File No. 33-48489
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
POST-EFFECTIVE
AMENDMENT NO. 8
TO
FORM S-6
For Registration Under the Securities Act of 1933 of Securities
of Unit Investment Trusts Registered on Form N-8B-2
ADVANTAGE GROWTH AND TREASURY SECURITIES TRUST, SERIES 1
(Exact Name of Trust)
NIKE SECURITIES L.P.
(Exact Name of Depositor)
1001 Warrenville Road
Lisle, Illinois 60532
(Complete address of Depositor's principal executive offices)
NIKE SECURITIES L.P. CHAPMAN AND CUTLER
Attn: James A. Bowen Attn: Eric F. Fess
1001 Warrenville Road 111 West Monroe Street
Lisle, Illinois 60532 Chicago, Illinois 60603
(Name and complete address of agents for service)
It is proposed that this filing will become effective (check
appropriate box)
: : immediately upon filing pursuant to paragraph (b)
: x : July 31, 2000
: : 60 days after filing pursuant to paragraph (a)
: : on (date) pursuant to paragraph (a) of rule (485 or 486)
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
1,875,022 UNITS
PROSPECTUS
Part One
Dated July 26, 2000
Note: Part One of this Prospectus may not be distributed unless accompanied by
Part Two.
The Trust
The Advantage Growth and Treasury Securities Trust (the "Trust") is a unit
investment trust consisting of a portfolio of "zero coupon" U.S. Treasury
bonds (treasury obligations) and shares of The Pilgrim Growth Opportunity Fund
("Pilgrim Growth"). Pilgrim Growth is an open-end diversified management
investment company, commonly known as a mutual fund. At June 16, 2000, each
Unit represented a 1/1,875,022 undivided interest in the principal and net
income of the Trust (see "The Trust" in Part Two).
The Units being offered by this Prospectus are issued and outstanding Units
which have been purchased by the Sponsor in the secondary market or from the
Trustee after having been tendered for redemption. The profit or loss
resulting from the sale of Units will accrue to the Sponsor. No proceeds from
the sale of Units will be received by the Trust.
Public Offering Price
The Public Offering Price per 1,000 Units is equal to the aggregate value of
the Securities in the Portfolio of the Trust divided by the number of Units
outstanding, multiplied by 1,000, plus a sales charge of 4.5% of the Public
Offering Price (4.712% of the amount invested). At June 16, 2000, the Public
Offering Price per 1,000 Units was $1,800.65 (see "Public Offering" in Part
Two). The minimum purchase is $1,000.
Please retain both parts of this Prospectus for future reference.
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
______________________________________________________________________________
NIKE SECURITIES L.P.
Sponsor
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
SUMMARY OF ESSENTIAL INFORMATION AS OF JUNE 16, 2000
Sponsor: Nike Securities L.P.
Evaluator: First Trust Advisors L.P.
Trustee: The Chase Manhattan Bank
<TABLE>
<CAPTION>
GENERAL INFORMATION
<S> <C>
Aggregate Maturity Value of Treasury Obligations in the Trust $1,888,000
Aggregate Number of Shares of Pilgrim Growth in the Trust 51,980.261
Number of Units 1,875,022
Fractional Undivided Interest in the Trust per Unit 1/1,875,022
Public Offering Price:
Aggregate Value of Securities in the Portfolio $3,224,318
Aggregate Value of Securities per 1,000 Units $1,719.62
Sales Charge 4.712% (4.5% of Public Offering Price) $81.03
Public Offering Price per 1,000 Units $1,800.65
Redemption Price and Sponsor's Repurchase Price per 1,000
Units ($81.03 less than the Public Offering Price per
1,000 Units) $1,719.62
</TABLE>
Date Trust Established July 22, 1992
Mandatory Termination Date February 15, 2003
Evaluator's Annual Fee: $.20 per $1,000 principal amount of Treasury
Obligations outstanding. Evaluations for purposes of sale, purchase or
redemption of Units are made as of the close of trading (4:00 p.m. Eastern
time) on the New York Stock Exchange on each day on which it is open.
Supervisory fee payable to Maximum of $.15 per 1,000
an affiliate of the Sponsor Units outstanding annually
Trustee's Annual Fee: $.85 per 1,000 Units outstanding.
Record Date: Five business days after Pilgrim Growth's ex-dividend date.
Distribution Date: Ten business days after Pilgrim Growth's distribution
date.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Unit Holders of The Advantage Growth and
Treasury Securities Trust, Series 1
We have audited the accompanying statement of assets and liabilities,
including the portfolio, of The Advantage Growth and Treasury Securities
Trust, Series 1 as of March 31, 2000, and the related statements of operations
and changes in net assets for each of the three years in the period then
ended. These financial statements are the responsibility of the Trust's
Sponsor. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 2000, by correspondence with the Trustee. An audit also includes
assessing the accounting principles used and significant estimates made by the
Sponsor, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Advantage Growth and
Treasury Securities Trust, Series 1 at March 31, 2000, and the results of its
operations and changes in its net assets for each of the three years in the
period then ended, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
July 9, 2000
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Securities, at market value (cost, including
accretion on the treasury obligations,
$2,347,115) (Note 1) $3,397,036
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND NET ASSETS
<S> <C> <C>
Accrued liabilities 590
Cash overdraft 24,464
__________
25,054
__________
Net assets, applicable to 1,882,242
outstanding units of fractional
undivided interest:
Cost of Trust assets, including
accretion on the treasury obligations
(Note 1) $2,347,115
Net unrealized appreciation (Note 2) 1,049,921
Distributable funds (deficit) (25,054)
__________
$3,371,982
==========
Net asset value per 1,000 units $1,791.47
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
PORTFOLIO
March 31, 2000
<TABLE>
<CAPTION>
Maturity Market
value Name of Issuer and Title of Security value
<C> <S> <C>
"Zero Coupon" U.S. Treasury bonds
$1,888,000 (1) maturing February 15, 2003 $1,577,216
==========
</TABLE>
<TABLE>
<CAPTION>
Shares
<C> <S> <C>
51,980.261 The Pilgrim Growth Opportunity Fund
(formerly The Advantage Growth Fund) 1,819,820
__________
Total investments $3,397,036
==========
</TABLE>
(1) The Treasury Obligations have been purchased at a discount from their
par value because there is no stated interest income thereon (such
securities are often referred to as U.S. Treasury zero coupon bonds).
Over the life of the treasury obligations the value increases, so that
upon maturity the holders will receive 100% of the principal amount
thereof.
See accompanying notes to financial statements.
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Interest income $108,758 116,123 133,524
Dividends:
Ordinary income 370,974 13,341 16,972
Capital gain 327,733 12,426 61,429
__________________________________
Total investment income 807,465 141,890 211,925
Expenses:
Trustee's fees and related
expenses (2,962) (5,795) (4,469)
Evaluator's fees (387) (444) (552)
Supervisory fees (291) (333) (414)
__________________________________
Total expenses (3,640) (6,572) (5,435)
__________________________________
Investment income - net 803,825 135,318 206,490
Net gain (loss) on investments:
Net realized gain (loss) 73,066 98,799 97,933
Change in net unrealized
appreciation or
depreciation 132,798 245,913 444,886
__________________________________
205,864 344,712 542,819
__________________________________
Net increase in net assets
resulting from operations $1,009,689 480,030 749,309
==================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Net increase in net assets
resulting from operations:
Investment income - net $803,825 135,318 206,490
Net realized gain (loss) on
investments 73,066 98,799 97,933
Change in net unrealized
appreciation or depreciation
on investments 132,798 245,913 444,886
__________________________________
1,009,689 480,030 749,309
Units redeemed (142,562, 425,025
and 479,578 in 2000, 1999 and
1998, respectively) (237,882) (609,627) (633,311)
Distributions to unit holders:
Investment income - net (369,922) (8,571) (13,040)
Principal from investment
transactions (327,714) (12,420) (59,320)
__________________________________
(697,636) (20,991) (72,360)
__________________________________
Total increase (decrease) in net
assets 74,171 (150,588) 43,638
Net assets:
At the beginning of the year 3,297,811 3,448,399 3,404,761
__________________________________
At the end of the year,
including distributable
funds (deficit) applicable
to Trust units of $(25,054),
$(71,617) and $3,195 at
March 31, 2000, 1999 and
1998, respectively) $3,371,982 3,297,811 3,448,399
==================================
Trust units outstanding at
the end of the year 1,882,242 2,024,804 2,449,829
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies
Security valuation -
The treasury obligations are stated at values as determined by First Trust
Advisors L.P. (the Evaluator), an affiliate of the Sponsor. The values are
based on (1) current bid prices for the securities obtained from dealers or
brokers who customarily deal in securities comparable to those held by the
Trust, (2) current bid prices for comparable securities, (3) appraisal or (4)
any combination of the above.
Shares of The Pilgrim Growth Opportunity (Pilgrim Growth) are stated at
Pilgrim Growth's published net asset value as reported by the Evaluator. Net
asset value is determined by dividing the value of Pilgrim Growth's securities
plus any cash and other assets (including accrued interest and dividends
receivable) less all liabilities (including accrued expenses) by the number of
shares outstanding, adjusted to the nearest whole cent.
Investment income -
Dividends from the Pilgrim Growth shares are recorded on Pilgrim Growth's ex-
dividend date. Interest income consists of amortization of original issue
discount and market discount or premium on the treasury obligations. Such
amortization is included in the cost of treasury obligations rather than in
distributable funds because it is not currently available for distribution to
unit holders.
Security cost -
Cost of the Trust's treasury obligations is based on the offering price of the
treasury obligations on the dates the treasury obligations were deposited in
the Trust, plus amortization of original issue discount and amortization of
market discount or premium. Cost of the Pilgrim Growth shares is based on the
net asset value of such shares on the dates the shares were deposited in the
Trust. The cost of securities sold is determined on the average cost method.
Sales of securities and fund shares are recorded on the trade date.
Federal income taxes -
The Trust is not taxable for Federal income tax purposes. Each unit holder is
considered to be the owner of a pro rata portion of the Trust and,
accordingly, no provision has been made for Federal income taxes.
Expenses of the Trust -
The Trust pays a fee for Trustee services to The Chase Manhattan Bank which is
based on $.85 per annum per 1,000 units outstanding based on the largest
aggregate number of units outstanding during the calendar year. The Evaluator
will receive an annual fee based on $.20 per $1,000 principal amount of
treasury obligations outstanding. Additionally, the Trust pays recurring
financial reporting costs and an annual supervisory fee payable to an
affiliate of the Sponsor.
<PAGE>
2. Unrealized appreciation and depreciation
An analysis of net unrealized appreciation at March 31, 2000 follows:
<TABLE>
<CAPTION>
Pilgrim
Treasury Growth
obligations shares Total
<S> <C> <C> <C>
Unrealized appreciation $38,630 1,011,291 1,049,920
Unrealized depreciation - - -
__________________________________
$38,630 1,011,291 1,049,921
==================================
</TABLE>
3. Other information
Cost to investors -
The cost to initial investors of units of the Trust was based on the aggregate
offering price of the treasury obligations and the net asset value of the
Pilgrim Growth shares on the date of an investor's purchase, plus a sales
charge of 5.0% of the public offering price which is equivalent to
approximately 5.263% of the net amount invested.
Distributions to unit holders -
Distributions to unit holders are made ten business days after Pilgrim
Growth's distribution date.
<PAGE>
Selected data per 1,000 units of the Trust
outstanding throughout each year -
<TABLE>
<CAPTION>
Year ended March 31,
2000 1999 1998
<S> <C> <C> <C>
Investment income -
interest and dividends $416.93 63.89 76.76
Expenses (1.88) (2.96) (1.97)
_________________________________
Investment income - net 415.05 60.93 74.79
Distributions to unit holders:
Investment income - net (192.54) (4.03) (4.77)
Principal from investment
transactions (170.11) (5.84) (21.70)
Net gain (loss) on investments 110.36 170.04 197.02
_________________________________
Total increase (decrease)
in net assets 162.76 221.10 245.34
Net assets:
Beginning of the year 1,628.71 1,407.61 1,162.27
_________________________________
End of the year $1,791.47 1,628.71 1,407.61
=================================
</TABLE>
Investment income - interest and dividends, Expenses and Investment income -
net per 1,000 units have been calculated based on the weighted average number
of units outstanding during each year (1,936,702, 2,220,814 and 2,760,793
units during the years ended March 31, 2000, 1999 and 1998, respectively).
Distributions to unit holders of investment income - net per 1,000 units
reflects the Trust's cash distributions of approximately $149.34 per 1,000
units to 1,931,032 units on October 20, 1999, approximately $43.20 per 1,000
units to 1,887,549 units on December 27, 1999, approximately $4.03 per 1,000
units to 2,126,688 units on January 19, 1999 and approximately $4.77 per 1,000
units to 2,733,662 units on January 14, 1998. Distributions of principal from
investment transactions reflect the Trust's cash distributions of
approximately $152.31 per 1,000 units to 1,931,032 units on October 20, 1999,
approximately $17.80 per 1,000 units to 1,887,549 units on December 27, 1999,
approximately $5.84 per 1,000 units to 2,126,688 units on January 19, 1999 and
approximately $21.70 per 1,000 units to 2,733,662 units on January 14, 1998.
<PAGE>
THE ADVANTAGE GROWTH AND
TREASURY SECURITIES TRUST, SERIES 1
PART ONE
Must be Accompanied by Part Two
___________________
P R O S P E C T U S
___________________
SPONSOR: Nike Securities L.P.
