U.S. Unit holders who are not resident nor
ordinarily resident for tax purposes in the U.K. will not be liable for
U.K. tax on capital gains realized on the disposal of their Units unless
such Units are used, held or acquired for the purposes of a trade,
profession or vocation carried on in the U.K. through a branch or agency
or for use by such branch or agency. An individual Unit holder who has,
on or after March 17, 1998, ceased to be resident or ordinarily resident
in the U.K. for a period of less than five tax years and who disposes of
Units during that period may be liable to U.K. tax on capital gains
(subject to any available exemption or relief).
Page 8
U.K. Inheritance Tax. An individual Unit holder who is domiciled in the
U.S. for the purposes of the Estate Tax Treaty and who is not a national
of the U.K. for the purposes of the Estate Tax Treaty will generally not
be subject to U.K. inheritance tax in respect of Units in the Global
Target 15 Strategy on the individual's death or on a gift or other non-
arm's length transfer of such Units during the individual's lifetime
provided that any applicable U.S. federal gift or estate tax liability
is paid, unless the Units are part of the business property of a
permanent establishment of the individual in the U.K. or pertain to a
fixed base in the U.K. used by the individual for the performance of
independent personal services. Where the Units have been placed in trust
by a settlor, the Units will generally not be subject to U.K.
inheritance tax if the settlor, at the time of settlement, was domiciled
in the U.S. for the purposes of the Estate Tax Treaty and was not a U.K.
national, provided that any applicable U.S. federal gift or estate tax
liability is paid. In the exceptional case where the Units are subject
both to U.K. inheritance tax and to U.S. federal gift or estate tax, the
Estate Tax Treaty generally provides for the tax paid in the U.K. to be
credited against tax paid in the U.S. or for tax paid in the U.S. to be
credited against tax payable in the U.K. based on priority rules set out
in that Treaty.
Stamp Tax. In connection with a transfer of Equity Securities listed in
the FT Index and held in the Global Target 15 Strategy, there is
generally imposed a U.K. stamp duty or stamp duty reserve tax payable
upon transfer, which tax is usually imposed on the purchaser of such
Equity Securities. Upon acquisition of the Equity Securities in the
Global Target 15 Strategy, such Trust paid such tax. It is anticipated
that upon the sale of such Equity Securities such tax will be paid by
the purchaser thereof and not by the Global Target 15 Strategy.
HONG KONG TAXATION
The following summary describes the Hong Kong tax consequences relating
to those Equity Securities held by the Global Target 15 Strategy and
listed on the Hang Seng Index under existing law to U.S. Unit holders of
Units of the Global Target 15 Strategy. This discussion is for general
purposes only and assumes that such Unit holder is not carrying on a
trade, profession or business in Hong Kong and has no profits sourced in
Hong Kong arising from the carrying on of such trade, profession or
business. Unit holders should consult their tax advisors as to the Hong
Kong tax consequences of ownership of Units of the Global Target 15
Strategy applicable to their particular circumstances.
Taxation of Dividends. Amounts in respect of dividends paid to Unit
holders of the Global Target 15 Strategy relating to those Equity
Securities listed on the Hang Seng Index are not taxable and therefore
will not be subject to the deduction of any withholding tax.
Profits Tax. A Unit holder of the Global Target 15 Strategy (other than
a person carrying on a trade, profession or business in Hong Kong) will
not be subject to profits tax imposed by Hong Kong on any gain or
profits made on the realization or other disposal of his or her Units.
Hong Kong Estate Duty. Units of the Global Target 15 Strategy will not
give rise to a liability to Hong Kong estate duty.
Are Investments in the Trusts Eligible for Retirement Plans?
Units of the Trusts are eligible 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 advisors
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.
PORTFOLIO
What are the Equity Securities?
The objective of each of the Trusts is to provide an above-average total
return. With the exception of the Target Small-Cap Strategy, each Trust
seeks to achieve its stated objective through a combination of capital
appreciation and dividend income. The Target Small-Cap Strategy seeks to
Page 9
achieve its stated objective through capital appreciation. While the
objectives of the Trusts are the same, each Trust follows a different
investment strategy (set forth below) in order to achieve its stated
objective.
Domestic Trusts
The Target 5 Strategy consists of the five companies with the lowest per
share stock price of the ten companies in the DJIA that have the highest
dividend yield as of the Domestic Stock Selection Date.
The Target 10 Strategy consists of the ten common stocks in the DJIA
that have the highest dividend yield as of the Domestic Stock Selection
Date.
The Target 25 Strategy consists of a portfolio of 25 common stocks
selected through the following four-step process (the "Target 25
Strategy") from a pre-screened subset of the stocks listed on the NYSE
as of the Target 25 Strategy Stock Selection Date. The first step begins
by selecting all the dividend-paying stocks listed on the New York Stock
Exchange (excluding financial, transportation and utility stocks,
American Depositary Receipts, limited partnerships and any stock
included in the Dow Jones Industrial Average). The second step ranks the
stocks from highest to lowest market capitalization, and the 400 highest
market cap stocks are selected. The third step then ranks the 400 stocks
from highest to lowest dividend yield, and the 75 highest dividend-
yielding stocks are chosen. Step four takes these remaining 75 stocks,
discards the 50 highest dividend-yielding stocks and the remaining 25
stocks are selected for the portfolio. In addition, companies which,
based on publicly available information as of the Target 25 Strategy
Stock Selection Date, are the subject of an announced business
combination which is expected to be concluded within six months of the
Initial Date of Deposit, have been excluded from the Target 25 Strategy.
The Target Small-Cap Strategy consists of a portfolio of 40 common
stocks selected on the Target Small-Cap Strategy Stock Selection Date
through the following six-step process (the "Target Small-Cap
Strategy"). The first step selects all U.S. registered corporations
which trade on the NYSE, AMEX or Nasdaq (excluding limited partnerships,
American Depositary Receipts and mineral and oil royalty trusts). The
second step selects only those companies which, based on 1996 dollars,
have a market capitalization of between $150 million and $1 billion and
whose stock has an average daily dollar trading volume of at least
$500,000. The third step selects those stocks with positive three-year
sales growth. The fourth step selects those stocks whose most recent
annual earnings are positive. The fifth step eliminates any stock whose
price has appreciated by more than 75% in the last 12 months. Finally,
from this list the 40 stocks with the greatest price appreciation in the
last 12 months are purchased on a relative market capitalization basis
(highest to lowest) for the Target Small-Cap Strategy. In each of the
above steps, monthly and rolling quarterly data are used in place of
annual figures where possible. In addition, companies which, based on
publicly available information as of the Target Small-Cap Strategy Stock
Selection Date, are the subject of an announced business combination
which is expected to be concluded within six months of the Initial Date
of Deposit, have been excluded from the Target Small-Cap Strategy.
International Trust
The Portfolio of the Global Target 15 Strategy consists of 15 common
stocks of companies which are components of the DJIA, the FT Index or
the Hang Seng Index, respectively. Specifically, the portfolio of the
Global Target 15 Strategy consists of common stocks of the five
companies with the lowest per share stock price of the ten companies in
each of the DJIA, FT Index and the Hang Seng Index, respectively, that
have the highest dividend yield in the respective index as of the
Domestic Stock Selection Date in the case of the DJIA stocks and the
Foreign Stock Selection Date in the case of the FT Index stocks and Hang
Seng Index stocks.
The yield for each Equity Security contained in a Domestic Trust (with
the exception of the Target Small-Cap Strategy, for which dividend yield
is not a criterion for stock selection) or listed on the DJIA was
calculated by annualizing the last quarterly or semi-annual ordinary
dividend declared and dividing the result by the market value of such
Equity Security as of the close of business on the Domestic Stock
Selection Date (or the Target 25 Strategy Stock Selection Date in the
case of the Target 25 Strategy). The yield for each Equity Security
listed on the FT Index or the Hang Seng Index was calculated by adding
together the most recent interim and final dividend declared and
dividing the result by the market value of such Equity Security as of
the close of business on the Foreign Stock Selection Date. An investment
in a Trust involves the purchase of a quality portfolio of attractive
equities in one convenient purchase. Investing in stocks with high
dividend yields may be effective in achieving certain of the Trust's
investment objectives, because regular dividends are common for
Page 10
established companies, and dividends have accounted for a substantial
portion of the total return on stocks of each comparative index as a
group. Due to the short duration of the Trusts, there is no guarantee
that either a Trust's objective will be achieved or that a Trust will
provide for capital appreciation in excess of such Trust's expenses.
"Dow Jones Industrial Average (SM)", "DJIA (SM)" and "Dow (SM)" are
service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been
licensed for use for certain purposes by First Trust Advisors L.P., an
affiliate of the Sponsor. None of the Trusts, including, and in
particular, The Dow (SM) 5 Target Strategy and The Dow (SM) 10 Target
Strategy, are endorsed, sold, or promoted by Dow Jones, and Dow Jones
makes no representation regarding the advisability of investing in such
products.
In addition, the publishers of the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), Ibbotson Small-Cap Index, FT Index and
the Hang Seng Index are not affiliated with the Sponsor and have not
participated in the creation of the Trusts or the selection of the
Equity Securities included therein. There is, of course, no guarantee
that the objective of the Trusts will be achieved.
Any changes in the components of any of the respective indices or in the
composition of the stocks listed on the NYSE, AMEX or Nasdaq made after
the respective Stock Selection Date will not cause a change in the
identity of the common stocks included in a Trust, including any
additional Equity Securities deposited thereafter.
Investors should note that the above criteria were applied to the Equity
Securities selected for inclusion in the Trust Portfolios as of the
respective Stock Selection Date. Since the Sponsor may deposit
additional Equity Securities which were originally selected through this
process, the Sponsor may continue to sell Units of the Trusts even
though the yields on these Equity Securities may have changed subsequent
to the Initial Date of Deposit. These Equity Securities may no longer be
included in the respective index or Exchange, or may not currently meet
a Trust's selection criteria, and therefore, such Equity Securities
would no longer be chosen for deposit into the Trusts if the selection
process was to be performed again at a later time.
The Dow Jones Industrial Average (SM)
The DJIA was first published in The Wall Street Journal in 1896.
Initially consisting of just 12 stocks, the DJIA expanded to 20 stocks
in 1916 and to its present size of 30 stocks on October 1, 1928. The
stocks are chosen by the editors of The Wall Street Journal as
representative of the broad market and of American industry. The
companies are major factors in their industries and their stocks are
widely held by individuals and institutional investors. Changes in the
components of the DJIA are made entirely by the editors of The Wall
Street Journal without consultation with the companies, the stock
exchange or any official agency. For the sake of continuity, changes are
made rarely. However, on March 17, 1997 four companies were added to the
DJIA replacing Bethlehem Steel Corporation, Texaco, Inc., Westinghouse
Electric Corporation and Woolworth Corporation. The companies added to
the DJIA were Hewlett-Packard Co., Johnson & Johnson, Travelers Group,
Inc. and Wal-Mart Stores Inc. Pursuant to the October, 1998 merger of
Travelers Group, Inc. and Citicorp, the combined entity changed its name
to Citigroup Inc. and remains a component of the DJIA. Most
substitutions have been the result of mergers, but from time to time,
changes may be made to achieve a better representation. The components
of the DJIA may be changed at any time for any reason. The following is
a list of the companies which currently comprise the DJIA.
AT&T Corporation Goodyear Tire & Rubber Company
Allied Signal Hewlett-Packard Co.
Aluminum Company of AmericaInternational Business
Machines Corporation
American Express Company International Paper Company
Boeing Company Johnson & Johnson
Caterpillar Inc. McDonald's Corporation
Chevron Corporation Merck & Company, Inc.
Citigroup Inc. Minnesota Mining &
Manufacturing Company
Coca-Cola Company J.P. Morgan & Company, Inc.
Walt Disney Company Philip Morris Companies, Inc.
E.I. du Pont de Nemours & Procter & Gamble Company
Company
Eastman Kodak Company Sears, Roebuck & Company
Exxon Corporation Union Carbide Corporation
Page 11
General Electric Company United Technologies Corporation
General Motors Corporation Wal-Mart Stores, Inc.
The Financial Times Industrial Ordinary Share Index
The FT Index began as the Financial News Industrial Ordinary Share Index
in London in 1935 and became the Financial Times Industrial Ordinary
Share Index in 1947. The Financial Times Ordinary Index is calculated by
FTSE International Ltd ("FTSE"). All copyright in the Index Constituent
list vests in FTSE. The FT Index is comprised of 30 common stocks chosen
by the editors of The Financial Times as representative of the British
industry and commerce. This index is an unweighted average of the share
prices of selected companies, which are highly capitalized, major
factors in their industries and their stocks are widely held by
individuals and institutional investors. Changes in the components of
the FT Index are made entirely by the editors of The Financial Times
without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely.
However, on June 8, 1998 Prudential Corporation Plc replaced Courtaulds
Plc. Most substitutions have been the result of mergers or because of
poor share performance, but from time to time, changes may be made to
achieve a better representation. The components of the FT Index may be
changed at any time for any reason. The following stocks are currently
represented in the FT Index:
ASDA Group Granada Group Plc
Allied Domecq Plc Guest Keen & Nettlefolds (GKN) Plc
BG Plc Imperial Chemical Industries Plc
BOC Group Lloyds TSB Group Plc
BP Amoco Plc Lucas Varity Plc
BTR Plc Marks & Spencer Plc
Blue Circle Industries Plc National Westminster Bank
Boots Company Plc Peninsular & Oriental Steam
Navigation Company
British Airways Plc Prudential Corporation Plc
British Telecommunications Reuters Holdings
Plc
Cadbury Schweppes Plc Royal & Sun Alliance Insurance Group
Diageo Plc Scottish Power Plc
EMI Group Plc SmithKline Beecham
General Electric Company Plc Tate & Lyle Plc
Glaxo Wellcome Plc Vodafone Plc
The Hang Seng Index
The Hang Seng Index was first published in 1969 and presently consists
of 33 of the 358 stocks currently listed on the Stock Exchange of Hong
Kong Ltd. (the "Hong Kong Stock Exchange"), and it includes companies
intended to represent four major market sectors: commerce and industry,
finance, properties and utilities. The Hang Seng Index is a recognized
indicator of stock market performance in Hong Kong. It is computed on an
arithmetic basis, weighted by market capitalization, and is therefore
strongly influenced by stocks with large market capitalizations. The
Hang Seng Index represents approximately 70% of the total market
capitalization of the stocks listed on the Hong Kong Stock Exchange. On
January 27, 1998, China Telecom Ltd. and Shanghai Industrial Holdings
Ltd. were added to the Hang Seng Index replacing Shun Tak Holdings Ltd.
and South China Morning Post Holdings Ltd. The Hang Seng Index is
currently comprised of the companies on the following list:
Amoy Properties Ltd. Hong Kong and China Gas
Bank of East Asia Hong Kong Electric Holdings Ltd.
CLP Holdings Ltd. Hong Kong & Shanghai Hotels,
Limited
Cathay Pacific Airways Hong Kong Telecommunications Ltd.
Cheung Kong Hopewell Holdings
Cheung Kong Infrastructure Holdings Hutchison Whampoa
Ltd.
China Resources Enterprise Ltd. Hysan Development Company Ltd.
China Telecom Ltd. New World Development Co. Ltd.
Citic Pacific Shanghai Industrial Holdings Ltd.
First Pacific Company Ltd. Shangri-La Asia Ltd.
Great Eagle Holdings Ltd. Sino Land Co. Ltd.
Guangdong Investment Sun Hung Kai Properties Ltd.
Page 12
HSBC Holdings Plc Swire Pacific (A)
Hang Lung Development Company Television Broadcasts
Hang Seng Bank Wharf Holdings Ltd.
Henderson Investment Ltd. Wheelock & Co.
Henderson Land Development Co. Ltd.
Except as previously described, neither the publishers of the S&P 500
Index, Ibbotson Small-Cap Index, DJIA, FT Index nor the Hang Seng Index
have granted the Trusts or the Sponsor a license to use their respective
Index. Units of the Trusts are not designed so that prices will parallel
or correlate with movements in any particular index or a combination
thereof and it is expected that their prices will not parallel or
correlate with such movements. The publishers of the S&P 500 Index,
Ibbotson Small-Cap Index, DJIA, FT Index and the Hang Seng Index have
not participated in any way in the creation of the Trusts or in the
selection of stocks in the Trusts and have not approved any information
related thereto.
Hypothetical Performance Information
The following tables and charts show hypothetical performance and
information for the strategies employed by each Trust and the actual
performance of the S&P 500 Index, the FT Index, the Hang Seng Index, the
DJIA, the Ibbotson Small-Cap Index and a combination of the FT Index,
Hang Seng Index and the DJIA (the "Cumulative Index Returns"). All of
the figures set forth below have been adjusted to take into account the
effect of currency exchange rate fluctuations of the U.S. dollar, where
applicable (i.e., returns are stated in U.S. dollar terms). The
Cumulative Index Returns are calculated by adding one-third of the total
returns of each of the FT Index, the Hang Seng Index and the DJIA. It
should be noted that in calculating hypothetical performance information
for both the Target 25 Strategy and the Target Small-Cap Strategy,
companies which, based on publicly available information at the time the
respective strategy is applied, were the subject of an announced
business combination expected to have been completed within six months
of the calculation were excluded from the respective Strategy Stocks.
The returns shown in the following tables and graphs are not guarantees
of future performance and should not be used as a predictor of returns
to be expected in connection with a Trust Portfolio. Both stock prices
(which may appreciate or depreciate) and dividends (which may be
increased, reduced or eliminated) will affect the returns. Each strategy
underperformed its respective index in certain years. Accordingly, there
can be no assurance that a Trust's Portfolio will outperform its
respective index (or combination thereof, where applicable) over the
life of a Trust or over consecutive rollover periods, if available.
A holder of Units in a Trust would not necessarily realize as high a
Total Return on an investment in the stocks upon which the hypothetical
returns are based for the following reasons, among others: the Total
Return figures shown do not reflect sales charges, commissions, Trust
expenses or taxes; the Trusts are established at different times of the
year; the Trusts' maturities vary slightly from those presented in
compiling the Total Returns; the Trusts may not be fully invested at all
times or equally weighted in all stocks comprising a strategy; Equity
Securities are often purchased or sold at prices different from the
closing prices used in buying and selling Units; and for Trusts
investing in foreign securities, currency exchange rates will be
different.
Annualized Performance Information
The following table compares the hypothetical performance of the Target
25 Strategy Stocks; the Ten Highest Dividend Yielding Stocks Strategy
for the DJIA; the Five Lowest Priced Stocks of the Ten Highest Dividend
Yielding Stocks Strategies for the DJIA; a combination of the Five
Lowest Priced Stocks of the Ten Highest Dividend Yielding Stocks
Strategies in the FT Index, Hang Seng Index and the DJIA (the "Combined
15 Strategy"); the Target Small-Cap Strategy Stocks; and the performance
of the S&P 500 Index, the FT Index, the Hang Seng Index, the DJIA, the
Ibbotson Small-Cap Index and the Cumulative Index Returns in each of the
20 years listed below, as of December 31 in each of those years.