1001 Warrenville Road
Lisle, Illinois 60532
(800) 621-1675
TRUSTEE: The Chase Manhattan Bank
4 New York Plaza, 6th Floor
New York, New York 10004-2413
LEGAL COUNSEL Chapman and Cutler
TO SPONSOR: 111 West Monroe Street
Chicago, Illinois 60603
LEGAL COUNSEL Carter, Ledyard & Milburn
TO TRUSTEE: 2 Wall Street
New York, New York 10005
INDEPENDENT Ernst & Young LLP
AUDITORS: Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606
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 statement and exhibits relating thereto, which the Trust has
filed with the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933 and the Investment Company Act of 1940, and to which
reference is hereby made.
THE FIRST TRUST(REGISTERED TRADEMARK) SPECIAL SITUATIONS TRUST
FT SERIES
PROSPECTUS NOTE: THIS PART TWO PROSPECTUS MAY
Part Two ONLY BE USED WITH PART ONE
Dated April 28, 2000 AND PART THREE
The Trust. FT Series (formerly known as The First Trust Special
Situations Trust) (the "Trusts" and each a "Trust") are unit investment
trusts consisting of portfolios of one or more of the following: common
stock ("Equity Securities"), preferred stock ("Preferred Stocks"), trust
preferred securities ("Trust Preferred Securities") or zero coupon U.S.
Treasury bonds ("Treasury Obligations"). Collectively, the Equity
Securities, Preferred Stocks and Trust Preferred Securities may be
referred to as the "Securities." See Parts One and Three for a more
complete description of the portfolio for each Trust, including whether
the portfolio of a Trust includes zero coupon U.S. Treasury bonds.
For a specific description of the objective of each Trust, see "The
Objective of the Trusts" in Part Three of this Prospectus. See
"Portfolio" appearing in Part One for each Trust. Each Trust has a
Mandatory Termination Date as indicated in Part One of this Prospectus.
The Treasury Obligations evidence the right to receive a fixed payment
at a future date from the U.S. Government and are backed by the full
faith and credit of the U.S. Government. The guarantee of the U.S.
Government does not apply to the market value of the Treasury
Obligations or the Units of the Growth and Treasury Trusts, whose net
asset values will fluctuate and, prior to maturity, may be worth more or
less than a purchaser's acquisition cost. There is, of course, no
guarantee that the objectives of the Trusts will be achieved.
Each Unit of a Trust represents an undivided fractional interest in all
the Securities and Treasury Obligations deposited in the Trust. The
Growth and Treasury Trusts have been organized so that purchasers of
Units should receive, at the termination of a Trust, an amount per Unit
at least equal to $1.00, or $10.00 for certain Trusts (which is equal to
the per Unit value upon maturity of the Treasury Obligations), even if
the Growth and Treasury Trusts never paid a dividend and the value of
the Securities were to decrease to zero, which the Sponsor considers
highly unlikely. This feature of the Growth and Treasury Trusts provides
Unit holders who purchase Units at a price of $1.00, or $10.00 for
certain Growth and Treasury Trusts, or less per Unit with total
principal protection, including any sales charges paid, although they
might forego any earnings on the amount invested. To the extent that
Units are purchased at a price less than $1.00, or $10.00 for certain
Growth and Treasury Trusts, per Unit, this feature may also provide a
potential for capital appreciation. See Part One for each Growth and
Treasury Trust to determine those Trusts for which information is based
on $1.00 per Unit or $10.00 per Unit. UNIT HOLDERS DISPOSING OF THEIR
UNITS PRIOR TO THE MATURITY OF A GROWTH AND TREASURY TRUST MAY RECEIVE
MORE OR LESS THAN $1.00 PER UNIT (OR $10.00 PER UNIT FOR CERTAIN TRUSTS)
DEPENDING ON MARKET CONDITIONS ON THE DATE UNIT ARE SOLD OR REDEEMED.
The Treasury Obligations deposited in a Growth and Treasury Trust on the
Initial Date of Deposit will mature as listed in the "Portfolio"
appearing in Part One for each Trust. The Treasury Obligations in a
Growth and Treasury Trust have a maturity value equal to or greater than
the aggregate Public Offering Price (which includes the sales charge) of
the Units of the Growth and Treasury Trust on the Initial Date of
ALL PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Deposit. Although the Equity Securities and Preferred Stocks have no
stated maturity date and the Trust Preferred Securities each have fixed
maturity dates occurring after the Mandatory Termination Dates of their
respective Trusts, certain of the Securities may be called, or may be
redeemed pursuant to extraordinary redemption provisions, prior to the
Mandatory Termination Date of their respective Trusts. The value of the
Equity Securities will fluctuate with changes in the value of common
stocks in general and with changes in the conditions and performance of
the specific Equity Securities owned by the Trusts. The value of the
Preferred Stocks and Trust Preferred Securities will fluctuate with
changes in the value of preferred stocks in general, with changes in the
financial condition of the issuers, and with changes in interest rates
and market liquidity. In particular, increasing interest rates will
reduce the value of the Preferred Stocks and Trust Preferred Securities
held in the Trusts, as well as the value of the Units. See "Portfolio"
appearing in Part One for each Trust.
Public Offering Price. The secondary market Public Offering Price per
Unit will be based upon a pro rata share of the bid prices of the
Treasury Obligations (if applicable) and the aggregate underlying value
of the Securities in the Trusts (generally determined by the closing
sale prices of listed Securities and the bid prices of over-the-counter
traded Securities) plus or minus a pro rata share of cash, if any, in
the Capital and Income Accounts of the Trust plus a sales charge as
indicated in Part One for each Trust. The minimum purchase of each Trust
is that amount as set forth in Part One for each Trust. For certain
Trusts, the sales charge is reduced on a graduated scale for sales
involving at least a minimum number of Units or a minimum dollar amount.
See "Public Offering-How is the Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions of dividends and
capital received, if any, by a Trust will be paid in cash on the
Distribution Date to Unit holders of record on the Record Date as set
forth in the "Summary of Essential Information" in Part One for each
Trust. Any distribution of income and/or capital will be net of the
expenses of the Trust. Distributions of funds in the Capital Account, if
any, will be made at least annually in December of each year. INCOME
WITH RESPECT TO THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY
OBLIGATIONS (IF APPLICABLE) WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS OF A GROWTH AND TREASURY TRUST WILL BE SUBJECT TO INCOME
TAX AT ORDINARY INCOME RATES AS IF A DISTRIBUTION HAD OCCURRED. See
"What is the Federal Tax Status of Unit Holders?" Additionally, upon
termination of a Trust, the Trustee will distribute, upon surrender of
Units for redemption, to each Unit holder his or her pro rata share of
the Trust's assets, less expenses, in the manner set forth under "Rights
of Unit Holders-How are Income and Capital Distributed?"
Secondary Market for Units. The Sponsor may maintain a market for Units
of the Trusts and offer to repurchase such Units at prices which are
based on the aggregate bid side evaluation of the Treasury Obligations
(if applicable) and the aggregate underlying value of Securities in a
Trust (generally determined by the closing sale prices of listed
Securities and the bid prices of over-the-counter traded Securities)
plus or minus cash, if any, in the Capital and Income Accounts of the
Trusts. If a secondary market is not maintained, a Unit holder may
redeem Units through redemption at prices based upon the aggregate bid
price of the Treasury Obligations (if applicable) plus the aggregate
underlying value of the Securities in a Trust (generally determined by
the closing sale prices of listed Securities and the bid prices of over-
the-counter traded Securities) plus or minus a pro rata share of cash,
if any, in the Capital and Income Accounts of such Trust. See "Rights of
Unit Holders-How May Units be Redeemed?" For certain Trusts, a Unit
holder tendering the minimum amount specified in "Summary of Essential
Information" appearing in Part One for such Trust for redemption may
request a distribution of shares of Securities (reduced by customary
transfer and registration charges) (an "In-Kind Distribution") in lieu
of payment in cash. See "Rights of Unit Holders-How May Units be
Redeemed?"
Termination. Commencing no later than the Mandatory Termination Date,
Securities will begin to be sold as prescribed by the Sponsor. The
Trustee shall provide written notice of any termination of a Trust to
Unit holders which will specify when Unit holders may surrender their
certificates for cancellation and will include a form to enable Unit
holders to elect an In-Kind Distribution if such Unit holder owns at
least that minimum amount specified in "Summary of Essential
Information," in Part One for each 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 Securities. All Unit holders of a
Growth and Treasury Trust will receive their pro rata portion of the
Treasury Obligations in cash upon the termination of such Trust. To be
effective, the election form, together with surrendered certificates and
other documentation required by the Trustee, must be returned to the
Trustee at least ten business days prior to the Mandatory Termination
Date. Unit holders not electing a distribution of shares of Securities
will receive a cash distribution from the sale of the remaining
Page 2
Securities and Treasury Obligations (if applicable) within a reasonable
time after a Trust is terminated. See "Rights of Unit Holders-How are
Income and Capital Distributed?" and "Other Information-How May the
Indenture be Amended or Terminated?"
Page 3
THE FIRST TRUST SPECIAL SITUATIONS TRUST
FT Series
What is the FT Series?
FT Series (formerly known as The First Trust Special Situations Trust)
(the "Trusts" and each a "Trust") is one of a series of investment
companies created by the Sponsor under the name of the FT Series, all of
which are generally similar but each of which is separate and is
designated by a different series number (the "Trust"). Beginning on
October 31, 1997 with the deposit of FT 211, the name of the series was
changed from The First Trust Special Situations Trust to the FT Series.
All Trusts were 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, Securities Evaluation Service, Inc., as Evaluator for
certain Trusts, First Trust Advisors L.P., as Evaluator for certain
Trusts, and First Trust Advisors L.P. as Portfolio Supervisor. See "The
Trusts" in Part Three for a more complete description of the portfolio
for each Trust.
See "The Objective of the Trusts" in Part Three for each Trust for a
specific description of the Trust's objective. The Treasury Obligations
in the Growth and Treasury Trusts evidence the right to receive a fixed
payment at a future date from the U.S. Government and are backed by the
full faith and credit of the U.S. Government. The guarantee of the U.S.
Government does not apply to the market value of the Treasury
Obligations or the Units of a Growth and Treasury Trust, whose net asset
value will fluctuate and, prior to maturity, may be more or less than a
purchaser's acquisition cost. There is, of course, no guarantee that the
objectives of the Trusts will be achieved.
The Growth and Treasury Trusts have been organized so that purchasers of
Units should receive, at the termination of a Growth and Treasury Trust,
an amount per Unit at least equal to $1.00 per Unit, or $10.00 per Unit
for certain Trusts (which is equal to the per Unit value upon maturity
of the Treasury Obligations), even if the Securities never paid a
dividend and the value of the Securities in a Growth and Treasury Trust
were to decrease to zero, which the Sponsor considers highly unlikely.
The receipt of only $1.00 per Unit, or $10.00 per Unit for certain
Trusts, upon termination of a Growth and Treasury Trust (an event which
the Sponsor believes is unlikely) represents a substantial loss on a
present value basis. Furthermore, the $1.00 per Unit, or $10.00 per Unit
for certain Trusts, in no respect protects investors against diminution
in the purchasing power of their investment due to inflation (although
expectations concerning inflation are a component in determining
prevailing interest rates, which in turn determine present values). To
the extent that Units of a Trust are redeemed, the aggregate value of
the Securities and Treasury Obligations (if applicable) in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trusts will increase. See "Rights of Unit
Holders-How May Units be Redeemed?" Each Trust has a Mandatory
Termination Date as set forth under "Summary of Essential Information,"
appearing in Part One for each Trust.
What are the Expenses and Charges?
With the exception of brokerage fees for certain trusts discussed in
"Rights of Unit Holders-How May Securities be Removed from the Trusts?"
and bookkeeping and other administrative services provided to certain
Trusts, for which the Sponsor will be reimbursed in amounts as set forth
under "Summary of Essential Information" in Part One (if applicable),
the Sponsor will not receive any fees in connection with its activities
relating to the Trusts. Legal and regulatory filing fees and expenses
associated with annually updating the Trusts' registration statements
are also now chargeable to each Trust. Historically, the Sponsor paid
these fees and expenses.
First Trust Advisors L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee set forth under "Summary of Essential
Information" in Part One of this Prospectus, for providing portfolio
supervisory services for each Trust. 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 underwriters or dealers of the Trusts.
Page 4
First Trust Advisors L.P. or Securities Evaluation Service, Inc. (as
applicable), the Evaluator for the respective Trusts, will receive a fee
as set forth under "Summary of Essential Information" in Part One of
this Prospectus for providing evaluation services for each Trust. Such
fee is based on the largest aggregate 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 outstanding during the period for which 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 One of this Prospectus. Such fee is based
upon the largest aggregate number of Units of such Trust outstanding
during the calendar year, except during an initial offering period, in
which case the fee is calculated based on the largest number of Units
outstanding during the period for which 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." Because
the above fees are generally calculated based on the largest aggregate
number of Units of the Trust outstanding during a calendar year, the per
Unit amounts set forth under "Summary of Essential Information" in Part
One of this Prospectus will be higher during any year in which
redemptions of Units occur.
The Trustee's and the above described fees 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 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.
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.
For certain Trusts, as set forth in the "Summary of Essential
Information" appearing in Part One for such Trusts, expenses incurred in
establishing such Trusts, including costs of preparing the registration
statement, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and states, the
initial audit of the Trust portfolio and the initial fees and expenses
of the Trustee and any other out-of-pocket expenses, have been paid by
the Trust and are being charged off over a period not to exceed five
years from such Trust's Initial Date of Deposit, or over a period not to
exceed the life of the Trust, if shorter than five years.
The following additional charges are or may be incurred by the Trusts:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trusts
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trusts; for certain Trusts, any offering costs
incurred after the earlier of six months after the Initial Date of
Deposit or 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
the Trusts; all taxes and other government charges imposed upon the
Securities or Treasury Obligations (if applicable) or any part of the
Trusts (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trusts. In addition, the Trustee is empowered to sell
Securities or Treasury Obligations (if applicable) 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 the Trust
except that the Trustee shall not sell Treasury Obligations in a Growth
and Treasury Trust to pay Trust expenses. Since the income stream
produced by dividend payments is unpredictable, the Sponsor cannot
provide any assurance that dividends will be sufficient to meet any or
Page 5
all expenses of the Trusts. As described above, if dividends are
insufficient to cover expenses, it is likely that 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?"
The Indenture requires a Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.50 per 1,000 Units if information is based on $1.00
per Unit (or per 100 Units if information is based on $10.00 per Unit).
Unit holders of a Trust covered by an audit may obtain a copy of the
audited financial statements upon request.
What is the Federal Tax Status of Unit Holders?
This section summarizes some of the main U.S. federal income tax
consequences of owning Units of the Trust. This section is current as of
the date of this prospectus. Tax laws and interpretations change
frequently, and these summaries do not describe all of the tax
consequences to all taxpayers. For example, these summaries generally do
not describe your situation if you are a non-U.S. person, a
broker/dealer, or other investor with special circumstances. In
addition, this section does not describe state or foreign taxes. As with
any investment, you should consult your own tax professional about your
particular consequences.
Assets of the Trust. Each Trust may hold (i) stock in domestic and
foreign corporations (the "Stocks"), (ii) interests in real estate
investment trusts (the "REIT Shares"), (iii) Trust Preferred Securities
(the "Debt Obligations"), (iv) shares in funds qualifying as regulated
investment companies (the "RIC Shares") and/or (v) zero coupon U.S.
Treasury bonds (the "Treasury Obligations"). All of the foregoing assets
constitute the "Trust Assets." For purposes of this federal tax
discussion, it is assumed that the Stocks constitute equity, the Debt
Obligations constitute debt and that the RIC Shares and the REIT Shares
constitute qualifying shares in regulated investment companies and real
estate investment trusts, respectively, for federal income tax purposes.
Trust Status. The Trust will not be taxed as a corporation for federal
income tax purposes. As a Unit owner, you will be treated as the owner
of a pro rata portion of each of the Trust Assets, and as such you will
be considered to have received a pro rata share of income (i.e.,
interest, dividends, accruals of original issue discount and market
discount, and capital gains, if any) from each Trust Asset when such
income is considered to be received by the Trust. This is true even if
you elect to have your distributions automatically reinvested into
additional Units. In addition, the income from the Trust which you must
take into account for federal income tax purposes is not reduced by
amounts used to pay a deferred sales charge.
Your Tax Basis and Income or Loss upon Disposition. If the Trust
disposes of Trust Assets, you will generally recognize gain or loss. If
you dispose of your Units or redeem your Units for cash, you will also
generally recognize gain or loss. To determine the amount of this gain
or loss, you must subtract your tax basis in the related Trust Assets
from your share of the total proceeds received in the transaction. You
can generally determine your initial tax basis in each Trust Asset by
apportioning the cost of your Units, generally including sales charges,
among each Trust Asset ratably according to its value on the date you
acquire your Units. In certain circumstances, however, you may have to
adjust your tax basis after you acquire your Units (for example, in the
case of certain dividends that exceed a corporation's accumulated
earnings and profits or in the case of original issue discount, market
discount, premium and accrued interest with regard to the Debt
Obligations, as discussed below).
If you are an individual, the maximum marginal federal tax rate for net
capital gain is generally 20% (10% for certain taxpayers in the lowest
tax bracket). Net capital gain equals net long-term capital gain minus
net short-term capital loss for the taxable year. 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. You must exclude the date you purchase your Units or the date the
Trust purchases a Trust Asset to determine the holding period. The tax
rates for capital gains realized from assets held for one year or less
are generally the same as for ordinary income. The Code may, however,
treat certain capital gains as ordinary income in special situations
(for example, in the case of gain on the Debt Obligations attributable
to market discount). In addition, capital gain received from assets held
for more than one year that is considered "unrecaptured section 1250
gain" (which may be the case, for example, with some capital gains
attributable to the REIT Shares) is taxed at a maximum stated tax rate
of 25%.
Page 6
Dividends from RIC Shares and REIT Shares. Some dividends on the REIT
Shares or the RIC Shares may qualify as "capital gain dividends,"
taxable to you as long-term capital gains. If you hold a Unit for six
months or less or if the Trust holds a RIC Share or REIT Share for six
months or less, any loss incurred by you related to the disposition of
such RIC Share or REIT Share will be treated as a long-term capital loss
to the extent of any long-term capital gain distributions received (or
deemed to have been received) with respect to such RIC Share or REIT
Share. Distributions of income or capital gains declared on the REIT
Shares or the RIC Shares in October, November or December will be deemed
to have been paid to you on December 31 of the year they are declared,
even when paid by the REIT or the RIC during the following January.
Discount, Accrued Interest and Premium on Debt Obligations. Debt
Obligations and Treasury Obligations may have been sold with original
issue discount. This generally means that the Debt Obligations and
Treasury Obligations were originally issued at a price below their face
(or par) value. Original issue discount accrues on a daily basis and
generally is treated as interest income for federal income tax purposes.
The basis of your Unit and of each Debt Obligation or Treasury
Obligation which was issued with original issue discount must be
increased as original issue discount accrues.
Some Debt Obligations may have been purchased by you or the Trust at a
market discount. Market discount is generally the excess of the stated
redemption price at maturity for the Debt Obligation over the purchase
price of the Debt Obligation (not including unaccrued original issue
discount). Market discount can arise based on the price the Trust pays
for a Debt Obligation or on the price you pay for your Units. Market
discount is taxed as ordinary income. You will recognize this income
when the Trust receives principal payments on the Debt Obligation, when
the Debt Obligation is sold or redeemed, or when you sell or redeem your
Units. Alternatively, you may elect to include market discount in
taxable income as it accrues. Whether or not you make this election will
affect how you calculate your basis and the timing of certain interest
expense deductions.
Alternatively, some Debt Obligations may have been purchased by you or
the Trust at a premium. Generally, if the tax basis of your pro rata
portion of any Debt Obligation exceeds the amount payable at maturity,
such excess is considered premium. You may elect to amortize premium. If
you make this election, you may reduce your interest income received on
the Debt Obligation by the amount of the premium that is amortized and
your tax basis will be reduced.
If the price of your Units included accrued interest on a Debt
Obligation, you must include the accrued interest in your tax basis in
that Debt Obligation. When the Trust receives this accrued interest, you
must treat it as a return of capital and reduce your tax basis in the
Debt Obligation.
This discussion provides only the general rules with respect to the tax
treatment of original issue discount, market discount and premium. The
rules, however, are complex and special rules apply in certain
circumstances. For example, the accrual of market discount or premium
may differ from the discussion set forth above in the case of Debt
Obligations that were issued with original issue discount.
Dividends Received Deduction. A corporation that owns Units will
generally not be entitled to the dividends received deduction with
respect to many dividends received by the Trust, because the dividends
received deduction is not available for dividends from most foreign
corporations or from REITs. Distributions on a RIC Share are eligible
for the dividends received deduction only to the extent that the
dividends received by the Unit owner are attributable to dividends
received by the RIC itself from certain domestic corporations and are
designated by the RIC as being eligible for the dividends received
deduction. Finally, because the Debt Obligations are treated as debt
(not equity) for federal income tax purposes, distributions from the
Debt Obligations are not eligible for the dividends received deduction.
In-Kind Distributions. Under certain circumstances, you may request an
In-Kind Distribution of Trust Assets when you redeem your Units or at
the Trust's termination. By electing to receive an In-Kind Distribution,
you will receive an undivided interest in Trust Assets plus, possibly,
cash. You will not recognize gain or loss if you only receive Trust
Assets in exchange for your pro rata portion of the Trust Assets held by
the Trust. However, if you also receive cash in exchange for a
fractional portion of a Trust Asset, you will generally recognize gain
or loss based on the difference between the amount of cash you receive
and your tax basis in such fractional portion of the Trust Asset.
Limitations on the Deductibility of Trust Expenses. Generally, for
federal income tax purposes, you must take into account your full pro
rata share of the Trust's income, even if some of that income is used to
Page 7
pay Trust expenses. You may deduct your pro rata share of each expense
paid by the Trust to the same extent as if you directly paid the
expense. You may be required to treat some or all of the expenses of the
Trust as miscellaneous itemized deductions. However, individuals may
only deduct certain miscellaneous itemized deductions to the extent they
exceed 2% of adjusted gross income.
Foreign, State and Local Taxes. Interest and dividend payments on the
Trust Assets of foreign companies that are paid to the Trust may be
subject to foreign withholding taxes. Any income withheld will still be
treated as income to you. Under the grantor trust rules, you are
considered to have paid directly your share of foreign taxes. Therefore,
for U.S. tax purposes, you may be entitled to a foreign tax credit or
deduction for those foreign taxes.
If you are a foreign investor (i.e., an investor other than a U.S.
citizen or resident or a U.S. corporation, partnership, estate or
trust), you will not be subject to U.S. federal income taxes, including
withholding taxes, on some of the income from the Trust or on any gain
from the sale or redemption of your Units, provided that certain
conditions are met. You should consult your tax advisor with respect to
the conditions you must meet in order to be exempt for U.S. tax purposes.
Under the existing income tax laws of the State and City of New York,
the Trust will not be taxed as a corporation, and the income of the
Trust will be treated as the income of the Unit holders in the same
manner as for federal income tax purposes. You should consult your tax
advisor regarding potential foreign, state or local taxation with
respect to your Units.
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 Treasury Obligations?
The Treasury Obligations deposited in the Growth and Treasury Trusts
consist of U.S. Treasury bonds which have been stripped of their
unmatured interest coupons. The Treasury Obligations evidence the right
to receive a fixed payment at a future date from the U.S. Government,
and are backed by the full faith and credit of the U.S. Government.
Treasury Obligations are purchased at a deep discount because the buyer
obtains only the right to a fixed payment at a fixed date in the future
and does not receive any periodic interest payments. The effect of
owning deep discount bonds which do not make current interest payments
(such as the Treasury Obligations) is that a fixed yield is earned not
only on the original investment, but also, in effect, on all earnings
during the life of the discount obligation. This implicit reinvestment
of earnings at the same rate eliminates the risk of being unable to
reinvest the income on such obligations at a rate as high as the
implicit yield on the discount obligation, but at the same time
eliminates the holder's ability to reinvest at higher rates in the
future. For this reason, the Treasury Obligations are subject to
substantially greater price fluctuations during periods of changing
interest rates than are securities of comparable quality which make
regular interest payments. The effect of being able to acquire the
Treasury Obligations at a lower price is to permit more of a Growth and
Treasury Trust's portfolio to be invested in Securities.
What are the Securities?
Each Trust contains different issues of Securities as described in "The
Trusts" in Part Three for each Trust and "Portfolio" appearing in Part
One for each Trust. An investment in Units of the Trusts should be made
with an understanding of the risks such an investment may entail.
Although actions have been taken to provide diversified portfolios of
Securities, some inherent risks exist due to the concentration in
certain Trusts of the Securities within a specific country, state or
geographic area or within specific industries, although a number of
Page 8
companies have significant business activities outside the specific
country, state or geographic area. Unpredictable factors include
governmental, political, economic and fiscal policies of the specific
country, state, geographic area or industry which may have an adverse
effect on the performance of the issuers which have significant business
activities within the specific country, state, geographic area or
industry. In addition, regional influences may affect the performance of
the issuers, particularly if an economic downturn or contraction occurs
throughout the area. See "Portfolio" in Part Three for each Trust for
additional considerations for investors, if applicable.
Each Trust consists of Securities listed under "Portfolio" appearing in
Part One for each Trust as may continue to be held from time to time in
such Trust together with cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any
failure in any of the Securities.
Because certain of the Securities from time to time may be sold under
certain circumstances described herein, and because the proceeds from
such events will be distributed to Unit holders and will not be
reinvested, no assurance can be given that the Trusts will retain for
any length of time their present size and composition. Although a
Portfolio is not managed, the Sponsor may instruct the Trustee to sell
Securities under certain limited circumstances. Pursuant to the
Indenture and with limited exceptions, the Trustee may sell or keep any
securities or other property acquired in exchange for Securities such as
those acquired in connection with a merger or other transaction. See
"Rights of Unit Holders-How May Securities be Removed from the Trusts?"
Securities, however, will not be sold by a Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation or
depreciation.