Page 13
<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN (2)
Hypothetical Strategy Total Returns Index Total Returns
____________________________________ ___________________________________________
10 Highest 5 Lowest Priced
Dividend of the 10 Highest
Yielding Stocks (1) Stocks (1)
___________________ ________________ Target S&P Hang Ibbotson Cumulative
Target 25 Combined Small-Cap 500 FT Seng Small-Cap Index
Year Strategy DJIA DJIA 15 Strategy Strategy Index Index Index DJIA Index Returns (3)
____ ________ ____ _____ ___________ ________ ______ _______ _______ _____ ________ ___________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1979 27.68% 13.01% 9.84% 44.70% 40.78% 18.22% 3.59% 77.99% 10.60% 43.46% 30.73%
1980 26.45% 27.90% 41.69% 52.51% 61.97% 32.11% 31.77% 65.48% 21.90% 38.88% 39.72%
1981 8.52% 7.46% 3.19% 0.03% -9.46% -4.92% -5.30% -12.34% -3.61% 13.88% -7.08%
1982 30.83% 27.12% 43.37% -2.77% 51.26% 21.14% 0.42% -48.01% 26.85% 28.01% -6.91%
1983 32.09% 39.07% 36.38% 15.61% 31.04% 22.28% 21.94% -2.04% 25.82% 39.67% 15.24%
1984 5.55% 6.22% 11.12% 29.88% -1.10% 6.22% 2.15% 42.61% 1.29% -6.67% 15.35%
1985 41.89% 29.54% 38.34% 54.06% 50.81% 31.77% 54.74% 50.95% 33.28% 24.66% 46.32%
1986 25.01% 35.63% 30.89% 38.11% 23.35% 18.31% 24.36% 51.16% 27.00% 6.85% 34.18%
1987 14.41% 5.59% 10.69% 17.52% 14.94% 5.33% 37.13% -6.84% 5.66% -9.30% 11.99%
1988 27.18% 24.57% 21.47% 24.26% 23.19% 16.64% 9.00% 21.04% 16.03% 22.87% 15.36%
1989 22.98% 26.97% 10.55% 15.98% 26.10% 31.35% 20.07% 10.59% 32.09% 10.18% 20.92%
1990 -0.82% -7.82% -15.74% 3.19% 1.08% -3.30% 11.03% 11.71% -0.73% -21.56% 7.34%
1991 37.67% 34.20% 62.03% 40.40% 59.55% 30.40% 8.77% 50.68% 24.19% 44.63% 27.88%
1992 15.14% 7.69% 22.90% 26.64% 27.81% 7.62% -3.13% 34.73% 7.39% 23.35% 12.99%
1993 15.22% 27.08% 34.01% 65.65% 22.47% 9.95% 19.22% 124.95% 16.87% 20.98% 53.68%
1994 9.73% 4.21% 8.27% -7.26% 2.11% 1.34% 1.97% -29.34% 5.03% 3.11% -7.45%
1995 36.69% 36.85% 30.50% 13.45% 41.65% 37.22% 16.21% 27.52% 36.67% 34.66% 26.80%
1996 28.53% 28.35% 26.20% 21.00% 34.96% 22.82% 18.35% 37.86% 28.71% 17.62% 28.31%
1997 30.69% 21.68% 19.97% -6.38% 16.66% 33.21% 14.78% -17.69% 24.82% 22.78% 7.47%
1998 1.83% 10.59% 12.36% 13.50% 1.85% 28.57% 12.32% -2.60% 18.03% -7.38% 9.25%
____________
<FN>
(1) The Target 25 Strategy Stocks and the Target Small-Cap Strategy
Stocks for any given period were selected by applying the respective
Strategy as of the beginning of the period. The Ten Highest Dividend
Yielding Stocks and the Five Lowest Priced Stocks of the Ten Highest
Dividend Yielding Stocks for any given period were selected by ranking
the dividend yields for each of the stocks as of the beginning of the
period and dividing by that stock's market value on the first trading
day on the exchange where that stock principally trades in the given
period. The Combined 15 Strategy merely averages the Total Return of the
stocks which comprise the Five Lowest Priced Stocks of the Ten Highest
Dividend Yielding Stocks in the FT Index, Hang Seng Index and the DJIA,
respectively.
(2) Total Return represents the sum of the percentage change in market
value of each group of stocks between the first and last trading day of
a period and the total dividends paid on each group of stocks during the
period divided by the opening market value of each group of stocks as of
the first trading day of a period. Total Return does not take into
consideration any sales charges, commissions, expenses or taxes. Total
Return assumes that all dividends are reinvested semi-annually (with the
exception of the FT Index and the Hang Seng Index from 12/31/78 through
12/31/86, during which time annual reinvestment was assumed), and all
returns are stated in terms of the United States dollar. Based on the
year-by-year returns contained in the table, over the 20 full years
listed above, the Target 25 Strategy Stocks achieved an average annual
total return of 21.25%, the Target Small-Cap Strategy achieved an
average annual total return of 24.39%, the Ten Highest Dividend Yielding
Stocks in the DJIA achieved an average annual total return of 19.57%,
and the Five Lowest Priced Stocks of the Ten Highest Dividend Yielding
Stocks in the DJIA and Combined 15 Strategy achieved an average annual
total return of 21.70% and 21.32%, respectively. In addition, over this
period, each individual strategy achieved a greater average annual total
return than that of its corresponding index, the S&P 500 Index, Ibbotson
Small-Cap Index, the DJIA or a combination of the FT Index, Hang Seng
Index and DJIA, which were 17.61%, 16.00%, 17.28% and 17.94%,
respectively. For the seven year period between January 1, 1972 and
December 31, 1978, the Ten Highest Dividend Yielding Stocks in the DJIA
achieved an annual total return of 23.76% in 1972, 4.01% in 1973, -1.02%
in 1974, 56.10% in 1975, 35.18% in 1976, -1.95% in 1977 and 0.03% in
1978; the Five Lowest Priced Stocks of the Ten Highest Dividend Yielding
Stocks in the DJIA achieved an annual total return of 22.92% in 1972,
20.01% in 1973, -5.40% in 1974, 64.77% in 1975, 40.96% in 1976, 5.49% in
1977 and 1.23% in 1978; the DJIA achieved an annual total return of
18.38% in 1972, -13.20% in 1973, -23.64% in 1974, 44.46% in 1975, 22.80%
in 1976, -12.91% in 1977 and 2.66% in 1978; the Target 25 Strategy
Stocks achieved an annual total return of 8.04% in 1972, -6.99% in 1973,
- -9.54% in 1974, 76.02% in 1975, 44.31% in 1976, -4.58% in 1977 and 6.49%
in 1978; the S&P 500 Index achieved an annual total return of 18.89% in
1972, -14.57% in 1973, -26.33% in 1974, 36.84% in 1975, 23.64% in 1976, -
7.25% in 1977 and 6.49% in 1978; the Target Small-Cap Strategy Stocks
achieved an annual total return of 12.66% in 1972, -25.02% in 1973, -
34.85% in 1974, 40.13% in 1975, 45.70% in 1976, 16.22% in 1977 and
17.53% in 1978; and the Ibbotson Small-Cap Index achieved an annual
total return of 4.43% in 1972, -30.90% in 1973, -19.95% in 1974, 52.82%
in 1975, 57.38% in 1976, 25.38% in 1977 and 23.46% in 1978. Although
each Trust seeks to achieve a better performance than its respective
index as a whole, there can be no assurance that a Trust will achieve a
better performance over its one-year life or over consecutive rollover
periods, if available.
(3) Cumulative Index Returns represent the average of the annual returns
of the stocks contained in the FT Index, Hang Seng Index and DJIA.
Cumulative Index Returns do not represent an actual index.
</FN>
</TABLE>
Page 14
Please refer to the APPENDIX following the last page of this document
for details on the chart included at this point.
The chart above represents past performance of the hypothetical Target
25 Strategy Stocks (but not the Target 25 Strategy), the DJIA and the
S&P 500 Index from January 1, 1972 through December 31, 1998 and should
not be considered indicative of future results. Further, these results
are hypothetical. The chart assumes that all dividends during a year are
reinvested semi-annually and does not reflect sales charges, commission,
expenses or taxes. There can be no assurance that the Target 25 Strategy
Stocks will outperform the DJIA or the S&P 500 over its 13-month life or
over consecutive rollover periods, if available.
Page 15
Please refer to the APPENDIX following the last page of this document
for details on the chart included at this point.
The chart above represents past performance of the DJIA, the Ten Highest
Dividend Yielding DJIA Stocks and the Five Lowest Priced Stocks of the
Ten Highest Dividend Yielding DJIA Stocks (but not the Target 10
Strategy or the Target 5 Strategy) from January 1, 1972 through December
31, 1998 and should not be considered indicative of future results.
Further, these results are hypothetical. The chart assumes that all
dividends during a year are reinvested semi-annually and does not
reflect sales charges, commissions, expenses or taxes. There can be no
assurance that either the Target 10 Strategy or the Target 5 Strategy
will outperform the DJIA over its 13-month life or over consecutive
rollover periods, if available.
Page 16
Please refer to the APPENDIX following the last page of this document
for details on the chart included at this point.
The chart above represents past performance of the Combined 15 Strategy
and the Cumulative Index Returns from January 1, 1979 through December
31, 1998, and should not be considered indicative of future results.
Further, these results are hypothetical. The chart assumes that all
dividends during a year are reinvested semi-annually beginning January
1, 1987 and annually prior thereto and does not reflect sales charges,
commissions, expenses or taxes. The annual figures in the chart have
been adjusted to take into account the effect of currency exchange rate
fluctuations of the U.S. dollar as described in the footnote below*.
There can be no assurance that the Global Target 15 Strategy will
outperform either the Combined Strategy or the Cumulative Index Returns
over its 13-month life or over consecutive rollover periods, if available.
____________
* The $10,000 initial investment was converted into local currency,
where applicable, using the opening exchange rate at the beginning of
each period. The year-end total in either British pounds sterling or
Hong Kong dollars was converted into U.S. dollars using the ending
exchange rate. This amount was then converted back into the appropriate
local currency using the opening exchange rate at the beginning of the
next period.
Page 17
Please refer to the APPENDIX following the last page of this document
for details on the chart included at this point.
The chart above represents past performance of the hypothetical Target
Small-Cap Strategy Stocks (but not the Trust), the Ibbotson Small-Cap
Index and the S&P 500 Index from January 1, 1972 through December 31,
1998 and should not be considered indicative of future results. Further,
these results are hypothetical. The chart assumes that all dividends
during a year are reinvested semi-annually and does not reflect sales
charges, commission, expenses or taxes. There can be no assurance that
the Strategy Stocks will outperform the Ibbotson Small-Cap Index or the
S&P 500 Index over its 13-month life or over consecutive rollover
periods, if available.
What are Some Additional Considerations for Investors?
The Trusts consist of different issues of Equity Securities, all of
which are listed on a securities exchange. In addition, each of the
companies whose Equity Securities are included in a portfolio are
actively-traded, well-established corporations.
A Trust consists of such of the Equity Securities listed under "Schedule
of Investments" appearing in Part I of this Prospectus as may continue
to be held from time to time in such Trust and any additional Equity
Securities acquired and held by such Trust pursuant to the provisions of
the Indenture, together with cash held in the Income and Capital
Accounts. Neither the Sponsor nor the Trustee shall be liable in any way
for any failure in any of the Equity Securities. However, should any
contract for the purchase of any of the Equity Securities initially
deposited hereunder fail, the Sponsor will, unless substantially all of
the moneys held in a Trust to cover such purchase are reinvested in
substitute Equity Securities in accordance with the Indenture, refund
the cash and sales charge attributable to such failed contract to all
Unit holders on the next distribution date.
Risk Factors. The Equity Securities selected for certain Trusts (with
Page 18
the exception of the Target Small-Cap Strategy) generally share
attributes that have caused them to have lower prices or higher yields
relative to other stocks in their respective index or Exchange. The
Equity Securities may, for example, be experiencing financial
difficulty, or be out of favor in the market because of weak
performance, poor earnings forecasts or negative publicity; or they may
be reacting to general market cycles. There can be no assurance that the
market factors that caused the relatively low prices and high dividend
yields of the Equity Securities will change, that any negative
conditions adversely affecting the stock prices will not deteriorate,
that the dividend rates on the Equity Securities will be maintained or
that share prices will not decline further during the life of the
Trusts, or that the Equity Securities will continue to be included in
the respective indices or Exchanges.
Certain or all of the Equity Securities in the Target Small-Cap Strategy
and the Target 25 Strategy may be small-cap company stocks. While
historically small-cap company stocks have outperformed the stocks of
large companies, the former have customarily involved more investment
risk as well. Small-cap companies may have limited product lines,
markets or financial resources; may lack management depth or experience;
and may be more vulnerable to adverse general market or economic
developments than large companies. Some of these companies may
distribute, sell or produce products which have recently been brought to
market and may be dependent on key personnel.
The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less
publicly available information. Also, because small-cap companies
normally have fewer shares outstanding and these shares trade less
frequently than large companies, it may be more difficult for the Trusts
which contain these Equity Securities to buy and sell significant
amounts of such shares without an unfavorable impact on prevailing
market prices.
Certain of the issuers of Equity Securities in certain Trusts may be
involved in the manufacture, distribution and sale of tobacco products.
Pending litigation proceedings against such issuers in the United States
and abroad cover a wide range of matters including product liability and
consumer protection. Damages claimed in such litigation alleging
personal injury (both individual and class actions), and in health cost
recovery cases brought by governments, labor unions and similar entities
seeking reimbursement for health care expenditures, aggregate many
billions of dollars.
In November 1998, certain companies in the U.S. tobacco industry entered
into a negotiated settlement with several states which would result in
the resolution of significant litigation and regulatory issues affecting
the tobacco industry generally. The proposed settlement, while extremely
costly to the tobacco industry, would significantly reduce uncertainties
facing the industry and increase stability in business and capital
markets. Future litigation and/or legislation could adversely affect the
value, operating revenues and financial position of tobacco companies.
The Sponsor is unable to predict the outcome of litigation pending
against tobacco companies or how the current uncertainty concerning
regulatory and legislative measures will ultimately be resolved. These
and other possible developments may have a significant impact upon both
the price of such Equity Securities and the value of Units of Trusts
containing such Equity Securities.
Because certain of the Equity Securities from time to time may be sold
under certain circumstances described herein, and because the proceeds
from such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that a Trust will retain for any
length of time its present size and composition. Although the Portfolios
are not managed, the Sponsor may instruct the Trustee to sell Equity
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may elect to keep or
sell any securities or other property acquired in exchange for Equity
Securities, such as those acquired in connection with a merger or other
transaction. See "Rights of Unit Holders-How May Equity Securities be
Removed from a Trust?" Equity Securities, however, will not be sold by a
Trust to take advantage of market fluctuations or changes in anticipated
rates of appreciation or depreciation or if the Equity Securities no
longer meet the criteria by which they were selected for a Trust.
Whether or not the Equity Securities are listed on a securities
exchange, the principal trading market for the Equity Securities may be
in the over-the-counter market. As a result, the existence of a liquid
trading market for the Equity Securities may depend on whether dealers
will make a market in the Equity Securities. There can be no assurance
that a market will be made for any of the Equity Securities, that any
market for the Equity Securities will be maintained or of the liquidity
of the Equity Securities in any markets made. In addition, a Trust may
Page 19
be restricted under the Investment Company Act of 1940 from selling
Equity Securities to the Sponsor. The price at which the Equity
Securities may be sold to meet redemptions and the value of a Trust will
be adversely affected if trading markets for the Equity Securities are
limited or absent.
An investment in Units in a Trust should be made with an understanding
of the risks which an investment in common stocks entails. In general,
the value of your investment will decline if the financial condition of
the issuers of the common stocks becomes impaired or if the general
condition of the relevant stock market worsens. Common stocks are
especially susceptible to general stock market movements and to volatile
increases and decreases of value, as market confidence in and
perceptions of the issuers change. These perceptions are based on
unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, and global or regional political,
economic or banking crises. Both U.S. and foreign markets have
experienced substantial volatility and significant declines recently as
a result of certain or all of these factors. From September 30, 1997
through October 30, 1997, amid record trading volume, the S&P 500 Index,
DJIA, FT Index and Hang Seng Index declined 4.60%, 7.09%, 6.19% and
31.14%, respectively. In addition, against a backdrop of continued
uncertainty regarding the current global currency crisis and falling
commodity prices, during the period between July 31, 1998 and September
30, 1998, the S&P 500, DJIA and FT Index declined by 8.97%, 11.32% and
17.80%, respectively, while the Hang Seng Index increased .20%. The
Sponsor cannot predict the direction or scope of any of these factors.
Common stocks have generally inferior rights to receive payments from
the issuer in comparison with the rights of creditors of, or holders of
debt obligations or preferred stocks issued by, the issuer. Moreover,
common stocks do not represent an obligation of the issuer and therefore
do not offer any assurance of income or provide the degree of protection
of capital provided by debt securities.
Unit holders will be unable to dispose of any of the Equity Securities
in a Portfolio, as such, and will not be able to vote the Equity
Securities. As the holder of the Equity Securities, the Trustee will
have the right to vote all of the voting stocks in a Trust and will vote
such stocks in accordance with the instructions of the Sponsor.
Investors should be aware of certain other considerations before making
a decision to invest in a Trust. The value of common stocks is subject
to market fluctuations for as long as the common stocks remain
outstanding, and thus, the value of the Equity Securities will fluctuate
over the life of a Trust and may be more or less than the price at which
they were deposited in such Trust. The Equity Securities may appreciate
or depreciate in value (or pay dividends) depending on the full range of
economic and market influences affecting these securities, including the
impact of the Sponsor's purchase and sale of the Equity Securities
(especially during the initial offering period of Units of a Trust and
during the Special Redemption and Liquidation Period) and other factors.
The Sponsor and the Trustee shall not be liable in any way for any
default, failure or defect in any Equity Security. In the event of a
notice that any Equity Security will not be delivered ("Failed Contract
Obligations") to a Trust, the Sponsor is authorized under the Indenture
to direct the Trustee to acquire other Equity Securities ("Replacement
Securities"). Any Replacement Security will be identical to those which
were the subject of the failed contract. The Replacement Securities must
be purchased within 20 days after delivery of the notice of a failed
contract, and the purchase price may not exceed the amount of funds
reserved for the purchase of the Failed Contract Obligations.
If the right of limited substitution described in the preceding
paragraph is not utilized to acquire Replacement Securities in the event
of a failed contract, the Sponsor will refund the sales charge
attributable to such Failed Contract Obligations to all Unit holders of
a Trust, and the Trustee will distribute the principal attributable to
such Failed Contract Obligations not more than 120 days after the date
on which the Trustee received a notice from the Sponsor that a
Replacement Security would not be deposited in such Trust. In addition,
Unit holders should be aware that, at the time of receipt of such
principal, they may not be able to reinvest such proceeds in other
securities at a yield equal to or in excess of the yield which such
proceeds would have earned for Unit holders of a Trust.
The Indenture also authorizes the Sponsor to increase the size of a
Trust and the number of Units thereof by the deposit of additional
Equity Securities, or cash (including a letter of credit) with
instructions to purchase additional Equity Securities, in such Trust and
the issuance of a corresponding number of additional Units. If the
Sponsor deposits cash, existing and new investors could experience a
dilution of their investments and a reduction in anticipated income
because of fluctuations in the prices of the Equity Securities between
the time of the cash deposit and the actual purchase of the Equity
Page 20
Securities and because the Trust will pay the brokerage fees associated
therewith.
Once all of the Equity Securities in a Trust are acquired, the Trustee
will have no power to vary the investments of such Trust, i.e., the
Trustee will have no managerial power to take advantage of market
variations to improve a Unit holder's investment, but may dispose of
Equity Securities only under limited circumstances. See "Rights of Unit
Holders-How May Equity Securities be Removed from a Trust?"