Whether or not the Securities are listed on a national securities
exchange, the principal trading market for the Securities may be in the
over-the-counter market. As a result, the existence of a liquid trading
market for the Securities may depend on whether dealers will make a
market in the Securities. There can be no assurance that a market will
be made for any of the Securities, that any market for the Securities
will be maintained or of the liquidity of the Securities in any markets
made. The investigation by the Securities and Exchange Commission of
illegal insider trading in connection with corporate takeovers, and
possible congressional inquiries and legislation relating to this
investigation, may adversely affect the ability of certain dealers to
remain market makers. In addition, the Trusts may be restricted under
the Investment Company Act of 1940 from selling Securities to the
Sponsor. The price at which the Securities may be sold to meet
redemptions, and the value of the Trusts, will be adversely affected if
trading markets for the Securities are limited or absent.
An investment in Units should be made with an understanding of the risks
which an investment in common stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the common stock market may worsen and the value of the
Securities and therefore the value of the Units may decline. Common
stocks are especially susceptible to general stock market movements and
to volatile increases and decreases of value as market confidence in and
perceptions of the issuers change. These perceptions are based on
unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates,
economic expansion or contraction, and global or regional political,
economic or banking crises. Shareholders of common stocks have rights to
receive payments from the issuers of those common stocks that are
generally subordinate to those of creditors of, or holders of debt
obligations or preferred stocks of, such issuers. Shareholders of common
stocks of the type held by the Trusts have a right to receive dividends
only when and if, and in the amounts, declared by the issuer's board of
directors and have a right to participate in amounts available for
distribution by the issuer only after all other claims on the issuer
have been paid or provided for. Common stocks do not represent an
obligation of the issuer and, therefore, do not offer any assurance of
income or provide the same degree of protection of capital as do debt
securities. The issuance of additional debt securities or preferred
stock will create prior claims for payment of principal, interest and
dividends which could adversely affect the ability and inclination of
the issuer to declare or pay dividends on its common stock or the rights
of holders of common stock with respect to assets of the issuer upon
liquidation or bankruptcy. The value of common stocks is subject to
market fluctuations for as long as the common stocks remain outstanding,
and thus the value of the Securities in a Portfolio may be expected to
fluctuate over the life of a Trust to values higher or lower than those
prevailing on a Unit holder's purchase date.
Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
Page 9
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.
Holders of preferred stocks have the right to receive dividends, when
and as declared by the issuer's Board of Directors but do not
participate in other amounts available for distribution by the issuing
corporation. Issues of preferred stock generally provide that the
preferred stock may be liquidated, either by a partial scheduled
redemption pursuant to a sinking fund or by a refunding redemption
pursuant to which, at the option of the issuer, all or part of the issue
can be retired from any available funds, at prices which may or may not
include a premium over the involuntary liquidation preference, which
generally is the same as the par or stated value of the preferred stock.
In general, optional redemption provisions are more likely to be
exercised when the preferred stocks are valued at a premium over par or
stated value than when they are valued at a discount from par or stated
value.
An investment in Units should be made with an understanding of the risks
which an investment in preferred stocks entails, including the risk that
the financial condition of the issuers of the Securities or the general
condition of the preferred stock market may worsen, and the value of the
preferred stocks and therefore the value of the Units may decline.
Preferred stocks may be 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, market liquidity, and global or
regional political, economic or banking crises. Preferred stocks are
also vulnerable to Congressional reductions in the dividends-received
deduction which would adversely affect the after-tax return to the
investors who can take advantage of the deduction. Such a reduction
might adversely affect the value of preferred stocks in general. Holders
of preferred stocks, as owners of the entity, have rights to receive
payments from the issuers of those preferred stocks that are generally
subordinate to those of creditors of, or holders of debt obligations or,
in some cases, other senior preferred stocks of, such issuers. Preferred
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 senior preferred stocks will create prior claims for
payment of principal and interest and senior dividends which could
adversely affect the ability and inclination of the issuer to declare or
pay dividends on its preferred stock or the rights of holders of
preferred stock with respect to assets of the issuer upon liquidation or
bankruptcy. The value of preferred stocks is subject to market
fluctuations for as long as the preferred stocks remain outstanding, and
thus the value of the Securities may be expected to fluctuate over the
life of the Trust to values higher or lower than those prevailing on the
Initial Date of Deposit.
Holders of Trust Preferred Securities incur risks in addition to or
slightly different than the typical risks of holding preferred stocks.
Trust Preferred Securities are limited-life preferred securities that
are typically issued by corporations, generally in the form of interest-
bearing notes or preferred securities issued by corporations, or by an
affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures issued by the
corporation, or similarly structured securities. The maturity and
dividend rate of the Trust Preferred Securities are structured to match
the maturity and coupon interest rate of the interest-bearing notes,
preferred securities or subordinated debentures. Trust Preferred
Securities usually mature on the stated maturity date of the interest-
bearing notes, preferred securities or subordinated debentures and may
be redeemed or liquidated prior to the stated maturity date of such
instruments for any reason on or after their stated call date or upon
the occurrence of certain extraordinary circumstances at any time. Trust
Preferred Securities generally have a yield advantage over traditional
preferred stocks, but unlike preferred stocks, distributions on the
Trust Preferred Securities are treated as interest rather than dividends
for Federal income tax purposes. Unlike most preferred stocks,
distributions received from Trust Preferred Securities are not eligible
for the dividends-received deduction. Certain of the risks unique to
Trust Preferred Securities include: (i) distributions on Trust Preferred
Securities will be made only if interest payments on the interest-
bearing notes, preferred securities or subordinated debentures are made;
Page 10
(ii) a corporation issuing the interest-bearing notes, preferred
securities or subordinated debentures may defer interest payments on
these instruments for up to 20 consecutive quarters and if such election
is made, distributions will not be made on the Trust Preferred
Securities during the deferral period; (iii) certain tax or regulatory
events may trigger the redemption of the interest-bearing notes,
preferred securities or subordinated debentures by the issuing
corporation and result in prepayment of the Trust Preferred Securities
prior to their stated maturity date; (iv) future legislation may be
proposed or enacted that may prohibit the corporation from deducting its
interest payments on the interest-bearing notes, preferred securities or
subordinated debentures for tax purposes, making redemption of these
instruments likely; (v) a corporation may redeem the interest-bearing
notes, preferred securities or subordinated debentures in whole at any
time or in part from time to time on or after a stated call date; (vi)
Trust Preferred Securities holders have very limited voting rights; and
(vii) payment of interest on the interest-bearing notes, preferred
securities or subordinated debentures, and therefore distributions on
the Trust Preferred Securities, is dependent on the financial condition
of the issuing corporation.
Since certain of the Securities in the Trusts may consist of securities
of foreign issuers, an investment in these Trusts involves some
investment risks that are different in some respects from an investment
in a trust that invests entirely in securities of domestic issuers.
Those investment risks include future political and governmental
restrictions which might adversely affect the payment or receipt of
payment of dividends on the relevant Securities. In addition, for the
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,
foreign issuers are not necessarily subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. However, due to the
nature of the issuers of Securities included in the Trusts, the Sponsor
believes that adequate information will be available to allow the
Portfolio Supervisor to provide portfolio surveillance.
The securities of certain of the foreign issuers in the Trusts are in
ADR form. ADRs evidence American Depositary Receipts which represent
common stock deposited with a custodian in a depositary. American
Depositary Shares, and receipts therefor (ADRs), are issued by an
American bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. These instruments may not
necessarily be denominated in the same currency as the securities into
which they may be converted. For purposes of the discussion herein, the
term ADR generally includes American Depositary Shares.
ADRs may be sponsored or unsponsored. In an unsponsored facility, the
depositary initiates and arranges the facility at the request of market
makers and acts as agent for the ADR holder, while the company itself is
not involved in the transaction. In a sponsored facility, the issuing
company initiates the facility and agrees to pay certain administrative
and shareholder-related expenses. Sponsored facilities use a single
depositary and entail a contractual relationship between the issuer, the
shareholder and the depositary; unsponsored facilities involve several
depositaries with no contractual relationship to the company. The
depositary bank that issues an ADR generally charges a fee, based on the
price of the ADR, upon issuance and cancellation of the ADR. This fee
would be in addition to the brokerage commissions paid upon the
acquisition or surrender of the security. In addition, the depositary
bank incurs expenses in connection with the conversion of dividends or
other cash distributions paid in local currency into U.S. dollars and
such expenses are deducted from the amount of the dividend or
distribution paid to holders, resulting in a lower payout per underlying
share represented by the ADR than would be the case if the underlying
share were held directly. Certain tax considerations, including tax rate
differentials and withholding requirements, arising from applications of
the tax laws of one nation to nationals of another and from certain
practices in the ADR market may also exist with respect to certain ADRs.
In varying degrees, any or all of these factors may affect the value of
the ADR compared with the value of the underlying shares in the local
market. In addition, the rights of holders of ADRs may be different than
those of holders of the underlying shares, and the market for ADRs may
be less liquid than that for the underlying shares. ADRs are registered
securities pursuant to the Securities Act of 1933 and may be subject to
the reporting requirements of the Securities Exchange Act of 1934.
For those Securities that are ADRs, currency fluctuations will affect
the U.S. dollar equivalent of the local currency price of the underlying
domestic share and, as a result, are likely to affect the value of the
ADRs and consequently the value of the Securities. The foreign issuers
of securities that are ADRs may pay dividends in foreign currencies
Page 11
which must be converted into dollars. 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
soundness of the world economy and the strength of the respective
economy as compared to the economies of the United States and other
countries. Therefore, for any securities of issuers (whether or not they
are in ADR form) whose earnings are stated in foreign currencies, or
which pay dividends in foreign currencies or which are traded in foreign
currencies, there is a risk that their United States dollar value will
vary with fluctuations in the United States dollar foreign exchange
rates for the relevant currencies.
On the basis of the best information available to the Sponsor at the
present time, none of the Securities are subject to exchange control
restrictions under existing law which would materially interfere with
payment to the Trusts of dividends due on, or proceeds from the sale of,
the Securities. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely
affect payment to the Trusts. In addition, the adoption of exchange
control regulations and other legal restrictions could have an adverse
impact on the marketability of international securities in the Trusts
and on the ability of the Trusts to satisfy their obligation to redeem
Units tendered to the Trustee for redemption.
Unit holders will be unable to dispose of any of the Securities in a
Portfolio, as such, and will not be able to vote the Securities. As the
holder of the 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.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in a Trust.
The value of the Securities, like the value of the Treasury Obligations
in Growth and Treasury Trusts, will fluctuate over the life of a Trust
and may be more or less than the price at which they were deposited in
the Trust. The Securities may appreciate or depreciate in value (or pay
dividends) depending on the full range of economic and market influences
affecting these securities. However, the Sponsor believes that, upon
termination of a Growth and Treasury Trust, even if the Securities
deposited in the Trust are worthless, an event which the Sponsor
considers highly unlikely, the Treasury Obligations will provide
sufficient principal to at least equal $1.00 per Unit, or $10.00 per
Unit for certain Growth and Treasury Trusts (which is equal to the per
Unit value upon maturity of the Treasury Obligations). This feature of
the Growth and Treasury Trusts provides Unit holders with principal
protection, although they might forego any earnings on the amount
invested. To the extent that Units are purchased at a price less than
$1.00 per Unit (or less than $10.00 per Unit for certain Trusts) this
feature may also provide a potential for capital appreciation.
Unless a Unit holder purchases Units of a Growth and Treasury Trust on a
date when the value of the Units is $1.00 or less (or $10.00 or less for
certain Trusts), total distributions, including distributions made upon
termination of the Trust, may be less than the amount paid for a Unit.
The Trustee will have no power to vary the investments of the Trusts,
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 Securities only under limited circumstances. See "How May Securities
be Removed from the Trusts?"
To the best of the Sponsor's knowledge, there is no litigation pending
as of the date of this Part Two Prospectus in respect of any Security
which might reasonably be expected to have a material adverse effect on
the Trusts. Litigation may be instituted on a variety of grounds with
respect to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trusts. See Part
Three for additional considerations, if applicable.
Legislation. Legislation may be enacted that could negatively affect the
Securities in a Trust or the issuers of the Securities. Changing
approaches to regulation may have a negative impact on certain companies
represented in a Trust. There can be no assurance that future
legislation, regulation or deregulation will not have a material adverse
effect on a Trust or will not impair the ability of the issuers of the
Securities to achieve their business goals.
Page 12
PUBLIC OFFERING
How is the Public Offering Price Determined?
Although 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 Securities in the Trust plus or minus cash, if any, in the Income
and Capital Accounts of the Trust. All expenses incurred in maintaining
a secondary market, other than the fees of the Evaluator, the costs of
the Trustee in transferring and recording the ownership of Units and
costs incurred in annually updating the Trusts' registration statements,
will be borne by the Sponsor. If the supply of Units exceeds demand, or
for some other business reason, the Sponsor may discontinue purchases of
Units at such prices. IF A UNIT HOLDER WISHES TO DISPOSE OF HIS UNITS,
HE SHOULD INQUIRE OF THE SPONSOR AS TO CURRENT MARKET PRICES PRIOR TO
MAKING A TENDER FOR REDEMPTION TO THE TRUSTEE. 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.
Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate bid side evaluation of the Treasury
Obligations (if applicable) and the aggregate underlying value of the
Securities in the Trust, plus or minus cash, if any, in the Income and
Capital Accounts of the Trust, plus the applicable sales charge.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" appearing in Part One for each Trust in accordance with
fluctuations in the prices of the underlying Securities. The aggregate
value of the Units of a Trust shall be determined (a) on the basis of
the bid prices of the Treasury Obligations (if applicable) and the
aggregate underlying value of the Securities therein plus or minus cash,
if any, in the Income and Capital Accounts of a Trust, (b) if bid prices
are not available for the Treasury Obligations (if applicable), on the
basis of bid prices for comparable securities, (c) by determining the
value of the Treasury Obligations (if applicable) on the bid side of the
market by appraisal, or (d) by any combination of the above.