Like other investment companies, financial and business organizations
and individuals around the world, the Trust could be adversely affected
if the computer systems used by the Sponsor, Evaluator, Portfolio
Supervisor or Trustee or other service providers to the Trust do not
properly process and calculate date-related information and data
involving dates of January 1, 2000 and thereafter. This is commonly
known as the "Year 2000 Problem." The Sponsor, Evaluator, Portfolio
Supervisor and Trustee are taking steps that they believe are reasonably
designed to address the Year 2000 Problem with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trust's other service providers.
At this time, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Trust.
The Year 2000 Problem is expected to impact corporations, which may
include issuers of the Equity Securities contained in the Trust, to
varying degrees based upon various factors, including, but not limited
to, their industry sector and degree of technological sophistication.
The Sponsor is unable to predict what impact, if any, the Year 2000
Problem will have on issuers of the Equity Securities contained in the
Trust.
To the best of the Sponsor's knowledge, other than tobacco litigation
discussed under "What are Some Additional Considerations for Investors?-
Risk Factors," there is no litigation pending as of the Initial Date of
Deposit with respect to any Equity Security which might reasonably be
expected to have a material adverse effect on the Trusts. At any time
after the Initial Date of Deposit, litigation may be instituted on a
variety of grounds with respect to the Equity Securities. The Sponsor is
unable to predict whether any such litigation will be instituted, or if
instituted, whether such litigation might have a material adverse effect
on the Trusts.
Legislation. From time to time Congress considers proposals to reduce
the rate of the dividends-received deductions. Enactment into law of a
proposal to reduce the rate would adversely affect the after-tax return
to investors who can take advantage of the deduction. Unit holders are
urged to consult their own tax advisors. Further, at any time after the
Initial Date of Deposit, legislation may be enacted that could
negatively affect the Equity Securities in the Trusts or the issuers of
the Equity Securities. Changing approaches to regulation, particularly
with respect to the tobacco industry, the environment or the petroleum
industry, may have a negative impact on certain companies represented in
the Trusts. There can be no assurance that future legislation,
regulation or deregulation will not have a material adverse effect on
the Trusts or will not impair the ability of the issuers of the Equity
Securities to achieve their business goals.
Foreign Issuers. Since certain of the Equity Securities included in the
International Trust consist of common stocks of foreign issuers, an
investment in such Trust involves certain investment risks that are
different in some respects from an investment in a trust which invests
entirely in common stocks of domestic issuers. These investment risks
include the possible imposition of future political or governmental
restrictions which might adversely affect the payment or receipt of
dividends on the relevant Equity Securities, the possibility that the
financial condition of the issuers of the Equity Securities may become
impaired or that the general condition of the relevant stock market may
deteriorate, the limited liquidity and relatively small market
capitalization of the relevant securities market, the imposition of
expropriation or confiscatory taxation, economic uncertainties, the lack
of the quantity and quality of publicly available information concerning
the foreign issuers as such issuers are generally not subject to the
same reporting and accounting requirements as domestic issuers, and the
effect of foreign currency devaluations, such as the current global
currency crisis, and fluctuations on the value of the common stocks and
dividends of foreign issuers in terms of U.S. dollars. In addition,
fixed brokerage commissions and other transaction costs on foreign
securities exchanges are generally higher than in the United States and
there is generally less government supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the
United States.
On the basis of the best information available to the Sponsor at the
present time, none of the Equity Securities in the International Trust
are subject to exchange control restrictions under existing law which
Page 21
would materially interfere with payment to such Trust of dividends due
on, or proceeds from the sale of, the Foreign Equity Securities. The
adoption of such restrictions or other legal restrictions could
adversely impact the marketability of the Foreign Equity Securities and
may impair the ability of such Trust to satisfy its obligation to redeem
Units or could cause delays or increase the costs associated with the
purchase and sale of the Foreign Equity Securities and correspondingly
affect the price of the Units.
The purchase and sale of the Foreign Equity Securities will generally be
effected only in foreign securities markets. Although the Sponsor does
not believe that the International Trust will encounter obstacles in
acquiring or disposing of the Foreign Equity Securities, investors
should be aware that in certain situations it may not be possible to
purchase or sell a Foreign Equity Security in a timely manner for any
number of reasons, including lack of liquidity in the relevant market,
the unavailability of a seller or purchaser of the Foreign Equity
Securities, and restrictions on such purchases or sales by reason of
federal securities laws or otherwise.
The information provided below details certain important factors which
impact the economies of both the United Kingdom and Hong Kong. This
information has been extracted from various governmental and private
publications, but no representation can be made as to its accuracy;
furthermore, no representation is made that any correlation exists
between the economies of the United Kingdom and Hong Kong and the value
of the Equity Securities held by the International Trust.
United Kingdom. The emphasis of the United Kingdom's economy is in the
private services sector, which includes the wholesale and retail sector,
banking, finance, insurance and tourism. Services as a whole account for
a majority of the United Kingdom's gross national product and makes a
significant contribution to the country's balance of payments. The
portfolio of the International Trust may contain common stocks of
British companies engaged in such industries as banking, chemicals,
building and construction, transportation, telecommunications and
insurance. Many of these industries may be subject to government
regulation, which may have a materially adverse effect on the
performance of their stock. In the first quarter of 1998, gross domestic
product (GDP) of the United Kingdom grew to a level 3.0% higher than in
the first quarter of 1997, however the overall rate of GDP growth has
slowed since the third quarter of 1997. The slow down largely reflects a
deteriorating trade position and higher indirect taxes. The average
quarterly rate of GDP growth in the United Kingdom (as well as in Europe
generally) has been decelerating since 1994. The United Kingdom is a
member of the European Union (the "EU") which was created through the
formation of the Maastricht Treaty on European Union in late 1993. It is
expected that the Treaty will have the effect of eliminating most
remaining trade barriers between the 15 member nations and make Europe
one of the largest common markets in the world. However, the effective
implementation of the Treaty provisions and the rate at which trade
barriers are eliminated is uncertain at this time. Furthermore, the
recent rapid political and social change throughout Europe make the
extent and nature of future economic development in the United Kingdom
and Europe and the impact of such development upon the value of Equity
Securities issued by United Kingdom companies impossible to predict.
A majority of the EU members are scheduled to convert their existing
sovereign currencies to a common currency (the "euro") on January 1,
1999. The United Kingdom will not participate in this conversion on
January 1, 1999 and the Sponsor is unable to predict if or when the
United Kingdom will convert to the euro. Moreover, it is not possible to
accurately predict the effect of the current political and economic
situation upon long-term inflation and balance of trade cycles and how
these changes, as well as the implementation of a common currency
throughout a majority of EU countries, would affect the currency
exchange rate between the U.S. dollar and the British pound sterling. In
addition, United Kingdom companies with significant markets or
operations in other European countries (whether or not such countries
are participating) face strategic challenges as these entities adapt to
a single trans-national currency. The euro conversion may have a
material impact on revenues, expenses or income from operations;
increase competition due to the increased price transparency of EU
markets; affect issuers' currency exchange rate risk and derivatives
exposure; disrupt current contracts; cause issuers to increase spending
on information technology updates required for the conversion; and
result in potential adverse tax consequences. The Sponsor is unable to
predict what impact, if any, the euro conversion will have on any of the
Equity Securities issued by United Kingdom companies in the
International Trust.
Hong Kong. Hong Kong, established as a British colony in the 1840's,
reverted to Chinese sovereignty effective July 1, 1997. On such date,
Hong Kong became a Special Administrative Region ("SAR") of China. Hong
Page 22
Kong's new constitution is the Basic Law (promulgated by China in 1990).
Prior to July 1, 1997, the Hong Kong government followed a laissez-faire
policy toward industry. There were no major import, export or foreign
exchange restrictions. Regulation of business was generally minimal with
certain exceptions, including regulated entry into certain sectors of
the economy and a fixed exchange rate regime by which the Hong Kong
dollar has been pegged to the U.S. dollar. Over the past two decades
through 1996, the gross domestic product (GDP) has tripled in real
terms, equivalent to an average annual growth rate of 6%. However, Hong
Kong's recent economic data has not been encouraging. The full impact of
the Asian financial crisis, as well as current international economic
instability, is likely to continue to have a negative impact on the Hong
Kong economy in the near future.
Although China has committed by treaty to preserve for 50 years the
economic and social freedoms enjoyed in Hong Kong prior to the
reversion, the continuation of the economic system in Hong Kong after
the reversion will be dependent on the Chinese government, and there can
be no assurances that the commitment made by China regarding Hong Kong
will be maintained. Prior to the reversion, legislation was enacted in
Hong Kong designed to extend democratic voting procedures for Hong
Kong's legislature. China has expressed disagreement with this
legislation, which it states is in contravention of the principles
evidenced in the Basic Law of the Hong Kong SAR. The National Peoples'
Congress of China has passed a resolution to the effect that the
Legislative Council and certain other councils and boards of the Hong
Kong Government were to be terminated on June 30, 1997. Such bodies have
subsequently been reconstituted in accordance with China's
interpretation of the Basic Law. Any increase in uncertainty as to the
future economic and political status of Hong Kong could have a
materially adverse effect on the value of the Global Target 15 Strategy.
The Sponsor is unable to predict the level of market liquidity or
volatility which may occur as a result of the reversion to sovereignty,
both of which may negatively impact such Trust and the value of the Units.
China currently enjoys a most favored nation status ("MFN Status") with
the United States. MFN Status is subject to annual review by the
President of the United States and approval by Congress. As a result of
Hong Kong's reversion to Chinese control, U.S. lawmakers have suggested
that they may review China's MFN status on a more frequent basis.
Revocation of the MFN Status would have a severe effect on China's trade
and thus could have a materially adverse effect on the value of the
Global Target 15 Strategy. The performance of certain companies listed
on the Hong Kong Stock Exchange is linked to the economic climate of
China. The renewal of China's MFN Status in May of 1996 has helped to
reduce the uncertainty for Hong Kong in conducting Sino-U.S. trade, and
the signing of the agreement on copyright protection between the U.S.
and Chinese governments in June of 1996 averted a trade war that would
have affected Hong Kong's re-export trade. In 1997, China and the United
States reached a four-year bilateral agreement on textiles, again
avoiding a Sino-U.S. trade war. More recently, the currency crisis which
has affected a majority of Asian markets since mid-1997 has forced Hong
Kong leaders to address whether to devalue the Hong Kong dollar or
maintain its peg to the U.S. dollar. During the volatile markets of
1998, the Hong Kong Monetary Authority (the "HKMA") acquired the common
stock of certain Hong Kong issuers listed on the Hong Kong Stock
Exchange in an effort to stabilize the Hong Kong dollar and thwart
currency speculators. Government intervention may hurt Hong Kong's
reputation as a free market and increases concerns that authorities are
not willing to let Hong Kong's currency system function autonomously.
This may undermine confidence in the Hong Kong dollar's peg to the U.S.
dollar. Any downturn in economic growth or increase in the rate of
inflation in China or Hong Kong could have a materially adverse effect
on the value of the Global Target 15 Strategy.
Securities prices on the Hong Kong Stock Exchange, and specifically the
Hang Seng Index, can be highly volatile and are sensitive to
developments in Hong Kong and China, as well as other world markets. For
example, the Hang Seng Index declined by approximately 31% in October,
1997 as a result of speculation that the Hong Kong dollar would become
the next victim of the Asian currency crisis, and in 1989, the Hang Seng
Index dropped 1,216 points (approximately 58%) in early June following
the events at Tiananmen Square. The Hang Seng Index gradually climbed
subsequent to the events at Tiananmen Square, but fell by 181 points on
October 13, 1989 (approximately 6.5%) following a substantial fall in
the U.S. stock markets. During 1994, the Hang Seng Index lost
approximately 31% of its value. From January through August of 1998,
during a period marked by international economic instability and a
global currency crisis, the Hang Seng Index declined by nearly 27%. The
Hang Seng Index is subject to change and delisting of any issues may
have an adverse impact on the performance of the Global Target 15
Strategy, although delisting would not necessarily result in the
Page 23
disposal of the stock of these companies, nor would it prevent such
Trust from purchasing additional Equity Securities. In recent years, a
number of companies, comprising approximately 10% of the total
capitalization of the Hang Seng Index, have delisted. In addition, as a
result of Hong Kong's reversion to Chinese sovereignty, an increased
number of Chinese companies could become listed on the Hong Kong Stock
Exchange, thereby changing the composition of the stock market and,
potentially, the composition of the Hang Seng Index.
Exchange Rate. The International Trust is comprised substantially of
Equity Securities that are principally traded in foreign currencies and
as such, involve investment risks that are substantially different from
an investment in a fund which invests in securities that are principally
traded in United States dollars. The United States dollar value of the
portfolios (and hence of the Units) and of the distributions from the
portfolios will vary with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies. Most foreign
currencies have fluctuated widely in value against the United States
dollar for many reasons, including supply and demand of the respective
currency, the rate of inflation in the respective economies compared to
the United States, the impact of interest rate differentials between
different currencies on the movement of foreign currency rates, the
balance of imports and exports goods and services, the soundness of the
world economy and the strength of the respective economy as compared to
the economies of the United States and other countries.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of
actual and proposed government policies on the value of currencies,
interest rate differentials between the currencies and the balance of
imports and exports of goods and services and transfers of income and
capital from one country to another. These economic factors are
influenced primarily by a particular country's monetary and fiscal
policies (although the perceived political situation in a particular
country may have an influence as well-particularly with respect to
transfers of capital). Investor psychology may also be an important
determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative
strength or weakness of a particular currency may sometimes exercise
considerable speculative influence on currency exchange rates by
purchasing or selling large amounts of the same currency or currencies.
However, over the long term, the currency of a country with a low rate
of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
The following table sets forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and
end of month equivalent U.S. dollar rates of exchange for the United
Kingdom pound sterling and the Hong Kong dollar:
Foreign Exchange Rates
Range of Fluctuations in Foreign Currencies
United Kingdom
Annual Pound Sterling/ Hong Kong/
Period U.S. Dollar U.S. Dollar
______ _______________ ___________
1983 0.616-0.707 6.480-8.700
1984 0.671-0.864 7.774-8.050
1985 0.672-0.951 7.729-7.990
1986 0.643-0.726 7.768-7.819
1987 0.530-0.680 7.751-7.822
1988 0.525-0.601 7.764-7.912
1989 0.548-0.661 7.775-7.817
1990 0.504-0.627 7.740-7.817
1991 0.499-0.624 7.716-7.803
1992 0.498-0.667 7.697-7.781
1993 0.630-0.705 7.722-7.766
1994 0.610-0.684 7.723-7.750
1995 0.610-0.653 7.726-7.763
1996 0.583-0.670 7.732-7.742
1997 0.584-0.633 7.708-7.751
1998 0.584-0.620 7.735-7.749
Source: Bloomberg L.P.
Page 24
The Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, since these markets are volatile and are constantly changing,
depending on the activity at any particular time of the large
international commercial banks, various central banks, large multi-
national corporations, speculators and other buyers and sellers of
foreign currencies, and since actual foreign currency transactions may
not be instantly reported, the exchange rates estimated by the Evaluator
may not be indicative of the amount in United States dollars the
International Trusts would receive had the Trustee sold any particular
currency in the market. The foreign exchange transactions of the
International Trust will be conducted by the Trustee with foreign
exchange dealers acting as principals on a spot (i.e., cash) buying
basis. Although foreign exchange dealers trade on a net basis, they do
realize a profit based upon the difference between the price at which
they are willing to buy a particular currency (bid price) and the price
at which they are willing to sell the currency (offer price).
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price, which is based on the
aggregate underlying U.S. dollar value of the Equity Securities in a
Trust, plus or minus cash, if any, in the Income and Capital Accounts of
such Trust, plus an initial sales charge with respect to each Trust
equal to the difference between the maximum sales charge for each Trust
(as set forth in Part I of this Prospectus) and the maximum remaining
deferred sales charge (initially $.175 per Unit), divided by the number
of Units of such Trust outstanding. A deferred sales charge of $.0175
will also be assessed per Unit per month on the dates set forth under
"Public Offering Price" in Part I. Units purchased subsequent to the
initial deferred sales charge payment will be subject to the initial
sales charge and the remaining deferred sales charge payments. For each
Trust, the deferred sales charge will be paid from funds in the Capital
Account, if sufficient, or from the periodic sale of Equity Securities.
In addition, a portion of the Public Offering Price during the initial
offering period also consists of Equity Securities in an amount
sufficient to pay for all or a portion of the costs incurred in
establishing a Trust, including costs of preparing the registration
statement, the Trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of each Trust portfolio, legal fees and the initial fees
and expenses of the Trustee. The organizational and offering costs will
be deducted from the assets of a Trust as of the close of the initial
offering period.
During the initial offering period, the Sponsor's Repurchase Price is
based on the aggregate underlying U.S. dollar value of the Equity
Securities in a Trust, plus or minus cash, if any, in the Income and
Capital Accounts of such Trust, plus estimated organizational and
offering costs, divided by the number of Units of such Trust outstanding
and reduced by the deferred sales charge not yet paid.
The minimum purchase of each Trust is $1,000 ($500 for Individual
Retirement Accounts or other retirement plans), except for Rollover Unit
holders who are not subject to a minimum purchase amount. The applicable
sales charge for primary market sales is reduced by a discount as
indicated below for volume purchases as a percentage of the Public
Offering Price (except for sales made pursuant to a "wrap fee account"
or similar arrangements as set forth below):
<TABLE>
<CAPTION>
Maximum
Dollar Amount of Transaction at Sales Net Dealer
Public Offering Price* Discount Charge Concession
_____________________ ________ _______ __________
<S> <C> <C> <C>
$50,000 but less than $100,000 0.25% 2.50% 2.00%
$100,000 but less than $150,000 0.50% 2.25% 1.75%
$150,000 but less than $500,000 0.85% 1.90% 1.40%
$500,000 but less than $1,000,000 1.00% 1.75% 1.25%
$1,000,000 or more 1.75% 1.00% 0.50%
<FN>
* The breakpoint sales charges are also applied on a Unit basis
utilizing a breakpoint equivalent in the above table of $10 per Unit and
will be applied on whichever basis is more favorable to the investor.
The breakpoints will be adjusted to take into consideration purchase
orders stated in dollars which cannot be completely fulfilled due to the
requirement that only whole Units be issued.
</FN>
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
Page 25
dealer. The reduced sales charge structure will apply on all purchases
of Units in a Trust by the same person on any one day from any one
dealer. An investor may aggregate purchases of Units of the Trusts
contained in this Prospectus and units of other unit investment trusts
containing equity securities for which the Sponsor acted as Principal
Underwriter which are currently in the initial offering period for
purposes of qualifying for volume purchase discounts listed above. In
addition, investors who commit to purchase $1,000,000 or more of Units
of the Trusts or subsequent series of the Trusts during the 12-month
period commencing with the date of their first purchase are eligible to
receive the discount set forth above for sales of $1,000,000 or more on
all individual purchases in excess of $83,000. The sales charge
reduction for quantity purchases will not apply to Rollover Unit
holders. Rollover Unit holders of prior series of the Trusts may
purchase Units of the Trusts subject to the maximum deferred sales
charge on such Units (for rollover purchases of $1,000,000 or more, such
charge shall be limited to 1.00%), deferred as set forth above. Units
purchased with rollover proceeds, reinvested dividends, redemption or
termination proceeds from other unit investment trusts or other similar
transactions will not be counted to reach the amount of intended
aggregate purchases. All Units of the Trusts will be subject to the
applicable deferred sales charge per Unit regardless of volume purchase
discounts. Investors who, as a result of volume purchase discounts, are
eligible to purchase Units subject to a Maximum Sales Charge of less
than the applicable maximum deferred sales charge amount will be
credited the difference between this Maximum Sales Charge and the
deferred sales charge at the time of purchase. Additionally, Units
purchased in the name of the spouse of a purchaser or in the name of a
child of such purchaser under 21 years of age will be deemed, for the
purposes of calculating the applicable sales charge, to be additional
purchases by the purchaser. The reduced sales charges will also be
applicable to a trustee or other fiduciary purchasing securities for a
single trust estate or single fiduciary account. The purchaser must
inform the dealer of any such combined purchase prior to the sale in
order to obtain the indicated discount. In addition, unit holders may
utilize their redemption or termination proceeds received from trusts
sponsored by the Sponsor, or their termination proceeds from other unit
investment trusts having a similar strategy as the Trusts, to purchase
Units of the Trusts, subject to a deferred sales charge of $.0175 per
Unit per month to be collected on each of the remaining deferred sales
charge payment dates as provided herein. Unit holders who redeem units
of trusts sponsored by the Sponsor should note that they will be
assessed the amount of any remaining deferred sales charge on such units
at the time of redemption. Except as described below, 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, related companies of the Sponsor, dealers and
their affiliates and vendors providing services to the Sponsor may
purchase Units at the Public Offering Price, less the applicable dealer
concession. The Sponsor and certain dealers may establish a schedule by
which employees, officers and directors of such dealers (as described
above) are able to purchase Units of a Trust at the Public Offering
Price less the established schedule amount, which is designed to
compensate such dealer for activities relating to the sale of such Units
(the "Employee Dealer Concession").
Investors who purchase Units through registered broker/dealers who
charge periodic fees for financial planning, investment advisory or
asset management services or provide such services in connection with
the establishment of an investment account for which a comprehensive
"wrap fee" charge is imposed may purchase Units in the primary or
secondary market at the Public Offering Price, less the concession the
Sponsor typically would allow such broker/dealer. See "Public Offering-
How are Units Distributed?"
Had the Units of the Trusts been available for sale on the business day
prior to the Initial Date of Deposit, the Public Offering Price would
have been as indicated in "Summary of Essential Information" appearing
in Part I of this Prospectus. The Public Offering Price of Units on the
date of the prospectus or during the initial offering period may vary
from the amount stated under "Summary of Essential Information" in
accordance with fluctuations in the local currency prices of the
underlying Equity Securities, changes in relevant currency exchange
rates and changes in applicable commissions, stamp taxes, custodial fees
and other costs associated with foreign trading. During the initial
offering period, the aggregate value of the Units of a Trust shall be
determined on the basis of the aggregate underlying U.S. dollar value of
the Equity Securities therein plus or minus cash, if any, in the Income
and Capital Accounts of such Trust. The aggregate underlying value of
the Equity Securities will be determined in the following manner: if the
Page 26
Equity Securities are listed on a securities exchange or The Nasdaq
Stock Market, this evaluation is generally based on the closing sale
prices on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if there is
no closing sale price on that exchange or system, at the closing ask
prices. If the Equity Securities are not so listed or, if so listed and
the principal market therefor is other than on the exchange, the
evaluation shall generally be based on the current ask prices on the
over-the-counter market (unless it is determined that these prices are
inappropriate as a basis for evaluation). If current ask prices are
unavailable, the evaluation is generally determined (a) on the basis of
current ask prices for comparable securities, (b) by appraising the U.S.
dollar value of the Equity Securities on the ask side of the market or
(c) by any combination of the above. The aggregate U.S. dollar value of
the Equity Securities during the initial offering period is computed on
the basis of the offering side value of the relevant currency exchange
rate expressed in U.S. dollars as of the Evaluation Time.
The Evaluator on each business day will appraise or cause to be
appraised the value of the underlying Equity Securities in a Trust as of
the Evaluation Time and will adjust the Public Offering Price of the
Units commensurate with such valuation. Such Public Offering Price will
be effective for all orders received prior to the Evaluation Time on
each such day. Orders received by the Trustee or Sponsor for purchases,
sales or redemptions after that time, or on a day which is not a
business day, will be held until the next determination of price. The
term "business day," as used herein and under "Rights of Unit Holders-
How May Units be Redeemed?", shall exclude Saturdays, Sundays and the
following holidays as observed by the New York Stock Exchange, Inc.: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
After the completion of the initial offering period, the secondary
market Public Offering Price will be equal to the aggregate underlying
U.S. dollar value of the Equity Securities therein, plus or minus cash,
if any, in the Income and Capital Accounts of a Trust plus the
applicable sales charge. The calculation of the aggregate underlying
U.S. dollar value of the Equity Securities for secondary market sales is
calculated in the same manner as described above for sales made during
the initial offering period with the exception that bid prices are used
instead of ask prices.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become 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, if requested, representing Units so
ordered will be made three business days following such order or shortly
thereafter. See "Rights of Unit Holders-How May Units be Redeemed?" for
information regarding the ability to redeem Units ordered for purchase.
How are Units Distributed?
During the initial offering period, Units issued on the Initial Date of
Deposit, additional Units created on subsequent Date(s) of Deposit, and
Units reacquired by the Sponsor and resold during the initial offering
period, will be sold at the current Public Offering Price. Upon the
termination of the initial offering period, Units reacquired in the
secondary market (see "Public Offering-Will There be a Secondary
Market?") may be offered by this prospectus at the secondary market
Public Offering Price.
It is the intention of the Sponsor to qualify Units of the Trusts for
sale in a number of states. Sales will be made to dealers and others at
prices which represent a concession or agency commission of 2.25% of the
Public Offering Price for primary and secondary market sales. Dealers
and others will receive a concession or agency commission of $0.13 per
Unit on purchases by Rollover Unit holders or on the sale of Units
subject only to the remaining deferred sales charge. In addition,
dealers and others will receive a maximum concession of up to $0.10 per
Unit on purchases of Units resulting from the automatic reinvestment of
income or capital distributions into additional Units. Such concession
will vary based upon the month of a Trust's Initial Date of Deposit.
Notwithstanding the foregoing, dealers and other selling agents who sell
Units of a Trust during the initial offering period in the dollar
amounts set forth below will be entitled to the following additional
sales concessions as a percentage of the Public Offering Price:
Page 27
<TABLE>
<CAPTION>
Total Sales per Trust Additional Concession
______________________ ______________________
<S> <C>
$40,000,000 but less than $50,000,000 0.050%
$50,000,000 but less than $75,000,000 0.125%
$75,000,000 but less than $100,000,000 0.150%
$100,000,000 or more 0.200%
</TABLE>
No dealer concessions will be made for sales to "wrap fee accounts" or
similar arrangements, or for sales made to employees, officers and
directors of the Sponsor, dealers or vendors providing services to the
Sponsor, except for amounts paid to certain dealers pursuant to the
Employee Dealer Concession. The Sponsor reserves the right to change the
amount of the concession or agency commission from time to time. In the
event the Sponsor reacquires, or the Trustee redeems, Units from
brokers, dealers and others while a market is being maintained for such
Units, such entities agree to repay immediately to the Sponsor any such
concession or agency commission relating to such reacquired Units.
Certain commercial banks may be making Units of the Trusts available to
their customers on an agency basis. A portion of the sales charge paid
by these customers is retained by or remitted to the banks in the
amounts indicated above. Under the Glass-Steagall Act, banks are
prohibited from underwriting Trust Units; however, the Glass-Steagall
Act does permit certain agency transactions and the banking regulators
have not indicated that these particular agency transactions are not
permitted under such Act. In Texas and in certain other states, any
banks making Units available must be registered as broker/dealers under
state law. The Sponsor expects to recoup the foregoing payments from the
deferred sales charge payments related to such Trusts.
From time to time the Sponsor may implement programs under which dealers
of a Trust may receive nominal awards from the Sponsor for each of their
registered representatives who have sold a minimum number of UIT Units
during a specified time period. In addition, at various times the
Sponsor may implement other programs under which the sales force of a
dealer may be eligible to win other nominal awards for certain sales
efforts, or under which the Sponsor will reallow to any such 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 qualifying dealers for certain services or activities which
are primarily intended to result in sales of Units of the Trusts. Such
payments are made by the Sponsor out of its own assets, and not out of
the assets of a Trust. These programs will not change the price Unit
holders pay for their Units or the amount that a Trust will receive from
the Units sold.
The Sponsor may from time to time in its advertising and sales materials
compare the then current estimated returns of a Trust and returns over
specified periods of other similar trusts sponsored by Nike Securities
L.P. or investment strategies utilized by a Trust (which may show
performance net of expenses and charges which such Trust would have
charged) with returns on other taxable investments such as the common
stocks comprising the DJIA, S&P 500 Index, the S&P Industrial Index,
Ibbotson Small-Cap Index, other investment indices, corporate or U.S.
Government bonds, bank CDs and money market accounts or money market
funds, each of which has investment characteristics that may differ from
those of the Trusts. U.S. Government bonds, for example, are backed by
the full faith and credit of the U.S. Government and bank CDs and money
market accounts are insured by an agency of the federal government.
Money market accounts and money market funds provide stability of
principal, but pay interest at rates that vary with the condition of the
short-term debt market. The investment characteristics of each Trust are
described more fully elsewhere in this Prospectus.
Advertisements and other sales material for the Trusts may also show the
total returns (price changes plus dividends received, divided by the
maximum public offering price) of each completed prior series and the
total and average annualized return of all series in the same quarterly
cycle, assuming the holder rolled over at the termination of each prior
series. These returns will reflect all applicable sales charges and
expenses.
Trust performance may be compared to performance on a total return basis
of the DJIA, 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
Page 28
and World Report, Business Week, Forbes or Fortune. As with other
performance data, performance comparisons should not be considered
representative of a Trust's relative performance for any future period.
What are the Sponsor's Profits?
The Sponsor of the Trusts will receive a gross sales commission equal to
the maximum sales charge per Unit for each Trust as set forth in Part I
of this Prospectus, less any reduced sales charge as described under
"Public Offering-How is the Public Offering Price Determined?" In
addition, the Sponsor may be considered to have realized a profit or to
have sustained a loss, as the case may be, in the amount of any
difference between the cost of the Equity Securities to a Trust (which
is based on the Evaluator's determination of the aggregate offering
price of the underlying Equity Securities of such Trust on the Initial
Date of Deposit as well as on subsequent deposits) and the cost of such
Equity Securities to the Sponsor. See Note (2) of "Schedule of
Investments" appearing in Part I of this Prospectus. During the initial
offering period, the dealers and others also may realize profits or
sustain losses as a result of fluctuations after the Date of Deposit in
the Public Offering Price received by such dealers and others upon the
sale of Units.
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a maximum sales charge for each Trust as
set forth in Part I of this Prospectus) or redeemed. The secondary
market Public Offering Price of Units may be greater or less than the
cost of such Units to the Sponsor. The Sponsor may also realize profits
or sustain losses in connection with the creation of additional Units
for the Distribution Reinvestment Option.
Will There be a Secondary Market?
After the initial offering period, although it is not obligated to do
so, the Sponsor intends to maintain a market for the Units and
continuously offer to purchase Units at prices, subject to change at any
time, based upon the aggregate underlying value of the Equity Securities
in a Trust plus or minus cash, if any, in the Income and Capital
Accounts of such Trust. The aggregate underlying value of the Equity
Securities is computed on the basis of the bid side value of the
relevant currency exchange rate (offer side during the initial offering
period) expressed in U.S. dollars. All expenses incurred in maintaining
a secondary market, other than the fees of the Evaluator and the costs
of the Trustee in transferring and recording the ownership of Units,
will be borne by the Sponsor. If the supply of Units exceeds demand, or
for some other business reason, the Sponsor may discontinue purchases of
Units at such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS 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. Units
subject to a deferred sales charge which are sold or tendered for
redemption prior to such time as the entire deferred sales charge on
such Units has been collected will be assessed the amount of the
remaining deferred sales charge at the time of sale or redemption.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable or may be redeemed by presentation and surrender to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. A Unit holder must sign exactly as his or her
name appears on the face of the certificate with 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.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
Page 29
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of their respective Trust; the number of Units issued or
transferred; the name, address and taxpayer identification number, if
any, of the new registered owner; a notation of any liens and
restrictions of the issuer and any adverse claims to which such Units
are or may be subject or a statement that there are no such liens,
restrictions or adverse claims; and the date the transfer was
registered. Uncertificated Units are transferable through the same
procedures applicable to Units evidenced by certificates (described
above), except that no certificate need be presented to the Trustee and
no certificate will be issued upon the transfer unless requested by the
Unit holder. A Unit holder may at any time request the Trustee to issue
certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder must follow procedures established by the Trustee, including
furnishing indemnity satisfactory to the Trustee and pay such expenses
as the Trustee may incur. Mutilated certificates must be surrendered to
the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income received with respect to any
of the Equity Securities in a Trust on or about the Income Distribution
Dates to Unit holders of record on the preceding Income Distribution
Record Date. See "Summary of Essential Information" in Part I of this
Prospectus. Persons who purchase Units will commence receiving
distributions only after such person becomes a Record Owner.
Notification to the Trustee of the transfer of Units is the
responsibility of the purchaser, but in the normal course of business
such notice is provided by the selling broker/dealer. Proceeds received
on the sale of any Equity Securities in a Trust, to the extent not used
to meet redemptions of Units, pay the deferred sales charge or pay
expenses, will, however, be distributed on the last day of each month to
Unit holders of record on the fifteenth day of each month if the amount
available for distribution equals at least $1.00 per 100 Units. The
Trustee is not required to pay interest on funds held in the Capital
Account of a Trust (but may itself earn interest thereon and therefore
benefit from the use of such funds). Notwithstanding, distributions of
funds in the Capital Account, if any, will be made as part of the final
liquidation distribution, and in certain circumstances, earlier. See
"What is the Federal Tax Status of Unit Holders?"
It is anticipated that the deferred sales charge will be collected from
the Capital Account of a Trust and that amounts in the Capital Account
will be sufficient to cover the cost of the deferred sales charge. To
the extent that amounts in the Capital Account are insufficient to
satisfy the then current deferred sales charge obligation, Equity
Securities may be sold to meet such shortfall. Distributions of amounts
necessary to pay the deferred portion of the sales charge will be made
to an account designated by the Sponsor for purposes of satisfying Unit
holders' deferred sales charge obligations.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
a Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder under certain circumstances by
contacting the Trustee, otherwise the amount may be recoverable only
when filing a tax return. Under normal circumstances the Trustee obtains
the Unit holder's tax identification number from the selling broker.
However, a Unit holder should examine his or her statements from the
Trustee to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided
such number, one should be provided as soon as possible.
Within a reasonable time after a Trust is terminated, each Unit holder
who is not a Rollover Unit holder will, upon surrender of his or her
Units for redemption, receive (i) the pro rata share of the amounts
realized upon the disposition of Equity Securities, unless, in the case
of a Domestic Trust, he or she elects an In-Kind Distribution as
described under "Other Information-How May the Indenture be Amended or
Terminated?" and (ii) a pro rata share of any other assets of such
Trust, less expenses of such Trust.
The Trustee will credit to the Income Account of a Trust any dividends
Page 30
received on the Equity Securities therein. All other receipts (e.g.,
return of capital, etc.) are credited to the Capital Account of a Trust.
Dividends received with respect to the Foreign Equity Securities, if
any, are converted into U.S. dollars at the applicable exchange rate.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for state and local taxes, if any, and any governmental charges
payable out of such Trust.
Distribution Reinvestment Option. Any Unit holder may elect to have each
distribution of income or capital on his or her Units, other than the
final liquidating distribution in connection with the termination of a
Trust, automatically reinvested in additional Units of such Trust. Each
person who purchases Units of a Trust may elect to become a participant
in the Distribution Reinvestment Option by notifying the Trustee of
their election. The Distribution Reinvestment Option may not be
available in all states. In order to enable a Unit holder to participate
in the Distribution Reinvestment Option with respect to a particular
distribution on his or her Units, the card must be received by the
Trustee within 10 days prior to the Record Date for such distribution.
Each subsequent distribution of income or capital on the participant's
Units will be automatically applied by the Trustee to purchase
additional Units of a Trust. The remaining deferred sales charge
payments will be assessed on Units acquired pursuant to the
Distributions Reinvestment Option. IT SHOULD BE REMEMBERED THAT EVEN IF
DISTRIBUTIONS ARE REINVESTED, THEY ARE STILL TREATED AS DISTRIBUTIONS
FOR INCOME TAX PURPOSES.
What Reports will Unit Holders Receive?
The Trustee shall furnish Unit holders in connection with each
distribution a statement of the amount of income, if any, and the amount
of other receipts, if any, which are being distributed, expressed in
each case as a dollar amount per Unit. Within a reasonable period of
time after the end of each calendar year, the Trustee shall furnish to
each person who at any time during the calendar year was a Unit holder
of a Trust the following information in reasonable detail: (1) a summary
of transactions in such Trust for such year; (2) any Equity Securities
sold during the year and the Equity Securities held at the end of such
year by such Trust; (3) the redemption price per Unit based upon a
computation thereof on the 31st day of December of such year (or the
last business day prior thereto); and (4) amounts of income and capital
distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Equity Securities in a Trust furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his or her 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, or in
the case of uncertificated Units, delivery of a request for redemption,
duly endorsed or accompanied by proper instruments of transfer with
signature guaranteed as explained above (or by providing satisfactory
indemnity, as in connection with lost, stolen or destroyed
certificates), and payment of applicable governmental charges, if any.
No redemption fee will be charged. On the third business day following
such tender, the Unit holder will be entitled to receive in cash an
amount for each Unit equal to the Redemption Price per Unit next
computed after receipt by the Trustee of such tender of Units. The "date
of tender" is deemed to be the date on which Units are received by the
Trustee (if such day is a day on which the New York Stock Exchange is
open for trading), except that as regards Units received after 4:00 p.m.
Eastern time (or as of any earlier closing time on a day on which the
New York Stock Exchange is scheduled in advance to close at such earlier
time), the date of tender is the next day on which the New York Stock
Exchange is open for trading and such Units will be deemed to have been
tendered to the Trustee on such day for redemption at the redemption
price computed on that day. Units so redeemed shall be cancelled. Units
tendered for redemption prior to such time as the entire deferred sales
charge on such Units has been collected will be assessed the amount of
the remaining deferred sales charge at the time of redemption.
Any Unit holder tendering 1,000 Units or more of a Domestic Trust for
redemption may request by written notice submitted at the time of tender
from the Trustee, in lieu of a cash redemption, a distribution of shares
of Equity Securities in an amount and value of Equity Securities per
Unit equal to the Redemption Price Per Unit, as determined as of the
evaluation next following tender. However, no In-Kind Distribution
requests submitted during the nine business days prior to a Trust's
Mandatory Termination Date will be honored. To the extent possible, in-
Page 31
kind distributions ("In-Kind Distributions") shall be made by the
Trustee through the distribution of each of the Equity Securities in
book-entry form to the account of the Unit holder's bank or
broker/dealer at the Depository Trust Company. An In-Kind Distribution
will be reduced by customary transfer and registration charges. The
tendering Unit holder will receive his or her pro rata number of whole
shares of each of the Equity Securities comprising a portfolio and cash
from the Capital Account equal to the fractional shares to which the
tendering Unit holder is entitled. The Trustee may adjust the number of
shares of any issue of Equity Securities included in a Unit holder's In-
Kind Distribution to facilitate the distribution of whole shares, such
adjustment to be made on the basis of the value of Equity Securities on
the date of tender. If funds in the Capital Account are insufficient to
cover the required cash distribution to the tendering Unit holder, the
Trustee may sell Equity Securities in the manner described above.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a
Unit redemption if the Trustee has not been furnished the redeeming Unit
holder's tax identification number in the manner required by such
regulations. For further information regarding this withholding, see
"Rights of Unit Holders-How are Income and Capital Distributed?" In the
event the Trustee has not been previously provided such number, one must
be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of a Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other
amounts paid on redemption shall be withdrawn from the Capital Account
of a Trust.