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed, 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 Securities are not
so listed or, if so listed and the principal market therefore is other
than on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these prices
are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or (c) by any
combination of the above.
Although payment is normally made three business days following the
order for purchase, payment may be made prior thereto. A person will
become owner of the Units on the date of settlement provided payment has
been received. Cash, if any, made available to the Sponsor prior to the
date of settlement for the purchase of Units may be used in the
Sponsor's business and may be deemed to be a benefit to the Sponsor,
subject to the limitations of the Securities Exchange Act of 1934.
Delivery of Certificates representing Units so ordered will be made five
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.
See "Public Offering" in Part Three for additional information for each
Trust.
How are Units Distributed?
Units repurchased in the secondary market may be offered by this Part
Two Prospectus at the secondary market public offering price determined
in the manner described above.
The Sponsor reserves the right to change the amount of the concession or
agency commission from time to time. Certain commercial banks may be
making Units of the Trusts available to their customers on an agency
basis. A portion of the sales charge paid by these customers is retained
by or remitted to the banks.
Page 13
From time to time the Sponsor may implement programs under which
broker/dealers, banks or other selling agents 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 broker/dealer,
bank or other selling agent 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 a Trust. Such payments are made by the Sponsor out of its
own assets, and not out of the assets of a Trust. These programs will
not change the price Unit holders pay for their Units or the amount that
a Trust will receive from the Units sold.
The Sponsor may, from time to time in its advertising and sales
materials, compare the then current estimated returns on a Trust and
returns over specified periods on other similar trusts sponsored by Nike
Securities L.P. with returns on other taxable investments such as
corporate or U.S. Government bonds, bank CDs and money market accounts
or money market funds, each of which has investment characteristics that
may differ from those of the respective Trust. U.S. Government bonds,
for example, are backed by the full faith and credit of the U.S.
Government, and bank CDs and money market accounts are insured by an
agency of the federal government. Money market accounts and money market
funds provide stability of principal, but pay interest at rates that
vary with the condition of the short-term debt market. The investment
characteristics of each respective Trust are described more fully
elsewhere in this Prospectus and in Part Three for each Trust.
Trust performance may be compared to performance on a total return basis
with the Dow Jones Industrial Average, the S&P 500 Composite Stock Price
Index, or performance data from Lipper Analytical Services, Inc. and
Morningstar Publications, Inc. or from publications such as Money, The
New York Times, U.S. News and World Report, BusinessWeek, 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?
In maintaining a market for the Units, the Sponsor will realize profits
or sustain losses in the amount of any difference between the price at
which Units are purchased and the price at which Units are resold (which
price includes a sales charge as indicated in Part One for each Trust)
or redeemed. The secondary market public offering price of Units may be
greater or less than the cost of such Units to the Sponsor.
RIGHTS OF UNIT HOLDERS
How is Evidence of Ownership Issued and Transferred?
The Trustee is authorized to treat as the record owner of Units that
person who is registered as such owner on the books of the Trustee.
Ownership of Units may be evidenced by registered certificates executed
by the Trustee and the Sponsor. Delivery of certificates representing
Units ordered for purchase is normally made three business days
following such order or shortly thereafter. Certificates are
transferable by presentation and surrender to the Trustee properly
endorsed or accompanied by a written instrument or instruments of
transfer. Certificates to be redeemed must be properly endorsed or
accompanied by a written instrument or instruments of transfer. A Unit
holder must sign exactly as his name appears on the face of the
certificate with the signature guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other
signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
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.
Page 14
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Capital Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the 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" appearing in Part One 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. The pro rata share of cash in the Capital Account of each
Trust will be computed as of the date indicated in Part One for each
Trust. Capital Account distributions to the Unit holders of record of a
Trust as of the date indicated in Part One for each Trust will be made
on the date indicated in Part One for each Trust. 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) nor to make a distribution from the Capital Account of a
Trust unless the amount available for distribution shall equal at least
$1.00 per 1000 Units (if $1.00 per Unit) or $1.00 per 100 Units (if
$10.00 per Unit). Proceeds received on the sale of any Securities or
Treasury Obligations (if applicable) in a Trust, to the extent not used
to meet redemptions of Units or pay expenses, will however be
distributed to Unit holders of record as indicated in Part One for each
Trust. Income with respect to the original issue discount on the
Treasury Obligations in a Growth and Treasury Trust will not be
distributed currently, although Unit holders will be subject to Federal
income tax as if a distribution had occurred. See "What is the Federal
Tax Status of Unit Holders?"
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
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, if applicable, will, upon surrender
of his Units for redemption, receive: (i) the pro rata share of the
amounts realized upon the disposition of Securities, unless he or she
elects an In-Kind Distribution as described under "Other Information-How
May the Indenture be Amended or Terminated?", (ii) a pro rata share of
the amounts realized upon the disposition of the Treasury Obligations
(if applicable) and (iii) a pro rata share of any other assets of the
Trust, less expenses of the Trust, subject to the limitation that
Treasury Obligations (if applicable) may not be sold to pay for Trust
expenses.
Page 15
The Trustee will credit to the Income Account of a Trust any dividends
received on the Securities therein. All other receipts (e.g. return of
principal, capital gains, etc.) are credited to the Capital Account of a
Trust.
The Trustee may establish reserves (the "Reserve Account") within a
Trust for state and local taxes, if any, and any governmental charges
payable out of such Trust.
Distribution Reinvestment Option. Eligible Unit holders 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 the Trust, automatically reinvested in additional Units
of an eligible Trust. See Part III of this Prospectus to determine
whether the distribution reinvestment option is available for a
particular Trust. Each person who purchases Units of an eligible 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 the Trust. 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 1,000 Units if $1.00 per Unit (or per
100 Units if $10.00 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 the Trust for such year; (2) any Securities sold during
the year and the Securities held at the end of such year by the Trust;
(3) the redemption price per 1,000 Units if $1.00 per Unit (or per 100
Units if $10.00 per Unit) based upon a computation thereof on the 31st
day of December of such year (or the last business day prior thereto);
and (4) amounts of income and capital distributed during such year.
In order to comply with Federal and state tax reporting requirements,
Unit holders will be furnished, upon request to the Trustee, evaluations
of the Securities in the Trusts furnished to it by the Evaluator.
How May Units be Redeemed?
A Unit holder may redeem all or a portion of his Units by tender to the
Trustee at its unit investment trust office in the City of New York of
the certificates representing the Units to be redeemed, 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.
For certain Equity Trusts, any Unit holder tendering at least the
minimum amount specified in "Summary of Essential Information" appearing
in Part One for each 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 Securities in an amount and value
of 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 the Mandatory Termination Date will be honored. To the extent
possible, In-Kind Distributions shall be made by the Trustee through the
distribution of each of the Securities in book-entry form to the account
Page 16
of the Unit holder's bank or broker/dealer at the Depository Trust
Company. An In-Kind Distribution will be reduced by customary transfer
and registration charges. The tendering Unit holder will receive his pro
rata number of whole shares of each of the Securities comprising the
portfolio and cash from the Capital Account equal to the fractional
shares to which the tendering Unit holder is entitled. The Trustee may
adjust the number of shares of any issue of 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
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 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 Securities and/or Treasury Obligations
(if applicable) of a Trust in order to make funds available for
redemption. To the extent that Securities and/or Treasury Obligations
(if applicable) are sold, the size and diversity of the Trust will be
reduced. Such sales may be required at a time when Securities and/or
Treasury Obligations (if applicable) would not otherwise be sold and
might result in lower prices than might otherwise be realized. For
Growth and Treasury Trusts, Securities will be sold to meet redemptions
of Units before Treasury Obligations, although Treasury Obligations may
be sold if the Growth and Treasury Trust is assured of retaining a
sufficient principal amount of Treasury Obligations to provide funds
upon maturity of the Trust at least equal to $1.00 per Unit, or $10.00
per Unit for certain Trusts.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Treasury Obligations (if applicable) and the aggregate underlying value
of the Securities in the Trust, plus or minus cash, if any, in the
Income and Capital Accounts of a Trust. The Redemption Price per Unit is
the pro rata share of each Unit determined by the Trustee by adding: (1)
the cash on hand in a Trust; (2) the aggregate value of the Securities
held in a Trust, as determined by the Evaluator on the basis of bid
prices of the Treasury Obligations (if applicable) and the aggregate
underlying value of the Securities in a Trust next computed; and (3)
dividends receivable on Securities trading ex-dividend as of the date of
computation; and deducting therefrom: (1) amounts representing any
applicable taxes or governmental charges payable out of a Trust; (2) any
amounts owing to the Trustee for its advances; (3) an amount
representing estimated accrued expenses of a Trust, including but not
limited to fees and expenses of the Trustee (including legal and
auditing fees), the Evaluator and supervisory fees, if any; (4) cash
held for distribution to Unit holders of record of a Trust as of the
business day prior to the evaluation being made; and (5) other
liabilities incurred by a Trust; and finally dividing the results of
such computation by the number of Units of the Trust outstanding as of
the date thereof.
The aggregate value of the Securities will be determined in the
following manner: if the Securities are listed, 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 Securities are not
so listed or, if so listed and the principal market therefore is other
than on the exchange, the evaluation shall generally be based on the
current bid price on the over-the-counter market (unless these prices
are inappropriate as a basis for evaluation). If current bid prices are
unavailable, the evaluation is generally determined (a) on the basis of
current bid prices for comparable securities, (b) by appraising the
value of the Securities on the bid side of the market or (c) by any
combination of the above.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed, other than
for customary weekend and holiday closings, or during which the
Securities and Exchange Commission determines that trading on the New
York Stock Exchange is restricted or any emergency exists, as a result
Page 17
of which disposal or evaluation of the Securities is not reasonably
practicable, or for such other periods as the Securities and Exchange
Commission may by order permit. Under certain extreme circumstances, the
Sponsor may apply to the Securities and Exchange Commission for an order
permitting a full or partial suspension of the right of Unit holders to
redeem their Units. The Trustee is not liable to any person in any way
for any loss or damage which may result from any such suspension or
postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. Eastern time on the same
business day and by making payment therefor to the Unit holder not later
than the day on which the Units would otherwise have been redeemed by
the Trustee. Units held by the Sponsor may be tendered to the Trustee
for redemption as any other Units. In the event the Sponsor does not
purchase Units, the Trustee may sell Units tendered for redemption in
the over-the-counter market, if any, as long as the amount to be
received by the Unit holder is equal to the amount he 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.
How May Securities be Removed from the Trusts?
The Portfolio of each Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a 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 Security, that the issuer of the 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 Security, that the issuer has defaulted on the payment
on any of its outstanding obligations, that the price of the 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 Securities
would be detrimental to a Trust. Treasury Obligations in Growth and
Treasury Trusts may be sold by the Trustee only pursuant to the
liquidation of a Growth and Treasury Trust or to meet redemption
requests. Pursuant to the Indenture and with limited exceptions, the
Trustee may sell any securities or other property acquired in exchange
for Securities such as those acquired in connection with a merger or
other transaction. If offered such new or exchanged securities or
property, the Trustee shall reject the offer. However, in the event such
securities or property are nonetheless acquired by a Trust, they may be
accepted for deposit in such Trust and either sold by the Trustee or
held in the Trust pursuant to the direction of the Sponsor (who may rely
on the advice of the Portfolio Supervisor). Proceeds from the sale of
Securities by the Trustee are credited to the Capital Account of 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 a Trust with respect to
selling Securities from such Trust. In acting in such capacity the
Sponsor or its affiliate will be held subject to the restrictions under
the Investment Company Act of 1940, as amended.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses;
provided, however, that in the case of Securities sold to meet
redemption requests, Treasury Obligations in Growth and Treasury Trusts
may only be sold if the Trust is assured of retaining a sufficient
principal amount of Treasury Obligations to provide funds upon maturity
of a Growth and Treasury Trust at least equal to $1.00 per Unit, or
$10.00 per Unit for certain Trusts. Treasury Obligations may not be sold
by the Trustee to meet Trust expenses.
The Sponsor, in designating 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 Securities. To the extent this is not
practicable, the composition and diversity of the Securities may be
Page 18
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 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.
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 $27 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, 1999, the total
partners' capital of Nike Securities L.P. was $19,881,035 (audited).
This paragraph relates only to the Sponsor and not to the Trusts or to
any series thereof or to any other Underwriter. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Code of Ethics. The Sponsor and each Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to a Trust.
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 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.