The Trustee is empowered to sell Equity Securities of a Trust in order
to make funds available for redemption. To the extent that Equity
Securities are sold, the size and diversity of a Trust will be reduced.
Such sales may be required at a time when Equity Securities would not
otherwise be sold and might result in lower prices than might otherwise
be realized.
The Redemption Price per Unit during the secondary market will be
determined on the basis of the aggregate underlying value of the Equity
Securities in a Trust plus or minus cash, if any, in the Income and
Capital Accounts of such Trust (net of applicable liquidation costs for
Foreign Equity Securities, if any). The Redemption Price per Unit is the
pro rata share of each Unit determined by the Trustee by adding: (1) the
cash on hand in a Trust other than cash deposited in the Trust to
purchase Equity Securities not applied to the purchase of such Equity
Securities; (2) the aggregate value of the Equity Securities held in
such Trust, as determined by the Evaluator on the basis of the aggregate
underlying value of the Equity Securities in such Trust next computed;
and (3) dividends receivable on the Equity Securities trading ex-
dividend as of the date of computation; and deducting therefrom: (1)
amounts representing any applicable taxes or governmental charges
payable out of such Trust; (2) any amounts owing to the Trustee for its
advances; (3) an amount representing estimated accrued expenses of such
Trust, including but not limited to fees and expenses of the Trustee
(including legal fees), the Evaluator and supervisory fees, if any; (4)
cash held for distribution to Unit holders of record of such Trust as of
the business day prior to the evaluation being made; and (5) other
liabilities incurred by such Trust; and finally dividing the results of
such computation by the number of Units of such Trust outstanding as of
the date thereof. The redemption price per Unit will be assessed the
amount, if any, of the remaining deferred sales charge at the time of
redemption. During the initial offering period, the Redemption Price per
Unit will include estimated organizational and offering costs as set
forth under "Summary of Essential Information" in Part I of this
Prospectus for each Trust.
The aggregate value of the Equity Securities for purposes of the
Redemption Price during the secondary market and the secondary market
Public Offering Price will be determined in the following manner: if the
Equity Securities are listed on a securities exchange or The Nasdaq
Stock Market, this evaluation is generally based on the closing sale
prices on that exchange or that system (unless it is determined that
these prices are inappropriate as a basis for valuation) or, if there is
no closing sale price on that exchange or system, at the closing bid
prices. If the Equity Securities are not so listed or, if so listed and
the principal market therefore is other than on a securities exchange,
the evaluation shall generally be based on the current bid prices on the
over-the-counter market (unless these prices are inappropriate as a
Page 32
basis for evaluation). If current bid prices are unavailable, the
evaluation is generally determined (a) on the basis of current bid
prices for comparable securities, (b) by appraising the value of the
Equity Securities on the bid side of the market or (c) by any
combination of the above. The value of the Equity Securities is
converted to their U.S. dollar equivalent by computing the aggregate
value on the basis of the bid side value of the relevant currency
exchange as of the Evaluation Time and when determining the Redemption
Price during the secondary market includes the applicable liquidation
costs associated with the sale of Foreign Equity Securities.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
Special Redemption, Liquidation and Investment in a New Trust
It is expected that a special redemption and liquidation will be made of
all Units of the Trusts held by any Unit holder (a "Rollover Unit
holder") who affirmatively notifies the Trustee in writing that he or
she desires to participate as a Rollover Unit holder by the Rollover
Notification Date specified in the "Summary of Essential Information"
appearing in Part I of this Prospectus. The Sponsor intends to create a
separate series of trusts (the "New Trusts") in conjunction with the
termination of the Trusts.
All Units of Rollover Unit holders will be redeemed In-Kind during the
Special Redemption and Liquidation Period, or such latter date as
permitted by the Trustee, and the underlying Equity Securities will be
distributed to the Distribution Agent on behalf of the Rollover Unit
holders. During the Special Redemption and Liquidation Period (as set
forth in "Summary of Essential Information" in Part I of this
Prospectus), the Distribution Agent will be required to sell all of the
underlying Equity Securities on behalf of Rollover Unit holders. The
sales proceeds will be net of brokerage fees, governmental charges or
any expenses involved in the sales.
The Distribution Agent may engage the Sponsor, as its agent, or other
brokers to sell the distributed Equity Securities. The Equity Securities
will be sold as quickly as is practicable during the Special Redemption
and Liquidation Period, subject to the Sponsor's sensitivity that
certain Equity Securities have different settlement dates and that the
concentrated sale of large volumes of Equity Securities may affect
market prices in a manner adverse to the interests of investors. The
Sponsor does not anticipate that the period will be longer than five
days, given that the Equity Securities are usually highly liquid. The
liquidity of any Equity Security depends on the daily trading volume of
the Equity Security and the amount that the Sponsor has available for
sale on any particular day.
Pursuant to an exemptive order from the Securities and Exchange
Commission, with the exception of the Target 25 Strategy and Target
Small-Cap Strategy, each terminating Trust (and the Distribution Agent
on behalf of Rollover Unit holders) may sell Equity Securities to the
New Trusts if those Equity Securities continue to meet the individual
Trust's strategy as set forth under "What is the FT Series?" The
exemption will enable each Trust to eliminate commission costs on these
transactions. The price for those Equity Securities will be the closing
sale price on the sale date on the exchange where the Equity Securities
are principally traded, as certified by the Sponsor and confirmed by the
Trustee of each Trust.
The Rollover Unit holders' proceeds will be invested in a New Trust or a
trust with a similar investment strategy (as selected by the Unit
holder), if then registered and being offered. The proceeds of
redemption will be used to buy New Trust units once all the proceeds
become available; accordingly, proceeds may be uninvested for up to
several days. Any Rollover Unit holder may thus be redeemed out of a
Trust and become a holder of an entirely different trust, a New Trust,
with a different portfolio of Equity Securities. In accordance with the
Rollover Unit holders' offer to purchase the New Trust units, the
proceeds of the sales (and any other cash distributed upon redemption)
will be invested in a New Trust, at the public offering price, including
the applicable maximum sales charge per Unit (which for Rollover Unit
holders is currently expected to be $.175 per unit for the New Series of
a Trust, all of which will be deferred as provided herein).
Page 33
The Sponsor intends to create New Trust units as quickly as possible,
depending upon the availability and reasonably favorable prices of the
Equity Securities included in a New Trust portfolio, and it is intended
that Rollover Unit holders will be given first priority to purchase the
New Trust units. Rollover Unit holders may also elect to have their
proceeds invested in a trust with a similar investment strategy, if such
trust is then registered in the Unit holder's state of residence and
being offered. There can be no assurance, however, as to the exact
timing of the creation of the New Trust units or the aggregate number of
New Trust units which the Sponsor will create. The Sponsor may, in its
sole discretion, stop creating new units (whether permanently or
temporarily) at any time it chooses, regardless of whether all proceeds
of the Special Redemption and Liquidation have been invested on behalf
of Rollover Unit holders. Cash which has not been invested on behalf of
the Rollover Unit holders in New Trust units will be distributed within
a reasonable time after such occurrence. However, since the Sponsor can
create units, the Sponsor anticipates that sufficient units can be
created, although moneys in a New Trust may not be fully invested on the
next business day.
The process of redemption, liquidation, and investment in a New Trust is
intended to allow for the fact that the portfolios selected by the
Sponsor are chosen on the basis of growth and income potential only for
a limited time period, at which point a new portfolio is chosen. It is
contemplated that a similar process of redemption, liquidation and
investment in a New Trust will be available as each Trust terminates.
It should also be noted that Rollover Unit holders may realize taxable
capital gains on the Special Redemption and Liquidation but, in certain
unlikely circumstances, will not be entitled to a deduction for certain
capital losses and, due to the procedures for investing in a New Trust,
no cash would be distributed at that time to pay any taxes. Included in
the cash for the Special Redemption and Liquidation will be an amount of
cash attributable to a semi-annual distribution of dividend income;
accordingly, Rollover Unit holders also will not have cash from this
source distributed to pay any taxes. See "What is the Federal Tax Status
of Unit Holders?"
In addition, during this period a Unit holder will be at risk to the
extent that Equity Securities are not sold and will not have the benefit
of any stock appreciation to the extent that moneys have not been
invested; for this reason, the Sponsor will be inclined to sell and
purchase the Equity Securities in as short a period as they can without
materially adversely affecting the price of the Equity Securities.
Unit holders who do not inform the Distribution Agent that they wish to
have their Units so redeemed and liquidated ("Remaining Unit holders")
will not realize capital gains or losses due to a Special Redemption and
Liquidation, and will not be charged any additional sales charge.
The Sponsor may for any reason, in its sole discretion, decide not to
sponsor the New Trusts or any subsequent series of the Trusts, without
penalty or incurring liability to any Unit holder. If the Sponsor so
decides, the Sponsor shall notify the Unit holders before a Special
Redemption and Liquidation. All Unit holders will then be remaining Unit
holders, with rights to ordinary redemption as before. See "Rights of
Unit Holders-How May Units be Redeemed?" The Sponsor may modify the
terms of the New Trusts or any subsequent series of the Trusts. The
Sponsor may also modify, suspend or terminate the Rollover Option upon
notice to the Unit holders of such amendment at least 60 days prior to
the effective date of such amendment.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he or she would have
received on redemption of the Units.
The offering price of any Units acquired by the Sponsor will be in
accord with the Public Offering Price described in the then effective
prospectus describing such Units. Any profit or loss resulting from the
resale or redemption of such Units will belong to the Sponsor.
Page 34
How May Equity Securities be Removed from a Trust?
The portfolios of the Trusts are not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of an Equity Security in
the event that an issuer defaults in the payment of a dividend that has
been declared, that any action or proceeding has been instituted
restraining the payment of dividends or there exists any legal question
or impediment affecting such Equity Security, that the issuer of the
Equity Security has breached a covenant which would affect the payments
of dividends, the credit standing of the issuer or otherwise impair the
sound investment character of the Equity Security, that the issuer has
defaulted on the payment on any other of its outstanding obligations,
that the price of the Equity Security has declined to such an extent or
other such credit factors exist so that in the opinion of the Sponsor,
the retention of such Equity Securities would be detrimental to a Trust.
Except as stated under "Portfolio-What are Some Additional
Considerations for Investors?" for Failed Contract Obligations, the
acquisition by a Trust of any securities or other property other than
the Equity Securities is prohibited. Pursuant to the Indenture and with
limited exceptions, the Trustee may sell any securities or other
property acquired in exchange for Equity Securities such as those
acquired in connection with a merger or other transaction. If offered
such new or exchanged securities or property, the Trustee shall reject
the offer. However, in the event such securities or property are
nonetheless acquired by a Trust, they may be accepted for deposit in a
Trust and either sold by the Trustee or held in a Trust pursuant to the
direction of the Sponsor (who may rely on the advice of the Portfolio
Supervisor). Proceeds from the sale of Equity Securities by the Trustee
are credited to the Capital Account of a Trust for distribution to Unit
holders or to meet redemptions. The Trustee may, from time to time,
retain and pay compensation to the Sponsor (or an affiliate of the
Sponsor) to act as agent for the Trusts with respect to selling Equity
Securities from the Trusts. In acting in such capacity, the Sponsor or
its affiliate will be held subject to the restrictions under the
Investment Company Act of 1940, as amended.
The Trustee may also sell Equity Securities designated by the Sponsor,
or if not so directed, in its own discretion, for the purpose of
redeeming Units of a Trust tendered for redemption and the payment of
expenses.
The Sponsor, in designating Equity Securities to be sold by the Trustee,
will generally make selections in order to maintain, to the extent
practicable, the proportionate relationship among the number of shares
of individual issues of Equity Securities. To the extent this is not
practicable, the composition and diversity of the Equity Securities may
be altered. In order to obtain the best price for a Trust, it may be
necessary for the Sponsor to specify minimum amounts (generally 100
shares) in which blocks of Equity Securities are to be sold. The Sponsor
may consider sales of Units of unit investment trusts which it sponsors
in making recommendations to the Trustee as to the selection of
broker/dealers to execute the Trusts' portfolio transactions, or when
acting as agent for the Trusts in acquiring or selling Equity Securities
on behalf of the Trusts.
INFORMATION AS TO SPONSOR, TRUSTEE AND EVALUATOR
Who is the Sponsor?
Nike Securities L.P., the Sponsor, specializes in the underwriting,
trading and distribution of unit investment trusts and other securities.
Nike Securities L.P., an Illinois limited partnership formed in 1991,
acts as Sponsor for successive series of The First Trust Combined
Series, 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 $20 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, 1997, the total
partners' capital of Nike Securities L.P. was $11,724,071 (audited).
This paragraph relates only to the Sponsor and not to the Trusts or to
any series thereof or to any other dealer. The information is included
herein only for the purpose of informing investors as to the financial
Page 35
responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Who is the Trustee?
The Trustee is The Chase Manhattan Bank, with its principal executive
office located at 270 Park Avenue, New York, New York 10017 and its unit
investment trust office at 4 New York Plaza, 6th floor, New York, New
York 10004-2413. Unit holders who have questions regarding the Trusts
may call the Customer Service Help Line at 1-800-682-7520. The Trustee
is subject to supervision by the Superintendent of Banks of the State of
New York, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
The Trustee, whose duties are ministerial in nature, has not
participated in the selection of the Equity Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Equity Securities. In the event of the failure of
the Sponsor to act under the Indenture, the Trustee may act thereunder
and shall not be liable for any action taken by it in good faith under
the Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Equity Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of a Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor and the Trustee,
in which event the Sponsor and the Trustee are to use their best efforts
to appoint a satisfactory successor. Such resignation or removal shall
Page 36
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that a Trust shall terminate upon the Mandatory
Termination Date indicated herein under "Summary of Essential
Information" in Part I of this Prospectus. Each Trust may be liquidated
at any time by consent of 100% of the Unit holders of a Trust or by the
Trustee when the value of the Equity Securities owned by such Trust as
shown by any evaluation, is less than the lower of $2,000,000 or 20% of
the total value of Equity Securities deposited in such Trust during the
initial offering period, or in the event that Units of such Trust not
yet sold aggregating more than 60% of the Units of such Trust are
tendered for redemption by underwriters, including the Sponsor. If a
Trust is liquidated because of the redemption of unsold Units of such
Trust by underwriters, the Sponsor will refund to each purchaser of
Units of such Trust the entire sales charge paid by such purchaser;
however, liquidation of a Trust in other circumstances will result in
all remaining unpaid deferred sales charges being deducted from
termination proceeds paid to Unit holders. In the event of termination,
written notice thereof will be sent by the Trustee to all Unit holders
of a Trust. Within a reasonable period after termination, the Trustee
will follow the procedures set forth under "Rights of Unit Holders-How
are Income and Capital Distributed?" Also, because of the Special
Redemption and Liquidation in a New Trust, there is a possibility that a
Trust may be reduced below the Discretionary Liquidation Amount and that
a Trust could therefore be terminated at that time before the Mandatory
Termination Date of the Fund.
Commencing during the period beginning nine business days prior to, and
no later than, the Mandatory Termination Date, Equity Securities will
begin to be sold in connection with the termination of a Trust. The
Sponsor will determine the manner, timing and execution of the sale of
the Equity Securities. Written notice of any termination of a Trust
specifying the time or times at which Unit holders may surrender their
certificates for cancellation shall be given by the Trustee to each Unit
holder at his or her address appearing on the registration books of such
Trust maintained by the Trustee. Not less than 30 days prior to the
Mandatory Termination Date of the Domestic Trusts the Trustee will
provide written notice thereof to all Unit holders and will include with
such notice a form to enable Unit holders to elect a distribution of
shares of Equity Securities (reduced by customary transfer and
registration charges), if such Unit holder owns at least 1,000 Units of
a Domestic Trust, rather than to receive payment in cash for such Unit
holder's pro rata share of the amounts realized upon the disposition by
the Trustee of Equity Securities. To be effective, the election form,
together with surrendered certificates and other documentation required
by the Trustee, must be returned to the Trustee at least ten business
days prior to the Mandatory Termination Date of a Domestic Trust. A Unit
holder may, of course, at any time after the Equity Securities are
distributed, sell all or a portion of the shares. Unit holders not
electing a distribution of shares of Equity Securities and who do not
elect the Rollover Option will receive a cash distribution from the sale
of the remaining Equity Securities within a reasonable time after a
Trust is terminated. Regardless of the distribution involved, the
Trustee will deduct from the funds of a Trust any accrued costs,
expenses, advances or indemnities provided by the Indenture, including
estimated compensation of the Trustee and costs of liquidation and any
amounts required as a reserve to provide for payment of any applicable
Page 37
taxes or other governmental charges. Any sale of Equity Securities in a
Trust upon termination may result in a lower amount than might otherwise
be realized if such sale were not required at such time. In addition, to
the extent that Equity Securities are sold prior to the Mandatory
Termination Date, Unit holders will not benefit from any stock
appreciation they would have received had the Equity Securities not been
sold at such time. The Trustee will then distribute to each Unit holder
his or her pro rata share of the balance of the Income and Capital
Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, will act as counsel for the Trustee and as
special New York tax counsel for the Trusts.
Experts
The statements of net assets, including the schedules of investments, of
the Trusts at the opening of business on the Initial Date of Deposit
appearing in Part I of this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing in Part I of this Prospectus and in the
Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and
auditing.
Supplemental Information
Upon written or telephonic request to the Trustee, investors will
receive at no cost to the investor supplemental information about this
Series, which has been filed with the Securities and Exchange Commission
and is hereby incorporated by reference. The supplemental information
includes more specific risk information concerning the Trusts.
Page 38
This page is intentionally left blank.
Page 39
CONTENTS:
What is the FT Series? 1
What are the Expenses and Charges? 2
What is the Federal Tax Status of Unit Holders? 3
United Kingdom Taxation 8
Hong Kong Taxation 9
Are Investments in the Trusts Eligible for
Retirement Plans? 9
Portfolio:
What are the Equity Securities? 9
Domestic Trusts 109
International Trust 10
The Dow Jones Industrial Average 11
The Financial Times Industrial Ordinary Share
Index 12
The Hang Seng Index 12
Hypothetical Performance Information 13
Annualized Performance Information 13
What are Some Additional Considerations
for Investors? 18
Risk Factors 18
Legislation 21
Foreign Issuers 21
United Kingdom 22
Hong Kong 22
Exchange Rate 24
Public Offering:
How is the Public Offering Price Determined? 25
How are Units Distributed? 27
What are the Sponsor's Profits? 29
Will There be a Secondary Market? 29
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 29
How are Income and Capital Distributed? 30
What Reports will Unit Holders Receive? 31
How May Units be Redeemed? 31
Special Redemption, Liquidation and
Investment in a New Trust 33
How May Units be Purchased by the Sponsor? 34
How May Equity Securities be Removed
from a Trust? 35
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 35
Who is the Trustee? 36
Limitations on Liabilities of Sponsor and Trustee 36
Who is the Evaluator? 36
Other Information:
How May the Indenture be Amended
or Terminated? 37
Legal Opinions 38
Experts 38
Supplemental Information 38
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THIS PROSPECTUS DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENTS AND EXHIBITS RELATING THERETO, WHICH THE FUND
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C.
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940,
AND TO WHICH REFERENCE IS HEREBY MADE.
FIRST TRUST (registered trademark)
TARGET STRATEGY SERIES
Prospectus
Part II
Nike Securities L.P.
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
24-Hour Pricing Line:
1-800-446-0132
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 40
First Trust (registered trademark)
TARGET STRATEGY SERIES
The FT Series
Information Supplement
This Information Supplement provides additional information concerning
the structure, operations and risks of unit investment trusts ("Trusts")
contained in The FT Series, Target Strategy Series not found in the
prospectuses for the Trusts. This Information Supplement is not a
prospectus and does not include all of the information that a
prospective investor should consider before investing in a Trust. This
Information Supplement should be read in conjunction with the prospectus
for the Trust in which an investor is considering investing
("Prospectus"). Copies of the Prospectus can be obtained by calling or
writing the Trustee at the telephone number and address indicated in
Part II of the Prospectus. The Information Supplement has been created
to supplement information contained in the Prospectus.
This Information Supplement is dated January 4, 1999. Capitalized
terms have been defined in the Prospectus.
Table of Contents
Dow Jones & Company, Inc. 1
Risk Factors
Equity Securities 2
Foreign Issuers 3
Exchange Rate 4
Concentrations
Banks and Thrifts 5
Petroleum Refining Companies 6
Real Estate Companies 7
Hong Kong 9
Small-Cap Companies 8
Portfolios
Equity Securities Selected for The Dow sm Target 5 Strategy 10
Equity Securities Selected for The Dow sm Target 10 Strategy 11
Equity Securities Selected for Target 25 Strategy 12
Equity Securities Selected for Target Small-Cap Strategy 13
Equity Securities Selected for Global Target 15 Strategy 14
Dow Jones & Company, Inc.
The Trusts are not sponsored, endorsed, sold or promoted by Dow Jones &
Company, Inc. ("Dow Jones"). Dow Jones makes no representation or
warranty, express or implied, to the owners of the Trusts or any member
of the public regarding the advisability of investing in securities
generally or in the Trusts particularly. Dow Jones' only relationship to
the Sponsor is the licensing of certain trademarks, trade names and
service marks of Dow Jones and of the Dow Jones Industrial Average (SM),
which is determined, composed and calculated by Dow Jones without regard
to the Sponsor or the Trusts. Dow Jones has no obligation to take the
needs of the Sponsor or the owners of the Trusts into consideration in
determining, composing or calculating the Dow Jones Industrial Average
(SM). Dow Jones is not responsible for and has not participated in the
determination of the timing of, prices at, or quantities of the Trusts
to be issued or in the determination or calculation of the equation by
which the Trusts are to be converted into cash. Dow Jones has no
obligation or liability in connection with the administration, marketing
or trading of the Trusts.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DOW JONES INDUSTRIAL AVERAGE (SM) OR ANY DATA INCLUDED THEREIN AND DOW
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE SPONSOR, OWNERS OF THE TRUSTS, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES INDUSTRIAL
AVERAGE (SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
Page 1
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE DOW JONES INDUSTRIAL AVERAGE (SM) OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
Risk Factors
Equity Securities. An investment in Units should be made with an
understanding of the risks which an investment in common stocks entails,
including the risk that the financial condition of the issuers of the
Equity Securities or the general condition of the relevant stock market
may worsen, and the value of the Equity Securities and therefore the
value of the Units may decline. Common stocks are especially susceptible
to general stock market movements and to volatile increases and
decreases of value, as market confidence in and perceptions of the
issuers change. These perceptions are based on unpredictable factors,
including expectations regarding government, economic, monetary and
fiscal policies, inflation and interest rates, economic expansion or
contraction, and global or regional political, economic or banking
crises. Both U.S. and foreign markets have experienced substantial
volatility and significant declines recently as a result of certain or
all of these factors. From September 30, 1997 through October 30, 1997,
amid record trading volume, the S&P 500 Index, DJIA, FT Index and Hang
Seng Index declined 4.60%, 7.09%, 6.19% and 31.14%, respectively. In
addition, against a backdrop of continued uncertainty regarding the
current global currency crisis and falling commodity prices, during the
period between July 31, 1998 and September 30, 1998, the S&P 500, DJIA
and FT Index declined by 8.97%, 11.32% and 17.80%, respectively, while
the Hang Seng Index increased .20%. Shareholders of common stocks have
rights to receive payments from the issuers of those common stocks that
are generally subordinate to those of creditors of, or holders of debt
obligations or preferred stocks of, such issuers. Shareholders of common
stocks of the type held by the Trusts have a right to receive dividends
only when and if, and in the amounts, declared by the issuer's board of
directors and have a right to participate in amounts available for
distribution by the issuer only after all other claims on the issuer
have been paid or provided for. Common stocks do not represent an
obligation of the issuer and, therefore, do not offer any assurance of
income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred
stock will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of
the issuer to declare or pay dividends on its common stock or the rights
of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. Cumulative preferred stock dividends must be
paid before common stock dividends, and any cumulative preferred stock
dividend omitted is added to future dividends payable to the holders of
cumulative preferred stock. Preferred stockholders are also generally
entitled to rights on liquidation which are senior to those of common
stockholders.
Foreign Issuers. Since certain or all of the Equity Securities included
in the International Trusts consist of securities of foreign issuers, an
investment in such Trusts involves certain investment risks that are
different in some respects from an investment in a trust which invests
entirely in the securities of domestic issuers. These investment risks
include future political or governmental restrictions which might
adversely affect the payment or receipt of payment of dividends on the
relevant Equity Securities, the possibility that the financial condition
of the issuers of the Equity Securities may become impaired or that the
general condition of the relevant stock market may worsen (both of which
would contribute directly to a decrease in the value of the Equity
Securities and thus in the value of the Units), the limited liquidity
and relatively small market capitalization of the relevant securities
market, expropriation or confiscatory taxation, economic uncertainties
and foreign currency devaluations and fluctuations. In addition, for
foreign issuers that are not subject to the reporting requirements of
the Securities Exchange Act of 1934, there may be less publicly
available information than is available from a domestic issuer. Also,
Page 2
foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. The securities of
many foreign issuers are less liquid and their prices more volatile than
securities of comparable domestic issuers. In addition, fixed brokerage
commissions and other transaction costs on foreign securities exchanges
are generally higher than in the United States and there is generally
less government supervision and regulation of exchanges, brokers and
issuers in foreign countries than there is in the United States.
However, due to the nature of the issuers of the Equity Securities
selected for the International Trusts, the Sponsor believes that
adequate information will be available to allow the Supervisor to
provide portfolio surveillance for such Trusts.
Equity securities issued by non-U.S. issuers generally pay dividends in
foreign currencies and are principally traded in foreign currencies.
Therefore, there is a risk that the United States dollar value of these
securities will vary with fluctuations in the U.S. dollar foreign
exchange rates for the various Equity Securities. See "Exchange Rate"
below.
On the basis of the best information available to the Sponsor at the
present time, none of the Equity Securities in the International Trusts
are subject to exchange control restrictions under existing law which
would materially interfere with payment to such Trusts of dividends due
on, or proceeds from the sale of, the Equity Securities. However, there
can be no assurance that exchange control regulations might not be
adopted in the future which might adversely affect payment to such a
Trust. The adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of
international securities in the International Trusts and on the ability
of such Trusts to satisfy their obligation to redeem Units tendered to
the Trustee for redemption. In addition, restrictions on the settlement
of transactions on either the purchase or sale side, or both, could
cause delays or increase the costs associated with the purchase and sale
of the foreign Equity Securities and correspondingly could affect the
price of the Units.
Investors should be aware that it may not be possible to buy all Equity
Securities at the same time because of the unavailability of any Equity
Security, and restrictions applicable to a Trust relating to the
purchase of an Equity Security by reason of the federal securities laws
or otherwise.
Foreign securities generally have not been registered under the
Securities Act of 1933 and may not be exempt from the registration
requirements of such Act. Sales of non-exempt Equity Securities by a
Trust in the United States securities markets are subject to severe
restrictions and may not be practicable. Accordingly, sales of these
Equity Securities by a Trust will generally be effected only in foreign
securities markets. Although the Sponsor does not believe that the
International Trust will encounter obstacles in disposing of the Equity
Securities, investors should realize that the Equity Securities may be
traded in foreign countries where the securities markets are not as
developed or efficient and may not be as liquid as those in the United
States. The value of the Equity Securities will be adversely affected if
trading markets for the Equity Securities are limited or absent.
Exchange Rate. The International Trust is comprised either totally or
substantially of Equity Securities that are principally traded in
foreign currencies and as such, involve investment risks that are
substantially different from an investment in a fund which invests in
securities that are principally traded in United States dollars. The
United States dollar value of the portfolio (and hence of the Units) and
of the distributions from the portfolio will vary with fluctuations in
the United States dollar foreign exchange rates for the relevant
currencies. Most foreign currencies have fluctuated widely in value
against the United States dollar for many reasons, including supply and
demand of the respective currency, the rate of inflation in the
respective economies compared to the United States, the impact of
interest rate differentials between different currencies on the movement
of foreign currency rates, the balance of imports and exports goods and
services, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and
other countries.
The post-World War II international monetary system was, until 1973,
dominated by the Bretton Woods Treaty which established a system of
fixed exchange rates and the convertibility of the United States dollar
into gold through foreign central banks. Starting in 1971, growing
volatility in the foreign exchange markets caused the United States to
abandon gold convertibility and to effect a small devaluation of the
United States dollar. In 1973, the system of fixed exchange rates
between a number of the most important industrial countries of the
world, among them the United States and most Western European countries,
Page 3
was completely abandoned. Subsequently, major industrialized countries
have adopted "floating" exchange rates, under which daily currency
valuations depend on supply and demand in a freely fluctuating
international market. Many smaller or developing countries have
continued to "peg" their currencies to the United States dollar although
there has been some interest in recent years in "pegging" currencies to
"baskets" of other currencies or to a Special Drawing Right administered
by the International Monetary Fund. Since 1983, the Hong Kong dollar has
been pegged to the U.S. dollar. In Europe, a European Currency Unit
("ECU") has been developed. Currencies are generally traded by leading
international commercial banks and institutional investors (including
corporate treasurers, money managers, pension funds and insurance
companies). From time to time, central banks in a number of countries
also are major buyers and sellers of foreign currencies, mostly for the
purpose of preventing or reducing substantial exchange rate fluctuations.
Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of
actual and proposed government policies on the value of currencies,
interest rate differentials between the currencies and the balance of
imports and exports of goods and services and transfers of income and
capital from one country to another. These economic factors are
influenced primarily by a particular country's monetary and fiscal
policies (although the perceived political situation in a particular
country may have an influence as well-particularly with respect to
transfers of capital). Investor psychology may also be an important
determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative
strength or weakness of a particular currency may sometimes exercise
considerable speculative influence on currency exchange rates by
purchasing or selling large amounts of the same currency or currencies.
However, over the long term, the currency of a country with a low rate
of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.
The following tables set forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and
end of month equivalent U.S. dollar rates of exchange for the United
Kingdom pound sterling and the Hong Kong dollar:
Range of Fluctuations in Foreign Currencies
United Kingdom
Annual Pound Sterling/ Hong Kong/
Period U.S. Dollar U.S. Dollar
_____ ______________ ___________
1983 0.616-0.707 6.480-8.700
1984 0.670-0.864 7.774-8.050
1985 0.672-0.951 7.729-7.990
1986 0.643-0.726 7.768-7.819
1987 0.530-0.680 7.751-7.822
1988 0.525-0.601 7.764-7.912
1989 0.548-0.661 7.775-7.817
1990 0.504-0.627 7.740-7.817
1991 0.499-0.624 7.716-7.803
1992 0.499-0.667 7.697-7.781
1993 0.630-0.705 7.722-7.766
1994 0.610-0.684 7.723-7.750
1995 0.610-0.653 7.726-7.763
1996 0.583-0.670 7.732-7.742
1997 0.584-0.633 7.708-7.751
1998 0.584-0.620 7.735-7.749
Source: Bloomberg L.P.
Page 4
<TABLE>
<CAPTION>
End of Month Exchange Rates End of Month Exchange Rates
for Foreign Currencies for Foreign Currencies (continued)
____________________________________________________ ___________________________________________________
United Kingdom Hong United Kingdom Hong
Pound Sterling/ Kong/U.S. Pound Sterling/ Kong/U.S.
Monthly Period U.S. Dollar Dollar Monthly Period U.S. Dollar Dollar
______________ ______________ __________ ______________ ______________ _________
<S> <C> <C> <C> <C> <C>
1992: June .627 7.736
January .559 7.762 July .626 7.738
February .569 7.761 August .645 7.741
March .576 7.740 September .631 7.732
April .563 7.757 October .633 7.727
May .546 7.749 November .652 7.731
June .525 7.731 December .645 7.733
July .519 7.732 1996:
August .503 7.729 January .661 7.728
September .563 7.724 February .653 7.731
October .641 7.736 March .655 7.734
November .659 7.742 April .664 7.735
December .662 7.744 May .645 7.736
1993: June .644 7.741
January .673 7.734 July .642 7.735
February .701 7.734 August .639 7.733
March .660 7.731 September .639 7.733
April .635 7.730 October .615 7.732
May .640 7.724 November .595 7.732
June .671 7.743 December .583 7.735
July .674 7.761 1997:
August .670 7.755 January .624 7.750
September .668 7.734 February .614 7.744
October .676 7.733 March .611 7.749
November .673 7.725 April .616 7.746
December .677 7.723 May .610 7.748
1994: June .600 7.747
January .664 7.724 July .609 7.742
February .673 7.727 August .622 7.750
March .674 7.737 September .619 7.738
April .659 7.725 October .598 7.731
May .662 7.726 November .592 7.730
June .648 7.730 December .607 7.749
July .648 7.725 1998:
August .652 7.728 January .613 7.735
September .634 7.727 February .609 7.743
October .611 7.724 March .598 7.749
November .639 7.731 April .598 7.747
December .639 7.738 May .613 7.749
1995: June .600 7.748
January .633 7.732 July .613 7.748
February .631 7.730 August .595 7.749
March .617 7.733 September .589 7.749
April .620 7.742 October .596 7.747
May .630 7.735 November .607 7.743
December .602 7.746
</TABLE>
Source: Bloomberg L.P.
The Evaluator will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, since these markets are volatile and are constantly changing,
Page 5
depending on the activity at any particular time of the large
international commercial banks, various central banks, large multi-
national corporations, speculators and other buyers and sellers of
foreign currencies, and since actual foreign currency transactions may
not be instantly reported, the exchange rates estimated by the Evaluator
may not be indicative of the amount in United States dollars the
International Trusts would receive had the Trustee sold any particular
currency in the market. The foreign exchange transactions of the
International Trusts will be conducted by the Trustee with foreign
exchange dealers acting as principals on a spot (i.e., cash) buying
basis. Although foreign exchange dealers trade on a net basis, they do
realize a profit based upon the difference between the price at which
they are willing to buy a particular currency (bid price) and the price
at which they are willing to sell the currency (offer price).
Concentrations
Banks and Thrifts. Certain Trusts may be considered to be concentrated
in common stocks of financial institutions. See "Risk Factors" in Part I
of this Prospectus which will indicate, if applicable, a Trust's
concentration in this industry. Banks, thrifts and their holding
companies are especially subject to the adverse effects of economic
recession, volatile interest rates, portfolio concentrations in
geographic markets and in commercial and residential real estate loans,
and competition from new entrants in their fields of business. Banks and
thrifts are highly dependent on net interest margin. Recently, bank
profits have come under pressure as net interest margins have
contracted, but volume gains have been strong in both commercial and
consumer products. There is no certainty that such conditions will
continue. Bank and thrift institutions had received significant consumer
mortgage fee income as a result of activity in mortgage and refinance
markets. As initial home purchasing and refinancing activity subsided,
this income diminished. Economic conditions in the real estate markets,
which have been weak in the past, can have a substantial effect upon
banks and thrifts because they generally have a portion of their assets
invested in loans secured by real estate. Banks, thrifts and their
holding companies are subject to extensive federal regulation and, when
such institutions are state-chartered, to state regulation as well. Such
regulations impose strict capital requirements and limitations on the
nature and extent of business activities that banks and thrifts may
pursue. Furthermore, bank regulators have a wide range of discretion in
connection with their supervisory and enforcement authority and may
substantially restrict the permissible activities of a particular
institution if deemed to pose significant risks to the soundness of such
institution or the safety of the federal deposit insurance fund.
Regulatory actions, such as increases in the minimum capital
requirements applicable to banks and thrifts and increases in deposit
insurance premiums required to be paid by banks and thrifts to the
Federal Deposit Insurance Corporation ("FDIC"), can negatively impact
earnings and the ability of a company to pay dividends. Neither federal
insurance of deposits nor governmental regulations, however, insures the
solvency or profitability of banks or their holding companies, or
insures against any risk of investment in the securities issued by such
institutions.
The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great
extent, these changes are embodied in the Financial Institutions Reform,
Recovery and Enforcement Act; enacted in August 1989, the Federal
Deposit Insurance Corporation Improvement Act of 1991, the Resolution
Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and the regulations promulgated under these laws. Many of the
regulations promulgated pursuant to these laws have only recently been
finalized and their impact on the business, financial condition and
prospects of the Equity Securities in the Trust's portfolio cannot be
predicted with certainty. Periodic efforts by recent Administrations to
introduce legislation broadening the ability of banks to compete with
new products have not been successful, but if enacted could lead to more
Page 6
failures as a result of increased competition and added risks. Failure
to enact such legislation, on the other hand, may lead to declining
earnings and an inability to compete with unregulated financial
institutions. Efforts to expand the ability of federal thrifts to branch
on an interstate basis have been initially successful through
promulgation of regulations, and legislation to liberalize interstate
banking has recently been signed into law. Under the legislation, banks
will be able to purchase or establish subsidiary banks in any state, one
year after the legislation's enactment. Starting in mid-1997, banks were
allowed to turn existing banks into branches. Consolidation is likely to
continue. The Securities and Exchange Commission and the Financial
Accounting Standards Board require the expanded use of market value
accounting by banks and have imposed rules requiring market accounting
for investment securities held in trading accounts or available for
sale. Adoption of additional such rules may result in increased
volatility in the reported health of the industry, and mandated
regulatory intervention to correct such problems. In late 1993 the
United States Treasury Department proposed a restructuring of the banks
regulatory agencies which, if implemented, may adversely affect certain
of the Equity Securities in the Trust's portfolio. Additional
legislative and regulatory changes may be forthcoming. For example, the
bank regulatory authorities have proposed substantial changes to the
Community Reinvestment Act and fair lending laws, rules and regulations,
and there can be no certainty as to the effect, if any, that such
changes would have on the Equity Securities in the Trust's portfolio. In
addition, from time to time the deposit insurance system is reviewed by
Congress and federal regulators, and proposed reforms of that system
could, among other things, further restrict the ways in which deposited
moneys can be used by banks or reduce the dollar amount or number of
deposits insured for any depositor. Such reforms could reduce
profitability as investment opportunities available to bank institutions
become more limited and as consumers look for savings vehicles other
than bank deposits. Banks and thrifts face significant competition from
other financial institutions such as mutual funds, credit unions,
mortgage banking companies and insurance companies, and increased
competition may result from legislative broadening of regional and
national interstate banking powers as has been recently enacted. Among
other benefits, the legislation allows banks and bank holding companies
to acquire across previously prohibited state lines and to consolidate
their various bank subsidiaries into one unit. The Sponsor makes no
prediction as to what, if any, manner of bank and thrift regulatory
actions might ultimately be adopted or what ultimate effect such actions
might have on the Trust's portfolio.