Page 19
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of 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 either Securities Evaluation Service, Inc., 531 East
Roosevelt Road, Suite 200, Wheaton, Illinois 60187 or First Trust
Advisors L.P., an Illinois limited partnership formed in 1991 and an
affiliate of the Sponsor. The address of First Trust Advisors L.P. is
1001 Warrenville Road, Lisle, Illinois 60532. See Part One for each
Trust to determine if Securities Evaluation Service, Inc. or First Trust
Advisors L.P. is evaluating such Trust. The Evaluator may resign or may
be removed by the Sponsor and the Trustee, in which event the Sponsor
and the Trustee are to use their best efforts to appoint a satisfactory
successor. Such resignation or removal shall become effective upon the
acceptance of appointment by the successor Evaluator. If upon
resignation of the Evaluator no successor has accepted appointment
within 30 days after notice of resignation, the Evaluator may apply to a
court of competent jurisdiction for the appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that a Trust shall terminate upon the maturity,
redemption or other disposition of the last of the Treasury Obligations
held in a Growth and Treasury Trust, but in no event beyond the
Mandatory Termination Date indicated in Part One for each Trust under
"Summary of Essential Information." A Trust may be liquidated at any
time by consent of 100% of the Unit holders of the Trust, by the Trustee
in the event that Units of a Trust not yet sold aggregating more than
60% of the Units of the Trust are tendered for redemption by an
Underwriter, including the Sponsor or, for Equity Trusts, by the Trustee
when the principal amount of the Securities owned by a Trust as shown by
any evaluation, is less than the amount specified in Part One for each
Trust. 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
Page 20
forth under "Rights of Unit Holders-How are Income and Capital
Distributed?"
Commencing during the period beginning nine business days prior to and
no later than the Mandatory Termination Date, 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
Securities. Written notice of any termination of a Trust specifying the
time or times at which Unit holders may surrender their certificates for
cancellation shall be given by the Trustee to each Unit holder at his
address appearing on the registration books of a Trust maintained by the
Trustee. Not less than 60 days prior to the Mandatory Termination Date,
the Trustee will provide written notice thereof to all Unit holders and
will include with such notice a form to enable Unit holders to elect a
distribution of shares of Securities (an "In-Kind Distribution"), if
such Unit holder owns at least that minimum amount as set forth in
"Summary of Essential Information" in Part One for each Trust, rather
than receive payment in cash for such Unit holder's pro rata share of
the amounts realized upon the disposition by the Trustee of Securities.
An In-Kind Distribution will be reduced by customary transfer and
registration charges. To be effective, the election form, together with
surrendered certificates and other documentation required by the
Trustee, must be returned to the Trustee at least ten business days
prior to the Mandatory Termination Date. Not less than 60 days prior to
the termination of the Trust, those Unit holders with at least that
minimum amount as set forth in "Summary of Essential Information" in
Part One for each Trust, will be offered the option of having the
proceeds from the Securities distributed "In-Kind," or they will be paid
in cash, as indicated above. For Growth and Treasury Trusts, all Unit
holders will receive their pro rata portion of the Treasury Obligations
in cash upon the termination of a Trust. A Unit holder may, of course,
at any time after the Securities are distributed, sell all or a portion
of the shares. Unit holders not electing a distribution of shares of
Securities will receive a cash distribution from the sale of the
remaining Securities and Treasury Obligations (if applicable) within a
reasonable time after a Trust is terminated. Regardless of the
distribution involved, the Trustee will deduct from the funds of the
Trust any accrued costs, expenses, advances or indemnities provided by
the Trust Agreement, including estimated compensation of the Trustee and
costs of liquidation and any amounts required as a reserve to provide
for payment of any applicable taxes or other governmental charges. Any
sale of Securities in 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 Securities are sold prior
to the Mandatory Termination Date, Unit holders will not benefit from
any stock appreciation they would have received had the Securities not
been sold at such time. The Trustee will then distribute to each Unit
holder his pro rata share of the balance of the Income and Capital
Accounts.
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
Federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn, acted as counsel for the Trustee and as
special New York tax counsel for the Trust.
Experts
The financial statements of the various Series of the Trust appearing in
Part One of this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere therein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
Page 21
DESCRIPTION OF BOND RATINGS*
Standard & Poor's. A brief description of the applicable Standard & Poor's
rating symbols and their meanings follows:
A Standard & Poor's corporate or municipal bond rating is a current assessment
of the creditworthiness of an obligor with respect to a specific debt
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangements under the
laws of bankruptcy and other laws affecting creditors' rights.
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional.
A provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his/her own judgment with respect to such likelihood
and risk.
Credit Watch: Credit Watch highlights potential changes in ratings of bonds
and other fixed income securities. It focuses on events and trends which
place companies and government units under special surveillance by S&P's
180-member analytical staff. These may include mergers, voter referendums,
actions by regulatory authorities, or developments gleaned from analytical
reviews. Unless otherwise noted, a rating decision will be made within 90
days. Issues appear on Credit Watch where an event, situation, or deviation
from trends occurred and needs to be evaluated as to its impact on credit
ratings. A listing, however, does not mean a rating change is inevitable.
_______________
* As published by the rating companies.
Page 22
Since S&P continuously monitors all of its ratings, Credit Watch is not
intended to include all issues under review. Thus, rating changes will
occur without issues appearing on Credit Watch.
Moody's. A brief description of the applicable Moody's rating symbols and
their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues. Their safety is so absolute that with the occasional
exception of oversupply in a few specific instances, characteristically,
their market value is affected solely by money market fluctuations.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat large than in Aaa securities. Their market value is virtually
immune to all but money market influences, with the occasional exception
of oversupply in a few specific instances.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future. The market value of A-rated bonds may be influenced
to some degree by economic performance during a sustained period of
depressed business conditions, but, during periods of normalcy, A-rated
bonds frequently move in parallel with Aaa and Aa obligations, with the
occasional exception of oversupply in a few specific instances.
A 1 and Baa 1 - Bonds which are rated A 1 and Baa 1 offer the maximum in
security within their quality group, can be bought for possible upgrading
in quality, and additionally, afford the investor an opportunity to gauge
more precisely the relative attractiveness of offerings in the market place.
Baa - Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. The
market value of Baa-rated bonds is more sensitive to changes in economic
circumstances, and aside from occasional speculative factors applying to
some bonds of this class, Baa market valuations will move in parallel with
Aaa, Aa, and A obligations during periods of economic normalcy, except in
instances of oversupply.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Moody's bond rating symbols may contain numerical modifiers of a generic
rating classification. The modifier 1 indicates that the bond ranks at the
high end of its category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
Con.(- - -) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals which
begin when facilities are completed, or (d) payments to which some other
limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) A brief
description of the applicable Fitch rating symbols and their meanings follows:
AAA - These bonds are considered to be investment grade and of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
Page 23
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - These bonds are considered to be investment grade and of high quality.
The obligor's ability to pay interest and repay principal, which is very
strong, is somewhat less than for AAA-rated securities or more subject to
possible change over the term of the issue.
A - These bonds are considered to be investment grade and of good quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB - These bonds are considered to be investment grade and of satisfactory
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to weaken this ability than bonds
with higher ratings.
BB - These bonds are considered speculative and of low investment grade.
The obligor's ability to pay interest and repay principal is not strong and
is considered likely to be affected over time by adverse economic changes.
B - These bonds are considered highly speculative. Bonds in this class are
lightly protected as to the obligor's ability to pay interest over the life
of the issue and repay principal when due.
A "+" or a "-" sign after a rating symbol indicates relative standing in its
rating.
Page 23
CONTENTS:
The First Trust Special Situations Trust
FT Series:
What is the FT Series? 4
What are the Expenses and Charges? 4
What is the Federal Tax Status of Unit Holders? 6
Are Investments in the Trusts Eligible for
Retirement Plans? 8
Portfolio:
What are Treasury Obligations? 8
What are the Securities? 8
What are Some Additional Considerations for
Investors? 12
Public Offering:
How is the Public Offering Price Determined? 13
How are Units Distributed? 13
What are the Sponsor's Profits? 14
Rights of Unit Holders:
How is Evidence of Ownership Issued and
Transferred? 14
How are Income and Capital Distributed? 15
What Reports will Unit Holders Receive? 16
How May Units be Redeemed? 16
How May Units be Purchased by the Sponsor? 18
How May Securities be Removed
from the Trusts? 18
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 19
Who is the Trustee? 19
Limitations on Liabilities of Sponsor and Trustee 20
Who is the Evaluator? 20
Other Information:
How May the Indenture be Amended or
Terminated? 20
Legal Opinions 21
Experts 21
Description of Bond Ratings 22
___________
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)
The First Trust
Special Situations Trust
FT Series
Prospectus
Part Two
April 28, 2000
First Trust (registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE AND PART THREE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 24
THE ADVANTAGE GROWTH AND TREASURY SECURITIES TRUST
PROSPECTUS
Part Two NOTE: THIS PART TWO PROSPECTUS MAY
Dated July 31, 2000 ONLY BE USED WITH PART ONE
The Trust. The Advantage Growth and Treasury Securities Trust (the
"Trust") is a unit investment trust consisting of a portfolio of zero
coupon U.S. Treasury bonds and shares of Pilgrim Growth Opportunities
Fund ("Pilgrim Growth" or the "Fund"). Pilgrim Growth Opportunities Fund
was formerly known as the Northstar Advantage Growth Fund and The
Northstar Growth Fund. Pilgrim Growth is an open-end diversified
management investment company, commonly known as a mutual fund.
The objective of the Trust is to protect Unit holders' capital by
investing a portion of the Trust's portfolio in zero coupon U.S.
Treasury bonds ("Treasury Obligations") and to provide for potential
capital appreciation by investing a portion of the Trust's portfolio in
shares of Pilgrim Growth. Collectively the Treasury Obligations and the
Pilgrim Growth shares are referred to herein as the "Securities." See
"Portfolio" in Part One of the Prospectus. Pilgrim Growth's investment
objective is to obtain long-term growth of capital by investing
primarily in domestic common stocks. The Fund invests primarily in U.S.
companies that the portfolio manager feels have above-average prospects
for growth. The Trust has a termination date as set forth in "Summary of
Essential Information" in Part One of the Prospectus. The Treasury
Obligations evidence the right to receive a fixed payment at a future
date from the U.S. Government and are backed by the full faith and
credit of the U.S. Government. The guarantee of the U.S. Government does
not apply to the market value of the Treasury Obligations or the Units
of the Trust, whose net asset value will fluctuate and, prior to
maturity, may be worth more or less than a purchaser's acquisition cost.
There is, of course, no guarantee that the objective of the Trust will
be achieved.
Each Unit of the Trust represents an undivided fractional interest in
all the Securities deposited in the Trust. The Trust has been organized
so that purchasers of Units should receive, at the termination of the
Trust, an amount per Unit at least equal to $1.00 (which is equal to the
per Unit value upon maturity of the Treasury Obligations), even if the
Trust never paid a dividend and the value of the Pilgrim Growth shares
were to decrease to zero, which the Sponsor considers highly unlikely.
This feature of the Trust provides Unit holders who purchase Units at a
price of $1.00 or less per Unit with total principal protection,
including any sales charges paid, although they might forgo any earnings
on the amount invested. To the extent that Units are purchased at a
price less than $1.00 per Unit, this feature may also provide a
potential for capital appreciation. UNIT HOLDERS DISPOSING OF THEIR
UNITS PRIOR TO THE MATURITY OF THE TRUST MAY RECEIVE MORE OR LESS THAN
$1.00 PER UNIT, DEPENDING ON MARKET CONDITIONS ON THE DATE UNITS ARE
SOLD OR REDEEMED.
The Treasury Obligations deposited in the Trust will mature on the date
listed in "Portfolio" appearing in Part One. The Treasury Obligations in
the Trust had a maturity value equal to or greater than the aggregate
Public Offering Price (which includes the sales charge) of the Units of
the Trust on the Initial Date of Deposit. The Pilgrim Growth shares
deposited in the Trust's portfolio have no fixed maturity date and the
net asset value of the shares will fluctuate. See "Portfolio" appearing
in Part One of the Prospectus.
BOTH PARTS OF THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Page 1
Public Offering Price. The Public Offering Price per Unit will be based
upon a pro rata share of the bid prices of the Treasury Obligations and
the net asset value of the Pilgrim Growth shares in the Trust plus or
minus a pro rata share of cash, if any, in the Principal Account of the
Trust plus a maximum sales charge as set forth in "Summary of Essential
Information" in Part One of the Prospectus. The minimum purchase is that
amount set forth in Part One of the Prospectus. The sales charge is
reduced on a graduated scale for sales involving at least that amount
set forth in Part One of the Prospectus. See "Public Offering-How is the
Public Offering Price Determined?"
Dividend and Capital Distributions. Distributions, if any, of net
income, other than amortized discount, will be made at least annually.
Distributions of realized capital gains, if any, received by the Trust,
will be made whenever Pilgrim Growth makes such a distribution. Any
distribution of income and/or capital will be net of the expenses of the
Trust. INCOME WITH RESPECT TO THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT ON
THE TREASURY OBLIGATIONS WILL NOT BE DISTRIBUTED CURRENTLY, ALTHOUGH
UNIT HOLDERS WILL BE SUBJECT TO INCOME TAX AT ORDINARY INCOME RATES AS
IF A DISTRIBUTION HAD OCCURRED. See "What is the Federal Tax Status of
Unit Holders?" Additionally, upon termination of the Trust, the Trustee
will distribute, upon surrender of Units for redemption, to each Unit
holder his or her pro rata share of the Trust's assets, less expenses,
in the manner set forth under "Rights of Unit Holders-How are Income and
Principal Distributed?"
Reinvestment. Each Unit holder will, unless he or she elects to receive
cash payments, have distributions of principal (including, if elected by
Unit holders, the proceeds received upon the maturity of the Treasury
Obligations in the Trust at termination), capital, if any, and income
earned by the Trust, automatically invested in shares of Pilgrim Growth
(if Units are properly registered) in the name of the Unit holder. Such
distributions (including, if elected by Unit holders, the proceeds
received upon the maturity of the Treasury Obligations in the Trust at
termination) will be reinvested without a sales charge or the imposition
of a contingent deferred sales load to the participant on each
applicable distribution date. See "Rights of Unit Holders-How Can
Distributions to Unit Holders be Reinvested?"