The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than 5%
of the outstanding shares of any class of voting securities of a bank or
bank holding company, (2) acquiring control of a bank or another bank
holding company, (3) acquiring all or substantially all the assets of a
bank, or (4) merging or consolidating with another bank holding company,
without first obtaining Federal Reserve Board ("FRB") approval. In
considering an application with respect to any such transaction, the FRB
is required to consider a variety of factors, including the potential
anti-competitive effects of the transaction, the financial condition and
future prospects of the combining and resulting institutions, the
managerial resources of the resulting institution, the convenience and
needs of the communities the combined organization would serve, the
record of performance of each combining organization under the Community
Reinvestment Act and the Equal Credit Opportunity Act, and the
prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.
The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. The
Sponsor makes no prediction as to the effect, if any, such laws will
have on the Equity Securities or whether such approvals, if necessary,
will be obtained.
Petroleum Refining Companies. Certain Trusts may be considered to be
concentrated in common stocks of companies engaged in refining and
marketing oil and related products. See "Risk Factors" in Part I of this
Prospectus which will indicate, if applicable, the Trust's concentration
in the petroleum industry. According to the U.S. Department of Commerce,
the factors which will most likely shape the industry include the price
and availability of oil from the Middle East, changes in United States
environmental policies and the continued decline in U.S. production of
crude oil. Possible effects of these factors may be increased U.S. and
world dependence on oil from the Organization of Petroleum Exporting
Page 7
Countries ("OPEC") and highly uncertain and potentially more volatile
oil prices. Factors which the Sponsor believes may increase the
profitability of oil and petroleum operations include increasing demand
for oil and petroleum products as a result of the continued increases in
annual miles driven and the improvement in refinery operating margins
caused by increases in average domestic refinery utilization rates. The
existence of surplus crude oil production capacity and the willingness
to adjust production levels are the two principal requirements for
stable crude oil markets. Without excess capacity, supply disruptions in
some countries cannot be compensated for by others. Surplus capacity in
Saudi Arabia and a few other countries and the utilization of that
capacity prevented during the Persian Gulf crisis, and continues to
prevent, severe market disruption. Although unused capacity contributed
to market stability in 1990 and 1991, it ordinarily creates pressure to
overproduce and contributes to market uncertainty. The likely
restoration of a large portion of Kuwait and Iraq's production and
export capacity over the next few years could lead to such a development
in the absence of substantial growth in world oil demand. Formerly, OPEC
members attempted to exercise control over production levels in each
country through a system of mandatory production quotas. Because of the
crisis in the Middle East, the mandatory system has since been replaced
with a voluntary system. Production under the new system has had to be
curtailed on at least one occasion as a result of weak prices, even in
the absence of supplies from Kuwait and Iraq. The pressure to deviate
from mandatory quotas, if they are reimposed, is likely to be
substantial and could lead to a weakening of prices. In the longer term,
additional capacity and production will be required to accommodate the
expected large increases in world oil demand and to compensate for
expected sharp drops in U.S. crude oil production and exports from the
Soviet Union. Only a few OPEC countries, particularly Saudi Arabia, have
the petroleum reserves that will allow the required increase in
production capacity to be attained. Given the large-scale financing that
is required, the prospect that such expansion will occur soon enough to
meet the increased demand is uncertain.
Declining U.S. crude oil production will likely lead to increased
dependence on OPEC oil, putting refiners at risk of continued and
unpredictable supply disruptions. Increasing sensitivity to
environmental concerns will also pose serious challenges to the industry
over the coming decade. Refiners are likely to be required to make heavy
capital investments and make major production adjustments in order to
comply with increasingly stringent environmental legislation, such as
the 1990 amendments to the Clean Air Act. If the cost of these changes
is substantial enough to cut deeply into profits, smaller refiners may
be forced out of the industry entirely. Moreover, lower consumer demand
due to increases in energy efficiency and conservation, gasoline
reformulations that call for less crude oil, warmer winters or a general
slowdown in economic growth in this country and abroad, could negatively
affect the price of oil and the profitability of oil companies. No
assurance can be given that the demand for or prices of oil will
increase or that any increases will not be marked by great volatility.
Some oil companies may incur large cleanup and litigation costs relating
to oil spills and other environmental damage. Oil production and
refining operations are subject to extensive federal, state and local
environmental laws and regulations governing air emissions and the
disposal of hazardous materials. Increasingly stringent environmental
laws and regulations are expected to require companies with oil
production and refining operations to devote significant financial and
managerial resources to pollution control. General problems of the oil
and petroleum products industry include the ability of a few influential
producers significantly to affect production, the concomitant volatility
of crude oil prices and increasing public and governmental concern over
air emissions, waste product disposal, fuel quality and the
environmental effects of fossil-fuel use in general.
In addition, any future scientific advances concerning new sources of
energy and fuels or legislative changes relating to the energy industry
or the environment could have a negative impact on the petroleum
products industry. While legislation has been enacted to deregulate
certain aspects of the oil industry, no assurances can be given that new
or additional regulations will not be adopted. Each of the problems
referred to could adversely affect the financial stability of the
issuers of any petroleum industry stocks in the Trusts.
Real Estate Companies. Certain Portfolios are considered to be
concentrated in common stocks of companies engaged in real estate asset
management, development, leasing, property sales and other related
activities. See "Risk Factors" in Part I of this Prospectus which will
indicate, if applicable, a Trust's concentration in this industry.
Investment in securities issued by these real estate companies should be
made with an understanding of the many factors which may have an adverse
impact on the credit quality of the particular company or industry.
Generally, these include economic recession, the cyclical nature of real
estate markets, competitive overbuilding, unusually adverse weather
conditions, changing demographics, changes in governmental regulations
Page 8
(including tax laws and environmental, building, zoning and sales
regulations), increases in real estate taxes or costs of material and
labor, the inability to secure performance guarantees or insurance as
required, the unavailability of investment capital and the inability to
obtain construction financing or mortgage loans at rates acceptable to
builders and purchasers of real estate. Additional risks include an
inability to reduce expenditures associated with a property (such as
mortgage payments and property taxes) when rental revenue declines, and
possible loss upon foreclosure of mortgaged properties if mortgage
payments are not paid when due.
REITs are financial vehicles that have as their objective the pooling of
capital from a number of investors in order to participate directly in
real estate ownership or financing. REITs are generally fully integrated
operating companies that have interests in income-producing real estate.
REITs are differentiated by the types of real estate properties held and
the actual geographic location of properties and fall into two major
categories: equity REITs emphasize direct property investment, holding
their invested assets primarily in the ownership of real estate or other
equity interests, while mortgage REITs concentrate on real estate
financing, holding their assets primarily in mortgages secured by real
estate. As of the Initial Date of Deposit, the Trust contains only
equity REITs. REITs obtain capital funds for investment in underlying
real estate assets by selling debt or equity securities in the public or
institutional capital markets or by bank borrowing. Thus, the returns on
common equities of the REITs in which the Trust invests will be
significantly affected by changes in costs of capital and, particularly
in the case of highly "leveraged" REITs (i.e., those with large amounts
of borrowings outstanding), by changes in the level of interest rates.
The objective of an equity REIT is to purchase income-producing real
estate properties in order to generate high levels of cash flow from
rental income and a gradual asset appreciation, and they typically
invest in properties such as office, retail, industrial, hotel and
apartment buildings and healthcare facilities.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from
corporate income taxes provided the REIT satisfies the requirements of
Sections 856 through 860 of the Internal Revenue Code. The major tests
for tax-qualified status are that the REIT (i) be managed by one or more
trustees or directors, (ii) issue shares of transferable interest to its
owners, (iii) have at least 100 shareholders, (iv) have no more than 50%
of the shares held by five or fewer individuals, (v) invest
substantially all of its capital in real estate related assets and
derive substantially all of its gross income from real estate related
assets and (vi) distributed at least 95% of its taxable income to its
shareholders each year. If any REIT in the Trust's portfolio should fail
to qualify for such tax status, the related shareholders (including the
Trust) could be adversely affected by the resulting tax consequences.
The underlying value of the Securities and the Trust's ability to make
distributions to Unit holders may be adversely affected by changes in
national economic conditions, changes in local market conditions due to
changes in general or local economic conditions and neighborhood
characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
capital improvements, particularly in older properties, changes in real
estate tax rates and other operating expenses, regulatory and economic
impediments to raising rents, adverse changes in governmental rules and
fiscal policies, dependency on management skill, civil unrest, acts of
God, including earthquakes and other natural disasters (which may result
in uninsured losses), acts of war, adverse changes in zoning laws, and
other factors which are beyond the control of the issuers of the REITs
in the Trust.
The value of the REITs may at times be particularly sensitive to
devaluation in the event of rising interest rates. Equity REITs are less
likely to be affected by interest rate fluctuations than mortgage REITs
and the nature of the underlying assets of an equity REIT may be
considered more tangible than that of a mortgage REIT. Equity REITs are
more likely to be adversely affected by changes in the value of the
underlying property it owns than mortgage REITs.
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential
complexes and office buildings. The impact of economic conditions on
REITs can also be expected to vary with geographic location and property
type. Investors should be aware the REITs may not be diversified and are
subject to the risks of financing projects. REITs are also subject to
defaults by borrowers, self-liquidation, the market's perception of the
Page 9
REIT industry generally, and the possibility of failing to qualify for
pass-through of income under the Internal Revenue Code, and to maintain
exemption from the Investment Company Act of 1940. A default by a
borrower or lessee may cause the REIT to experience delays in enforcing
its right as mortgagee or lessor and to incur significant costs related
to protecting its investments. In addition, because real estate
generally is subject to real property taxes, the REITs in the Trust may
be adversely affected by increases or decreases in property tax rates
and assessments or reassessments of the properties underlying the REITs
by taxing authorities. Furthermore, because real estate is relatively
illiquid, the ability of REITs to vary their portfolios in response to
changes in economic and other conditions may be limited and may
adversely affect the value of the Units. There can be no assurance that
any REIT will be able to dispose of its underlying real estate assets
when advantageous or necessary. In an effort to reduce the impact of the
risks discussed above, the Underwriter has selected REITs that are
diversified among various real estate sectors and geographic locations.
The issuer of REITs generally maintains comprehensive insurance on
presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, certain types
of losses may be uninsurable or not be economically insurable as to
which the underlying properties are at risk in their particular locales.
There can be no assurance that insurance coverage will be sufficient to
pay the full current market value or current replacement cost of any
lost investment. Various factors might make it impracticable to use
insurance proceeds to replace a facility after it has been damaged or
destroyed. Under such circumstances, the insurance proceeds received by
a REIT might not be adequate to restore its economic position with
respect to such property.
Under various environmental laws, a current or previous owner or
operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such
property. Such laws often impose liability whether or not the owner or
operator caused or knew of the presence of such hazardous or toxic
substances and whether or not the storage of such substances was in
violation of a tenant's lease. In addition, the presence of hazardous or
toxic substances, or the failure to remediate such property properly,
may adversely affect the owner's ability to borrow using such real
property as collateral. No assurance can be given that one or more of
the REITs in the Trust may not be presently liable or potentially liable
for any such costs in connection with real estate assets they presently
own or subsequently acquire while such REITs are held in the Trust.
Small-Cap Companies. While historically small-cap company stocks have
outperformed the stocks of large companies, the former have customarily
involved more investment risk as well. Small-cap companies may have
limited product lines, markets or financial resources; may lack
management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. Some of
these companies may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel.
Hong Kong. Recently, in the wake of Chinese economic development and
reform, certain Hong Kong real estate companies and other investors
began purchasing and developing real estate in southern China, including
Beijing, the Chinese capital. By 1992, however, southern China began to
experience a rise in real estate prices, increases in construction costs
and a tightening of credit markets. Any worsening of these conditions
could affect the profitability and financial condition of Hong Kong real
estate companies and could have a materially adverse effect on the value
of a Hong Kong Portfolio.
The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less
publicly available information. Also, because small cap companies
normally have fewer shares outstanding and these shares trade less
frequently than large companies, it may be more difficult for the Trusts
which contain these Equity Securities to buy and sell significant
amounts of such shares without an unfavorable impact on prevailing
market prices.
Portfolios
Equity Securities Selected for The Dow (sm) Target 5 Strategy
Caterpillar Inc., headquartered in Peoria, Illinois, makes earthmoving,
construction and materials handling machinery and equipment, and diesel
engines. The company also provides various financial products and
services.
Page 10
E.I. du Pont de Nemours & Company, headquartered in Wilmington,
Delaware, explores for, develops and produces crude oil and natural gas;
makes polymers, elastomers, finishes and performance films; makes
specialty fibers and chemicals; produces agricultural products; and
makes electronic materials and medical products. The company
participates in five principal business segments-Petroleum Operations;
Polymers; Fibers; Chemicals; and Diversified Businesses.
Goodyear Tire & Rubber Company, headquartered in Akron, Ohio, develops,
makes and sells tires and related transportation products; participates
in various crude oil transportation and gathering activities; and makes
various industrial rubber and chemical products.
International Paper Company, headquartered in Purchase, New York,
manufactures printing and writing paper, pulp, tissue, paperboard,
packaging and wood products. The company also manufactures nonwoven
papers, specialty chemcials, specialty panels and laminated products.
The company sells its products primarily in the United States, Europe
and the Pacific Rim.
Philip Morris Companies, Inc., headquartered in New York, New York, is
the world's largest producer and marketer of consumer packaged goods.
Its five principal operating companies are Kraft Foods, Inc., Miller
Brewing Company, Philip Morris International Inc., Philip Morris U.S.A.
and Philip Morris Capital Corporation.
Equity Securities Selected for The Dow (sm) Target 10 Strategy
Caterpillar Inc., headquartered in Peoria, Illinois, makes earthmoving,
construction and materials handling machinery and equipment, and diesel
engines. The company also provides various financial products and
services.
Chevron Corporation, headquartered in San Francisco, California, is an
international oil company with activities in the United States and
abroad. The company is involved in worldwide, integrated petroleum
operations which explore for, develop and produce petroleum liquids and
natural gas, as well as transporting the products. The company is also
involved in the mineral and chemical industries.
E.I. du Pont de Nemours & Company, headquartered in Wilmington,
Delaware, explores for, develops and produces crude oil and natural gas;
makes polymers, elastomers, finishes and performance films; makes
specialty fibers and chemicals; produces agricultural products; and
makes electronic materials and medical products. The company
participates in five principal business segments-Petroleum Operations;
Polymers; Fibers; Chemicals; and Diversified Businesses.
Eastman Kodak Company, headquartered in Rochester, New York, develops,
makes and sells consumer and commercial photographic imaging products.
The company's products include films, photographic papers and chemicals,
cameras, projectors, processing equipment, audiovisual equipment,
copiers, microfilm products, applications software, printers and other
equipment.
General Motors Corporation, headquartered in Detroit, Michigan,
manufactures and sells cars and trucks worldwide under the trademarks
"Chevrolet," "Oldsmobile," "Pontiac," "Buick," "Saturn," "Cadillac" and
"GMC Trucks."
Goodyear Tire & Rubber Company, headquartered in Akron, Ohio, develops,
makes and sells tires and related transportation products; participates
in various crude oil transportation and gathering activities; and makes
various industrial rubber and chemical products.
International Paper Company, headquartered in Purchase, New York,
manufactures printing and writing paper, pulp, tissue, paperboard,
packaging and wood products. The company also manufactures nonwoven
papers, specialty chemcials, specialty panels and laminated products.
The company sells its products primarily in the United States, Europe
and the Pacific Rim.
Minnesota Mining & Manufacturing Company, headquartered in St. Paul,
Minnesota, manufactures industrial, electronic, health, consumer and
information-imaging products for distribution worldwide. The company's
products include adhesives, abrasives, laser imagers and "Scotch" brand
products.
J.P. Morgan & Company, Inc., headquartered in New York, New York, is a
global investment banking firm that serves clients with complex needs
through an integrated range of advisory, financing, trading, investment
and related capabilities.
Philip Morris Companies, Inc., headquartered in New York, New York, is
the world's largest producer and marketer of consumer packaged goods.
Page 11
Its five principal operating companies are Kraft Foods, Inc., Miller
Brewing Company, Philip Morris International Inc., Philip Morris U.S.A.
and Philip Morris Capital Corporation.
Equity Securities Selected for the Target 25 Strategy
Abitibi Consolidated, Inc., headquartered in Montreal, Canada, produces
publication papers, including newsprint and value-added grades. The
company also operates paper mills.
Baker-Hughes, Inc., headquartered in Houston, Texas, makes drilling
products for the oil and gas industry; production products used in
installing, cementing, and perforating the casing in the drilling hole;
and process equipment, pumps and instrumentation.
Bemis Company, headquartered in Minneapolis, Minnesota, makes flexible
packaging products and pressure sensitive materials to customers. The
primary market for the company's products is the food industry; other
markets include companies in chemical, agribusiness, pharmaceutical,
medical, printing and graphic industries.
Cooper Industries, Inc., headquartered in Houston, Texas, manufactures,
markets and sells electrical products, tools and hardware, and
automotive parts. The company's products include compression equipment
for oil and natural gas applications, rotary drilling equipment, mining
and construction machinery, and electrical power transformers.
Deere & Company, headquartered in Moline, Illinois, makes and
distributes agricultural equipment, industrial equipment, and commercial
and consumer equipment. The company also provides credit services,
property and casualty insurance, and health management programs.
Eaton Corporation, headquartered in Cleveland, Ohio, manufactures
engineered products which serve industrial, vehicle, construction,
commercial and semiconductor markets. The company's principal products
include electrical power distribution and control equipment, truck
drivetrain systems, engine components, hydraulic products, ion
implanters and a variety of controls.
Federal Signal Corporation, headquartered in Oak Brook, Illinois, makes
and supplies safety, signaling and communications equipment, fire rescue
products, street sweeping and vacuum loader vehicles, parking control
equipment, custom on-premise signage, carbide cutting tools, precision
punches and related die components.
Fortune Brands, Inc., headquartered in Old Greenwich, Connecticut, makes
and sells distilled spirits, office products, hardware and home
improvement products, supplies and accessories, and golf and leisure
products.
Gencorp, Inc., headquartered in Fairlawn, Ohio, makes extruded and
molded rubber products, vinyl-coated fabrics, vinyl woodgrain laminates,
decorative wallcoverings, tennis balls and racquetballs, styrene and
butadiene-based specialty latices, plastic films, propulsion systems and
defense electronics.
General Mills, Inc., headquartered in Minneapolis, Minnesota, makes and
markets a variety of consumer foods products, including ready-to-eat
cereals; desserts; flour and baking mixes; dinner and side dish
products; snack products; beverages and yogurt products.
Harris Corporation, headquartered in Melbourne, Florida, through
subsidiaries, researches, develops and produces high-technology systems
for government and commercial organizations, makes data-sheet integrated
circuits and discrete devices, and makes communications equipment. The
company also sells office equipment and business communication products.
Kellogg Company, headquartered in Battle Creek, Michigan, makes and
markets ready-to-eat cereals under the "Kellogg's" name, and other
convenience food products including toaster pastries, frozen waffles,
bagels, marshmallow squares and cereal bars.
PPG Industries, Inc., headquartered in Pittsburgh, Pennsylvania, makes
protective and decorative coatings, flat glass, fabricated glass
products, continuous strand fiber glass and industrial and specialty
chemicals. Markets for the company's products include manufacturing,
construction, automotive, and chemical processing.
Pall Corporation, headquartered in East Hills, New York, designs,
manufactures and markets fine disposable filters, membranes and other
fluid clarification and separations devices. The company's devices are
used in the healthcare, aeropower and fluid processing markets.