Secondary Market for Units. The Sponsor may maintain a market for Units
of the Trust and offer to repurchase such Units at prices which are
based on the aggregate bid side evaluation of the Treasury Obligations
and the aggregate net asset value of Pilgrim Growth shares in the Trust
plus or minus a pro rata share of cash, if any, in the Principal Account
of the Trust.
Page 2
THE ADVANTAGE GROWTH AND TREASURY SECURITIES TRUST
What is The Advantage Growth and Treasury Securities Trust?
The Advantage Growth and Treasury Securities Trust is a series of
investment companies created by the Sponsor under the name of The
Advantage Growth and Treasury Securities Trust, all of which are
generally similar but each of which is separate and is designated by a
different series number (the "Trust"). This series was created under the
laws of the State of New York pursuant to a Trust Agreement (the
"Indenture"), dated the Initial Date of Deposit, with Nike Securities
L.P. as Sponsor, The Chase Manhattan Bank as Trustee, First Trust
Advisors L.P. as Evaluator and Portfolio Supervisor.
The objective of the Trust is to protect Unit holders' capital by
investing a portion of the Trust's portfolio in zero coupon U.S.
Treasury bonds ("Treasury Obligations") and to provide for potential
capital appreciation by investing a portion of the Trust's portfolio in
shares of Pilgrim Growth Opportunities Fund ("Pilgrim Growth"). Pilgrim
Growth Opportunities Fund was formerly known as the Northstar Advantage
Growth Fund and The Northstar Growth Fund. The Treasury Obligations
evidence the right to receive a fixed payment at a future date from the
U.S. Government and are backed by the full faith and credit of the U.S.
Government. The guarantee of the U.S. Government does not apply to the
market value of the Treasury Obligations or the Units of the Trust,
whose net asset value will fluctuate and, prior to maturity, may be more
or less than a purchaser's acquisition cost. Pilgrim Growth is an open
end mutual fund whose investment objective is to obtain long-term growth
of capital by investing primarily in domestic common stocks.
Collectively, the Treasury Obligations and Pilgrim Growth shares in the
Trust are referred to herein as the "Securities." There is, of course,
no guarantee that the objective of the Trust will be achieved.
The Trust has been organized so that purchasers of Units should receive,
at the termination of the Trust, an amount per Unit at least equal to
$1.00 per Unit (which is equal to the per Unit value upon maturity of
the Treasury Obligations), even if the Pilgrim Growth shares never paid
a dividend and the value of Pilgrim Growth shares in the Trust were to
decrease to zero, which the Sponsor considers highly unlikely. The
receipt of only $1.00 per Unit upon the termination of the Trust (an
event which the Sponsor believes is unlikely) represents a substantial
loss on a present value basis. Furthermore, the $1.00 per Unit in no
respect protects investors against diminution in the purchasing power of
their investment due to inflation (although expectations concerning
inflation are a component in determining prevailing interest rates,
which in turn determine present values). To the extent that Units of the
Trust are redeemed, the aggregate value of the Securities in the Trust
will be reduced and the undivided fractional interest represented by
each outstanding Unit of the Trust will increase. See "Rights of Unit
Holders-How May Units be Redeemed?" The Trust has a Mandatory
Termination Date as set forth under "Summary of Essential Information"
appearing in Part One of the Prospectus.
What are the Expenses and Charges?
At no cost to the Trust, the Sponsor has borne all the expenses of
creating and establishing the Trust, including the cost of the initial
preparation, printing and execution of the Indenture and the
certificates for the Units, legal and accounting expenses, expenses of
the Trustee and other out-of-pocket expenses. The Sponsor will not
receive any fees in connection with its activities relating to the
Trust. However, legal and regulatory filing fees and expenses associated
with annually updating the Trusts' registration statements are also now
chargeable to each Trust. Historically, the Sponsor paid these fees and
expenses.
First Trust Advisors, L.P., an affiliate of the Sponsor, will receive an
annual supervisory fee, which is not to exceed the amount set forth
under "Summary of Essential Information" appearing in Part One of the
Prospectus, for providing portfolio supervisory services for the Trust.
Such fee is based on the number of Units outstanding in the Trust on
January 1 of each year except during 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
such year.
The Evaluator will receive a fee as indicated in "Summary of Essential
Information" appearing in Part One of the Prospectus. No fee is paid to
the Evaluator with respect to the Pilgrim Growth shares in the Trust.
The Trustee pays certain expenses of the Trust for which it is
reimbursed by the Trust. The Trustee will receive for its ordinary
Page 3
recurring services to a Trust and for all normal expenses of the Trustee
incurred by or in connection with its responsibilities under the
Indenture, an annual fee computed at $.85 per annum per 1,000 Units in
the Trust outstanding based upon the largest aggregate number of Units
of the Trust outstanding at any time during the year. For a discussion
of the services performed by the Trustee pursuant to its obligations
under the Indenture, reference is made to the material set forth under
"Rights of Unit Holders." Rule 12b-1 fees imposed on shares of Pilgrim
Growth held in the Trust, are rebated to the Trust, deposited in the
Income Account and are used to pay expenses of the Trust.
The Trustee's and the above described fees are payable from the Income
Account of the Trust to the extent funds are available and then from the
Principal Account of the Trust. Since the Trustee has the use of the
funds being held in the Principal and Income Accounts for payment of
expenses and redemptions and since such Accounts are noninterest-bearing
to Unit holders, the Trustee benefits thereby. Part of the Trustee's
compensation for its services to the Trust is expected to result from
the use of these funds.
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.
The following additional charges are or may be incurred by the Trust:
all legal and annual auditing expenses of the Trustee incurred by or in
connection with its responsibilities under the Indenture; the expenses
and costs of any action undertaken by the Trustee to protect the Trust
and the rights and interests of the Unit holders; fees of the Trustee
for any extraordinary services performed under the Indenture;
indemnification of the Trustee for any loss, liability or expense
incurred by it without negligence, bad faith or willful misconduct on
its part, arising out of or in connection with its acceptance or
administration of the Trust; indemnification of the Sponsor for any
loss, liability or expense incurred without gross negligence, bad faith
or willful misconduct in acting as Depositor of the Trust; all taxes and
other government charges imposed upon the Securities or any part of the
Trust (no such taxes or charges are being levied or made or, to the
knowledge of the Sponsor, contemplated). The above expenses and the
Trustee's annual fee, when paid or owing to the Trustee, are secured by
a lien on the Trust. In addition, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay all
these amounts if funds are not otherwise available in the Income and
Principal Accounts of the Trust except that the Trustee shall not sell
Treasury Obligations to pay Trust expenses.
The Indenture requires the Trust to be audited on an annual basis at the
expense of the Trust by independent auditors selected by the Sponsor. So
long as the Sponsor is making a secondary market for the Units, the
Sponsor is required to bear the cost of such annual audits to the extent
such cost exceeds $.50 per 1,000 Units. Unit holders of the Trust
covered by an audit may obtain a copy of the audited financial
statements upon request.
What is the Federal Tax Status of Unit Holders?
The following is a general discussion of certain of the Federal income
tax consequences of the purchase, ownership and disposition of the
Units. The summary is limited to investors who hold the Units as
"capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Internal Revenue Code of 1986 (the
"Code"). Unit holders should consult their tax advisors in determining
the Federal, state, local and any other tax consequences of the
purchase, ownership and disposition of Units in the Trust. For purposes
of the following discussion and opinions, it is assumed that the shares
of Pilgrim Growth represent shares in an entity treated as a regulated
investment company for Federal income tax purposes.
In the opinion of Chapman and Cutler, counsel for the Sponsor, under
existing law:
1. The Trust is not an association taxable as a corporation for
Federal income tax purposes; each Unit holder will be treated as the
owner of a pro rata portion of the assets of the Trust under the Code;
the income of the Trust will be treated as income of the Unit holders
thereof under the Code; and each Unit holder will be considered to have
received his or her pro rata share of income derived from each Trust
asset when such income is considered to be received by the Trust.
2. Each Unit holder will have a taxable event when the Trust disposes
of a Security (whether by sale, exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unit holder.
Page 4
The price a Unit holder pays for his or her Units, including sales
charges, is allocated among his or her pro rata portion of each Security
held by the 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 initial tax basis (before
adjustment for accrual of original issue discount) for his or her pro
rata portion of each Security held by the Trust. Unit holders should
consult their own tax advisors with regard to calculation of basis. The
Treasury Obligations held by the Trust are treated as stripped bonds and
are treated as bonds issued at an original issue discount as of the date
a Unit holder purchases his or her Units. Because the Treasury
Obligations represent interests in "stripped" U.S. Treasury bonds, a
Unit holder's initial cost for his or her pro rata portion of each
Treasury Obligation held by the Trust (determined at the time he or she
acquires his or her Units in the manner described above) is generally
treated as its "purchase price" by the Unit holder. Original issue
discount is effectively treated as interest for Federal income tax
purposes and the amount of original issue discount in this case is
generally the difference between the bond's purchase price and its
stated redemption price at maturity. A Unit holder will be required to
include in gross income for each taxable year the sum of his or her
daily portions of original issue discount attributable to the Treasury
Obligations held by the Trust as such original issue discount accrues
and will in general be subject to Federal income tax with respect to the
total amount of such original issue discount that accrues for such year
(even though the income is not distributed to the Unit holders during
such year) to the extent it is not less than a "de minimis" amount as
determined under Treasury Regulations relating to stripped bonds. To the
extent the amount of such discount is less than the respective "de
minimis" amount, such discount is generally treated as zero. In general,
original issue discount accrues daily under a constant interest rate
method which takes into account the semi-annual compounding of accrued
interest. In the case of the Treasury Obligations, this method will
generally result in an increasing amount of income to the Unit holders
each year. Unit holders should consult their tax advisors regarding the
Federal income tax consequences and accretion of original issue
discount. For Federal income tax purposes, a Unit holder's pro rata
portion of dividends (other than designated capital gain dividends as
discussed below) as defined by Section 316 of the Code, paid with
respect to a Pilgrim Growth share held by the Trust is taxable as
ordinary income to the extent of Pilgrim Growth's current and
accumulated "earnings and profits." A Unit holder's pro rata portion of
dividends paid on such Pilgrim Growth share which exceed such current
and accumulated earnings and profits will first reduce a Unit holder's
tax basis in such Pilgrim Growth share, and to the extent that such
dividends exceed a Unit holder's tax basis in such Pilgrim Growth share
shall generally be treated as capital gain. In general, the holding
period for such capital gain will be determined by the period of time
the Unit holder has held his or her Units for more than one year.
3. A Unit holder's portion of gain, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust
will generally be considered a capital gain (except in the case of a
dealer or a financial institution). A Unit holder's portion of loss, if
any, upon the sale or redemption of Units or the disposition of
Securities held by the Trust will generally be considered a capital loss
(except in the case of a dealer or a financial institution) and, in
general, will be long-term if the Unit holder has held his Units for
more than one year. Unit holders should consult their tax advisors
regarding the recognition of such capital gains and losses for Federal
income tax purposes.
Dividends Received Deduction. Distributions on the Pilgrim Growth shares
which are taxable as ordinary income to the Unit holders will constitute
dividends for Federal income tax purposes. To the extent dividends
received by Pilgrim Growth are attributable to foreign corporations, a
corporation that owns Units will not be entitled to the dividends
received deduction with respect to such pro rata portion of such
dividends, since the dividends received deduction is generally available
only with respect to dividends paid by domestic corporations. However,
to the extent dividends received by Pilgrim Growth are from United
States corporations (other than real estate investment trusts) and are
designated by Pilgrim Growth as being eligible for the dividends
received deduction, distributions received by corporate Unit holders
(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 accumulated
Page 5
earnings tax and personal holding corporation tax) with respect to
Pilgrim Growth shares attributable to such dividends may qualify for the
70% dividends received deduction, subject to limitations otherwise
applicable to the availability of the deduction. It should be noted that
various legislative proposals that would affect the dividends received
deduction have been introduced. Unit holders should consult with their
tax advisors with respect to the limitations on and possible
modifications to the dividends received deductions.
Recognition of Taxable Gain or Loss Upon Disposition of Securities by
the Trust or Disposition of Units. Because Unit holders are deemed to
directly own a pro rata portion of the Pilgrim Growth shares as
discussed above, Unit holders are advised to read the discussion of tax
consequences set forth in the current prospectus for Pilgrim Growth.
Distributions declared by Pilgrim Growth on the Pilgrim Growth shares in
October, November or December that are held by the Trust and paid during
the following January will be treated as having been received by Unit
holders on December 31 in the year such distributions were declared.
Distributions of the Pilgrim Growth's net capital gain which Pilgrim
Growth properly designates as capital gain dividends will be taxable to
the Unit holders as long-term capital gains regardless of how long a
person has been a Unit holder. If a Unit holder holds his Units for six
months or less or if the Trust holds shares of Pilgrim Growth for six
months or less, any loss incurred by a Unit holder related to the
disposition of Pilgrim Growth shares will be treated as a long-term
capital loss to the extent of any long-term capital gains distributions
received (or deemed to have been received) with respect to such shares.