Rayonier, Inc., headquartered in Stamford, Connecticut, trades,
merchandises and makes logs, timber and wood products; and produces and
sells high value-added specialty pulps.
Reynolds Metals Company, headquartered in Richmond, Virginia, makes
metals and other materials through its worldwide operations. The company
Page 12
produces and processes bauxite into alumina and finally into aluminum.
The company also manufactures and distributes finished products,
including household foils and commercial building products. The company
sells the metal products to automotive producers, restaurants and
construction companies.
Snap-On, Inc., headquartered in Kenosha, Wisconsin, develops,
manufactures and distributes tool and equipment solutions worldwide. The
company's products include hand and power tools, diagnostics and shop
equipment, tool storage products, diagnostics software and other
solutions for the automotive and industrial service industries.
Sonoco Products Company, headquartered in Hartsville, South Carolina,
makes paperboard-based and plastic-based packaging products (carriers
and containers) for both consumer and industrial markets.
Sunoco, Inc., headquartered in Philadelphia, Pennsylvania, operates
domestic refineries from Maine to Virginia and west to Indiana. The
company sells lubricants and petrochemicals worldwide. The company also
operates domestic pipelines and terminals, and manufactures
metallurgical-grade coke for use in the steel industry.
Thomas & Betts Corporation, headquartered in Memphis, Tennessee,
designs, makes and sells, on a global basis, electrical and electronic
connectors and components, as well as other related products and
accessories for construction and original equipment manufacturer
markets. Products are sold worldwide through electrical, electronic and
HVAC distributors, mass merchandisers, catalogs and home centers.
USX-Marathon Group, headquartered in Pittsburgh, Pennsylvania, explores
for, produces, refines, distributes and markets crude oil, natural gas
and petroleum products.
Unocal Corporation, headquartered in El Segundo, California, explores
for, develops, produces and markets crude oil and natural gas; explores
for, produces and sells geothermal resources; makes and markets nitrogen-
based fertilizers, petroleum coke, graphites and specialty minerals.
Wallace Computer Services, Inc., headquartered in Lisle, Illinois, sells
a broad line of products and services including business forms,
commercial and promotional graphics printing, office products, computer
and consumer product labels, machine ribbons, computer hardware and
software, computer accessories and electronic forms.
Weis Markets, Inc., headquartered in Sunbury, Pennsylvania, with
subsidiaries, operates retail food markets in Maryland, New Jersey, New
York, Pennsylvania, Virginia and West Virginia; operates pet supply
stores in Alabama, Georgia, Indiana, Kentucky, Maryland, Michigan, Ohio,
Pennsylvania, South Carolina and Tennessee; and operates as a restaurant
and institutional food supplier.
Whirlpool Corporation, headquartered in Benton Harbor, Michigan, makes
and markets major home appliances, including home laundry appliances,
home refrigeration and room air conditioning equipment and other home
appliances, products and services.
Equity Securities Selected for the Target Small-Cap Strategy
Advanced Energy Industries, Inc., headquartered in Ft. Collins,
Colorado, develops and produces power conversion and control systems
which are used by manufacturers of semiconductors and in industrial thin
film manufacturing processes.
Advent Software, Inc., headquartered in San Francisco, California,
provides stand-alone and client/server software products, data
interfaces and related services that automate and integrate certain
mission-critical functions of investment management organizations.
Alpharma, Inc. (Class A), headquartered in Ft. Lee, New Jersey, through
divisions, develops, makes and sells specialty generic and proprietary
human pharmaceuticals and animal health products.
Bell & Howell Company, headquartered in Skokie, Illinois, through wholly-
owned Bell & Howell Operating Company, develops and markets imaging and
information services, and systems that provide its customers with access
solutions to targeted segments of complex public and private information
databases. The company also develops and markets a complete range of
high volume mail-processing systems.
C-Cube Microsystems, Inc., headquartered in Milpitas, California,
provides powerful, highly integrated, standards-based digital video
compression solutions. The company's products enable high quality video
to be provided cost-effectively by a broad range of end user systems.
Caere Corporation, headquartered in Los Gatos, California, designs,
develops, manufactures, and markets optical character recognition
Page 13
software and hardware. The company's products convert scanned and faxed
images into computer usable text, as well as desktop electronic forms
and information management products. Products are marketed under the
"OmniPage" and "WordScan" names.
Calpine Corporation, headquartered in San Jose, California, develops,
acquires, owns and operates power generation facilities, and produces
electricity and steam from natural gas-fired and geothermal energy
facilities located in the western United States. The company sells
electricity and steam in the United States and selected international
markets.
Copart, Inc., headquartered in Benicia, California, provides vehicle
suppliers, mainly insurance companies, with a full range of services to
process and sell salvage vehicles through auctions, principally to
licensed dismantlers, rebuilders and used vehicle dealers.
DM Management Company, headquartered in Hingham, Massachusetts, operates
as a national direct marketer of a wide assortment of classic women's
apparel through full-color catalogs which are designed to appeal to
mature, upscale woman.
Education Management Corporation, headquartered in Pittsburgh,
Pennsylvania, provides proprietary postsecondary education in the United
States based on student enrollments and revenues, including associate's
and bachelor's degree programs. The company also provides non-degree
programs in the areas of design, media arts, culinary arts, fashion and
paralegal studies.
FPIC Insurance Group, Inc., headquartered in Jacksonville, Florida,
provides medical professional liability insurance for physicians and
dentists in Florida, managed care liability insurance, professional and
comprehensive general liability insurance for healthcare facilities,
AHCA/OSHA insurance coverage, provider stop loss insurance and third
party services.
Fossil, Inc., headquartered in Richardson, Texas, designs, develops,
markets, and distributes fashion watches and accessories, including
sunglasses, small leather goods, belts, and handbags. The company's
brand names include "FOSSIL," "RELIC," and "FSL." The company sells its
products primarily through department stores and other major retailers
around the world.
Genovese Drug Stores, Inc. (Class A), headquartered in Melville, New
York, operates retail drug and general merchandise stores. The company
also operates a mail-order prescription service, professional photo
retail store, arts and crafts store, and discount clearance stores.
Hanger Orthopedic Group, Inc., headquartered in Bethesda, Maryland,
through subsidiaries, provides orthotic and prosthetic patient care
services in 28 states and Washington, D.C. The company also makes and
distributes components and finished patient care products to the
orthotic and prosthetic industry.
International Speedway Corporation (Class A), headquartered in Daytona
Beach, Florida, conducts motor sport activities at raceways in Alabama,
Arizona, Florida, New York and South Carolina; and holds investments in
other motorsports entertainment companies. The company also produces and
syndicates race and race-related radio broadcasts.
Jacobs Engineering Group, Inc., headquartered in Pasadena, California,
with subsidiaries, provides engineering, design and consulting services;
construction and construction management services; and process plant
maintenance services to various industrial, commercial and governmental
clients throughout the United States, the United Kingdom, Ireland and
India.
Kendle International, Inc., headquartered in Cincinnati, Ohio, is a
contract research organization that provides a broad range of clinical
research and drug development services to the pharmaceutical and
biotechnology industries.
LandAmerica Financial Group, Inc., headquartered in Richmond, Virginia,
operates a title insurance business in 49 states, Washington, D.C.,
Puerto Rico, the U.S. Virgin Islands, the Bahamas and certain provinces
of Canada. The company also provides escrow services to customers in
various areas of the country.
Landstar System, Inc., headquartered in Jacksonville, Florida, through
subsidiaries, operates as a truckload carrier in North America,
transporting a variety of freight including iron and steel, automotive
products, paper, lumber and building products, aluminum, chemicals,
foodstuffs, heavy machinery, ammunition and explosives, and military
hardware.
Medical Manager Corporation, headquartered in Tampa, Florida, develops,
markets, implements, and supports the "Medical Manager" physician
Page 14
practice management system. The system addresses the financial,
administrative, clinical, and practice management needs of physicians.
The company's system is marketed throughout the United States.
Metris Companies, Inc., headquartered in St. Louis Park, Minnesota,
markets consumer credit products, extended service plans and fee based
products and services to moderate income consumers.
MotivePower Industries, Inc., headquartered in Pittsburgh, Pennsylvania,
designs, makes and distributes engineered locomotive components and
parts; provides locomotive fleet maintenance, remanufacturing and
overhauls; and makes switcher, commuter and mid-range, DC traction,
diesel-electric and liquefied natural gas locomotives.
NCI Building Systems, Inc., headquartered in Houston, Texas, designs,
makes and markets pre-engineered metal building systems and components
for commercial, industrial, agricultural and community service uses; and
overhead doors, self-storage buildings and metal home framing systems
and components.
NCO Group, Inc., headquartered in Ft. Washington, Pennsylvania, provides
accounts receivable management services utilizing an extensive
teleservices infrastructure mainly to educational organizations,
financial institutions, healthcare organizations, telecommunications
companies, utilities and government entities.
NeoMagic Corporation, headquartered in Santa Clara, California, designs,
develops and markets multimedia accelerators for notebook PC
manufacturers. Eight of the world's ten largest notebook PC
manufacturers have integrated the company's line of MagicGraph 128 pin-
compatible multimedia accelerators into the overall design of their
notebook computers.
Orbotech Ltd., headquartered in Yvane, Israel, designs, develops, makes
and markets automated optical inspection systems for automated
inspection and identification of flaws in printed circuit boards and
liquid crystal flat panel displays. The company also makes computer-
aided manufacturing systems and laser plotters.
O'Reilly Automotive, Inc., headquartered in Springfield, Missouri, sells
automotive aftermarket parts, tools, supplies, equipment and accessories
mainly through stores in Arkansas, Kansas, Missouri and Oklahoma.
Products are sold to both do-it-yourself customers and professional
mechanics or service technicians.
Periphonics Corporation, headquartered in Bohemia, New York, develops,
makes, sells and supports high-performance, interactive transaction
processing systems which facilitate interaction with computer databases
using a touch-tone telephone, speech input and output, Web browsers and
fax output.
Playtex Products, Inc., headquartered in Westport, Connecticut,
manufactures and distributes personal care products. The company's
marketed products include the brand names "Playtex" and "Ultimates"
tampons, "Playtex" disposable feeding systems for infants, "Cherubs"
baby products, "Playtex," "Handsaver," "Banana Boat" sun and skin care
products, and a line of household and industrial gloves.
Premier Bancshares, Inc., headquartered in Atlanta, Georgia, is a multi-
bank holding company. The bank operates offices located in the
southeastern United States and operates as a full service commercial bank.
RCM Technologies, Inc., headquartered in Pennsauken, New Jersey, through
subsidiaries, provides temporary and contract personnel to businesses,
professional and service organizations, manufacturers and public
utilities. The company provides its services to national, regional and
local clients through branch offices in 17 states.
Ruby Tuesday, Inc., headquartered in Maryville, Tennessee, operates
casual dining restaurants in 32 states under the names "Ruby Tuesdays,"
"Mozzarella's American Cafe" and "Tia's Tex-Mex."
The SABRE Group Holdings, Inc. (Class A), headquartered in Ft. Worth,
Texas, provides for the electronic distribution of travel solutions
through SABRE, its proprietary travel reservation and information
system. The company also provides software development, product sales,
transactions processing, consulting solutions and other services to the
airline industry.
Steiner Leisure Limited, headquartered in Nassau, Bahamas, provides spa
services and skin and hair care products onboard cruise ships worldwide.
The company sells premium-priced, high-quality personal care products in
connection with the services it provides and, to a lesser extent,
through third party land-based salon and retail channels.
Superior TeleCom, Inc., headquartered in New York, New York, makes and
Page 15
sells copper wire and cable for the telecommunications industry; and
data communication and other electronic products and systems for
defense, governmental and commercial applications.
Tetra Tech, Inc., headquartered in Pasadena, California, provides
comprehensive environmental engineering and consulting services
addressing complex water contamination and other environmental problems.
Trans World Entertainment Corporation, headquartered in Albany, New
York, operates retail stores selling compact discs, pre-recorded audio
and video cassettes, blank audio and video cassettes and related
accessories.
Veterinary Centers of America, Inc., headquartered in Santa Monica,
California, owns and operates companion animal hospitals in the United
States. The hospitals provide both general and surgical medical
services, as well as vaccinations, spaying, neutering, and dental care
for small animals. The company also owns and operates a veterinarian-
exclusive laboratory network.
Zapata Corporation, headquartered in Houston, Texas, produces and sells
a variety of fish protein and oil products; and supplies food packaging
products and food service supplies.
Zoran Corporation, headquartered in Santa Clara, California, develops
and markets integrated circuits, integrated circuit cores, and software
for digital video and audio compression applications.
Equity Securities Selected for the Global Target 15 Strategy
Dow Jones Industrial Average SM
Caterpillar Inc., headquartered in Peoria, Illinois, makes earthmoving,
construction and materials handling machinery and equipment, and diesel
engines. The company also provides various financial products and
services.
E.I. du Pont de Nemours & Company, headquartered in Wilmington,
Delaware, explores for, develops and produces crude oil and natural gas;
makes polymers, elastomers, finishes and performance films; makes
specialty fibers and chemicals; produces agricultural products; and
makes electronic materials and medical products. The company
participates in five principal business segments-Petroleum Operations;
Polymers; Fibers; Chemicals; and Diversified Businesses.
Goodyear Tire & Rubber Company, headquartered in Akron, Ohio, develops,
makes and sells tires and related transportation products; participates
in various crude oil transportation and gathering activities; and makes
various industrial rubber and chemical products.
International Paper Company, headquartered in Purchase, New York,
manufactures printing and writing paper, pulp, tissue, paperboard,
packaging and wood products. The company also manufactures nonwoven
papers, specialty chemicals, specialty panels and laminated products.
The company sells its products primarily in the United States, Europe
and the Pacific Rim.
Philip Morris Companies, Inc., headquartered in New York, New York, is
the world's largest producer and marketer of consumer packaged goods.
Its five principal operating companies are Kraft Foods, Inc., Miller
Brewing Company, Philip Morris International Inc., Philip Morris U.S.A.
and Philip Morris Capital Corporation.
Financial Times Industrial Ordinary Share Index
Blue Circle Industries Plc, through subsidiaries, makes and sells heavy
building materials including cement, concrete and aggregates, and
heating and bathroom products. The company also manages real estate and
develops commercial and residential properties.
British Airways Plc operates international and domestic scheduled
passenger airline services, as well as a worldwide air cargo business.
The company is one of the largest airlines in the world.
Marks & Spencer Plc retails consumer goods and food under the name "St.
Michael." The company sells quality clothing through "Brooks Brothers"
stores in the United States and Japan, sells food through its "Kings
Super Markets" in the United States, and other merchandise through a
chain of retail stores in Canada, Europe and Hong Kong. The company is
also engaged in financial, unit trust, treasury and insurance.
Royal & Sun Alliance Plc is the holding company for the multi-national
insurance companies Sun Alliance Group Plc and Royal Insurance Holdings
Page 16
Plc. The companies provide major classes of general and life insurance
to customers in the United Kingdom, Australia, Canada, Scandinavia,
South Africa and the United States.
Tate & Lyle Plc is the holding company for an international group of
companies which manufacture, refine, process, distribute and trade
sweeteners, starches and their by-products. Products include white
sugar, molasses and low calorie sweeteners. The company also
manufactures and sells engineered sugar milling equipment and provides
reinsurance services.
Hang Seng Index
Amoy Properties Limited is a property investment company. The company's
principal activities are property investment and investment holding, and
through its subsidiaries, property investment for rental income, car
park management and property management.
Henderson Investment Ltd. is an investment holding company. The
principal activities of its subsidiaries are property development and
investment, investment holding, retailing and the hotel business.
Hongkong & Shanghai Hotel operates hotels in Hong Kong, China, the
United States, the Philippines and Vietnam. It also leases apartments
and retail space, operates a funicular, entertainment centers and
laundry services, and manages clubs.
Hysan Development Company Ltd. is active in investment holding, property
investment and capital market investments.
Wharf Holdings Ltd. is involved in property, infrastructure, hotels,
terminals and warehousing, tunnel operations, communications, management
services and investment consultancy.
The Sponsor has obtained the foregoing company descriptions from sources
it deems reliable. The Sponsor has not independently verified the
provided information either in terms of accuracy or completeness.
Page 17
-APPENDIX-
The graph which appears on page 15 of Part II of the Prospectus
represents a comparison between a $10,000 investment made on January 1,
1972 in those stocks which comprise the DJIA Index and the S&P
500 Index and approximately equal amounts invested in each of the
25 common stocks selected from a pre-screened subset of the stocks
listed on the New York Stock Exchange as of December 31 of each
respective year. The chart indicates that $10,000 invested on January 1,
1972 in the stocks which comprise the DJIA Index would on December 31,
1998 be worth $301,881, as opposed to $320,822 had the $10,000 been
invested in the stocks which comprise the S&P 500 Index and
$1,106,197 had the $10,000 been invested in the 25 common stocks
selected from the pre-screened subset of the stocks listed on the New
York Stock Exchange. Each figure assumes that dividends received during
each year will be reinvested at year-end; and sales charges,
commissions, expenses and taxes were not considered in determining total
returns.
The graph which appears on page 16 of Part II of the Prospectus
represents a comparison between a $10,000 investment made on January 1,
1972 in those stocks which comprise the Dow Jones Industrial Average,
the ten common stocks in the Dow Jones Industrial Average having the
highest dividend yield and the five lowest priced stocks of the ten
common stocks in the Dow Jones Industrial Average having the highest
dividend yield as of December 31 of each respective year. The chart
indicates that $10,000 invested on January 1, 1972 in the stocks which
comprise the Dow Jones Industrial Average would on December 31, 1998 be
worth $301,881, as opposed to $940,826 had the $10,000 been invested in
the ten common stocks in the Dow Jones Industrial Average having the
highest dividend yield and $1,757,051 had the $10,000 been invested in
the five lowest priced stocks of the ten common stocks in the Dow Jones
Industrial Average having the highest dividend yield as of December 31
of each respective year. Each figure assumes that dividends received
during each year will be reinvested at year end and sales charges,
commissions, expenses and taxes were not considered in determining total
returns.
The graph which appears on page 17 of Part II of the Prospectus
represents a comparison between a $10,000 investment made on January 1,
1979 in those stocks which comprise each Combined Strategy and the
Cumulative Index Returns as of December 31 of each respective year. The
chart indicates that $10,000 invested on January 1, 1979 and reinvested
as of each December 31 in the stocks which comprise the Combined 15
Strategy would be worth $477,459 on December 31, 1998. The same $10,000,
invested on January 1, 1979 and reinvested as of each December 31 in the
Cumulative Index Returns would be worth $270,963 on December 31, 1998.
Each figure assumes that dividends received during a year are reinvested
semi-annually beginning January 1, 1987 and annually prior thereto and
sales charges, commissions, expenses and taxes were not considered in
determining total returns. The figures have been adjusted to take into
account currency exchange rate fluctuations in the U.S. dollar.
The graph which appears on page 18 of Part II of the Prospectus
represents a comparison between a $10,000 investment made on January 1,
1972 in those stocks which comprise the Ibbotson Small-Cap Index and the
S&P 500 Index and approximately equal amounts invested in the Strategy
stocks as of December 31 of each respective year. The chart indicates
that $10,000 invested on January 1, 1972 in the stocks which comprise
the Ibbotson Small-Cap Index would on December 31, 1998 be worth
$418,706, as opposed to $320,822 had the $10,000 been invested in the
stocks which comprise the S&P 500 Index and $1,208,074 had the $10,000
been invested in the Strategy stocks. Each figure assumes that dividends
received during each year will be reinvested at year-end; and sales
charges, commissions, expenses and taxes were not considered in
determining total returns.