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 generally 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. The legislation is generally
effective retroactively for amounts properly taken into account on or
after January 1, 1998. Capital gains realized from assets held for one
year or less are taxed at the same rates as ordinary income.
Note, however, that the 1998 Tax Act (and the Taxpayer Relief Act of
1997) provide that the application of the rules described above in the
case of pass-through entities such as Pilgrim Growth will be prescribed
in future Treasury Regulations. The Internal Revenue Service has
released preliminary guidance which provides that, in general, pass-
through entities such as Pilgrim Growth may designate their capital
gains dividends as either a 20% rate gain distribution, an unrecaptured
section 1250 gain distribution, or a 28% rate gain distribution,
depending on the nature of the gain received by the pass-through entity.
Unit holders should consult their own tax advisors as to the tax rate
applicable to capital gain dividends.
In addition, it should be noted that capital gains may be
recharacterized as ordinary income in the case of certain financial
transactions that are "conversion transactions" effective for
transactions entered into after April 30, 1993. Unit holders and
prospective investors should consult with their tax 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 entire pro rata interest in all assets of the Trust
including his pro rata portion of all the Securities represented by that
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.
Limitations on Deductibility of Trust Expenses by Unit Holders. Each
Unit holder's pro rata share of each expense paid by the Trust is
deductible by the Unit holder to the same extent as though the expense
had been paid directly by him 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.
Page 6
General. If more than 50% of the value of the total assets of Pilgrim
Growth consists of stock or securities in foreign corporations, Pilgrim
Growth may elect to pass through to its shareholders the foreign income
and similar taxes paid by Pilgrim Growth in order to enable such
shareholders to take a credit (or deduction) for foreign income taxes
paid by Pilgrim Growth. If such an election is made, Unit holders of the
Trust, because they are deemed to own a pro rata portion of the Pilgrim
Growth shares held by the Trust, as described above, must include in
their gross income, for Federal income tax purposes, both their portion
of dividends received by the Trust from Pilgrim Growth, and also their
portion of the amount which Pilgrim Growth deems to be the Trust's
portion of foreign income taxes paid with respect to, or withheld from,
dividends, interest or other income of Pilgrim Growth from its foreign
investments. Unit holders may then subtract from their Federal income
tax the amount of the foreign tax credit with respect to such taxes
withheld, or else treat such foreign taxes as deductions from gross
income; however, as in the case of investors receiving income directly
from foreign sources, the above described tax credit or deduction is
subject to certain limitations. The 1997 Act imposes a required holding
period (with respect to the Unit holder's holding of Units in the Trust,
the Trust's holding of shares in Pilgrim Growth and Pilgrim Growth's
holding of foreign securities) for such credit. Unit holders should
consult their tax advisors regarding this election and its consequences
to them.
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 the Trust to such Unit holder (including amounts received upon the
redemption of Units) will be subject to back-up withholding.
Distributions by a Trust will generally be subject to United States
income taxation and withholding in the case of Units held by non-
resident alien individuals, foreign corporations or other non-United
States persons (accrual of original issue discount on the Treasury
Obligations may not be subject to taxation or withholding provided
certain requirements are met). Such persons should consult their tax
advisors.
Unit holders will be notified annually of the amounts of original issue
discount, dividend income and long-term capital gains distributions
includable in the Unit holder's gross income and amounts of Trust
expenses which may be claimed as itemized deductions.
Dividend income, long-term capital gains and accrual of original issue
discount may also be subject to state and local taxes. Foreign investors
may be subject to different Federal income tax consequences than those
described above. Investors should consult their tax advisors for
specific information on the tax consequences of particular types of
distributions.
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 Trust Eligible for
Retirement Plans?"
In the opinion of Carter, Ledyard & Milburn, Special Counsel to the
Trust for New York tax matters, under the existing income tax laws of
the State of New York the Trust is not an association taxable as a
corporation and the income of the Trust will be treated as the income of
the Unit holders thereof.
Are Investments in the Trust Eligible for Retirement Plans?
Units of the Trust 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 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 Zero Coupon Treasuries?
The Treasury Obligations deposited in the Trust consist of U.S. Treasury
bonds which have been stripped of their unmatured interest coupons. The
Treasury Obligations evidence the right to receive a fixed payment at a
Page 7
future date from the U.S. Government, and are backed by the full faith
and credit of the U.S. Government. Treasury Obligations are purchased at
a deep discount because the buyer obtains only the right to a fixed
payment at a fixed date in the future and does not receive any periodic
interest payments. The effect of owning deep discount bonds which do not
make current interest payments (such as the Treasury Obligations) is
that a fixed yield is earned not only on the original investment but
also, in effect, on all earnings during the life of the discount
obligation. This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest the income on such
obligations at a rate as high as the implicit yield on the discount
obligation, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, the Treasury
Obligations are subject to substantially greater price fluctuations
during periods of changing interest rates than are securities of
comparable quality which make regular interest payments. The effect of
being able to acquire the Treasury Obligations at a lower price is to
permit more of the Trust's portfolio to be invested in shares of Pilgrim
Growth.
What is the Pilgrim Growth Opportunities Fund?
The portfolio of the Trust also contains shares of Pilgrim Growth.
Pilgrim Growth is a Massachusetts business trust registered as an open-
end, management investment company, commonly known as a mutual fund.
Pilgrim Growth's investment objective is long-term growth of capital.
The shares of Pilgrim Growth deposited in the Trust are maintained on
the books of Pilgrim Growth's transfer agent.
Pilgrim Growth currently offers three classes of shares ("Class A,"
"Class B" and "Class C") which may be purchased at a price equal to
their respective net asset value per share, plus a sales charge. The
Trust has purchased Class T shares, which as of June 5, 1995 are no
longer offered for sale by any Pilgrim Fund, except in connection with
reinvestment of dividends and other distributions, upon exchange of
Class T shares of another Pilgrim Fund or upon exchange from the Class T
Account of the Money Market Fund. Any reference to Pilgrim Growth shares
in this Prospectus shall refer to Class T shares.
Pilgrim Growth has followed the practice of paying a distribution at
least once annually representing substantially all of its net investment
income and distributing any net realized capital gains.
The table below shows important financial information for Pilgrim
Growth, such as net investment income, expenses, and dividends,
expressed in terms of one share outstanding throughout the period. This
table is covered by the independent public accountant's report appearing
in Pilgrim Growth's Annual Report. PILGRIM GROWTH'S STATEMENT OF
ADDITIONAL INFORMATION DATED MAY 1, 2000 AND ITS PROSPECTUS DATED MAY 1,
2000, CONTAINS MORE DETAILED INFORMATION ABOUT THE FUND AND MAY BE
OBTAINED WITHOUT CHARGE BY WRITING TO THE PILGRIM FUNDS, 40 NORTH
CENTRAL AVENUE, SUITE 1200, PHOENIX, AZ 85004 OR CALLING 1-800-992-0180.
Page 8
Pilgrim Growth Fund
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, at beginning of period $25.59 $21.01 $17.82 $15.53 $15.75
_______ _______ _______ _______ _______
Net investment income (loss) (0.39) (0.36) (0.17) (0.06) 0.07
Net realized and unrealized
gain on investments 19.57 5.14 4.22 3.16 3.77
_______ _______ _______ _______ _______
Total from investment operations 19.18 4.78 4.05 3.10 3.84
======= ======= ======= ======= =======
Dividends from net investment income - - - - (0.07)
Dividends from net realized gain (12.84) (0.21) (0.85) (0.81) (3.99)
_______ _______ _______ _______ _______
Total distributions (12.84) (0.21) (0.85) (0.81) (4.06)
======= ======= ======= ======= =======
Net asset value at end of period $31.93 $25.59 $21.02 $17.82 $15.53
_______ _______ _______ _______ _______
Total investment return+ 91.72% 22.79% 22.94% 19.90% 24.40%
Ratios and supplemental data:
Net assets at end of period (thousands) $33,772 $52,023 $73,674 $70,406 $76,343
Ratio of expenses to average net assets
after reimbursement 2.03% 2.05% 2.03% 2.00% 2.00%
Ratio of expenses to average net assets
prior to expense reimbursement 2.03% 2.05% 2.03% 2.04% 2.00%
Ratio of net investment income (loss)
to average net assets (1.62)% (1.19)% (0.81)% (3.05)% 0.37%
Portfolio turnover 286.00% 98.00% 32.00% 62.00% 134.00%
______________
<FN>
+ Assumes dividends have been reinvested and does not reflect the effect of sales charges. Unaudited prior to 1992.
</FN>
</TABLE>
There are two types of fees and expenses when you invest in the Fund:
fees, including sales charges, you pay directly when you buy or sell
shares; and operating expenses paid each year by the Fund.
Fees you pay directly
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Load (as a percentage of Offering Price) 0%
Maximum Front-End or Deferred Sales Load on Reinvested Dividends/Distributions 0%
Maximum Contingent Deferred Sales Load on Sale of Shares
(as a percentage of the lesser of original price or redemption proceeds) 4% *
Exchange Fee $ 0
Annual Pilgrim Growth Operating Expenses
(as a percentage of average net assets)
Management Fee .75% **
Distribution and Service (12b-1) Fee .95%
Other Expenses .33%
Total Fund Operating Expenses 2.03%
______________
<FN>
* Contingent deferred sales load on redemptions declines 1% annually
from a maximum of 4% to 0% after four years.
** At a meeting held on April 27, 2000, the Board of Trustees of Pilgrim
Growth Opportunities Fund approved an amendment to the Advisory
Agreement of the Fund with Pilgrim Investments, Inc. The amendment would
have the effect of increasing the current management fee that the Fund
pays of 0.75% per annum of the Fund's average daily net assets to 0.95%
for Pilgrim Growth Opportunities Fund. The amendment will become
effective upon approval by shareholders of the Fund. A meeting of
shareholders of the Fund is scheduled to occur in August, 2000.
</FN>
</TABLE>
Page 9
Example
Here's an example of what you would pay in expenses if you invested
$10,000, reinvested all your dividends, the Fund earned an average
annual return of 5%, and annual operating expenses remained at the
current level. Keep in mind that this is only an example-actual and
performance may vary.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
_______ _______ _______ _______
<S> <C> <C> <C> <C>
If you sell your shares $606 $837 $1,093 $2,194**
If you don't sell your shares:
Pilgrim Growth* $206 $637 $1,093 $2,194**
_______________
<FN>
* There is no contingent deferred sales load payable upon the redemption
of the Pilgrim Growth shares deposited in the Trust. However, the
maximum sales charge on the Units, and therefore indirectly on the
Pilgrim Growth shares is 5.0% in the secondary market.
** Class T shares convert to Class A Shares after year 8 or on June 2,
1998, whichever is later. This figure uses Class A expenses for years 9
and 10.
</FN>
</TABLE>
What are Pilgrim Growth's Investment Objectives and Policies?
Pilgrim Growth's investment objective is long-term growth of capital.
The investment objective of Pilgrim Growth may be changed by Pilgrim
Growth's Trustees without shareholder approval. There can, of course, be
no guarantee that the investment objectives of Pilgrim Growth will be
achieved, due to the uncertainty inherent in all investments. The Fund
invests primarily in U.S. companies that the portfolio manager feels
have above-average prospects for growth. Under normal market conditions,
the Fund invests at least 65% of its total assets in securities
purchased on the basis of the potential for capital appreciation. These
securities may be from large-cap, mid-cap or small-cap companies. The
portfolio managers use a "topdown" disciplined investment process, which
includes extensive database screening, frequent fundamental research,
identification and implementation of a trend-oriented approach in
structuring the portfolio and a sell discipline. The portfolio managers
seek to invest in companies expected to benefit the most from major
social, economic and technological trends that are likely to shape the
future of business and commerce over the next three to five years, and
attempt to provide a framework for identifying the industries and
companies expected to benefit most. This top down approach is combined
with rigorous fundamental research (a bottoms up approach) to guide
stock selection and portfolio structure. In periods of unusual market
conditions, the Fund may temporarily invest part or all of its assets in
cash or high-quality money market securities. In these circumstances,
the Fund may not achieve its objective.
Risks. A Unit holder could lose money on an investment in the Fund. The
Fund may be affected by the following risks, among others:
- Price Volatility-The value of the Fund changes as the prices of its
investments go up or down. Equity securities face market, issuer and
other risks, and their values may go up or down, sometimes rapidly and
unpredictably. Market risk is the risk that securities may decline in
value due to factors affecting securities markets generally or
particular industries. Issuer risk is the risk that the value of a
security may decline for reasons relating to the issuer, such as changes
in the financial condition of the issuer. While equities may offer the
potential for greater long-term growth than most debt securities, they
generally have higher volatility. This Fund invests in companies that
the portfolio manager feels have the potential for rapid growth, which
may give the Fund a higher risk of price volatility than a fund that
emphasizes other styles, such as a value-oriented style. The Fund may
invest in small and medium-sized companies, which may be more
susceptible to price swings than larger companies because they have
fewer financial resources, more limited product and market
diversification and many are dependent on a few key managers.
- Market Trends-From time to time, the stock market may not favor the
growth securities in which the Fund invests. Rather, the market could
favor value-oriented stocks, or may not favor equities at all.
- Inability to Sell Securities-Securities of smaller companies trade in
lower volume and may be less liquid than securities of larger, more
established companies. The Fund could lose money if it cannot sell a
security at the time and price that would be most beneficial to the Fund.
More Information About Risks. All mutual funds involve risk-some more
than others-and there is always the chance that you could lose money or
not earn as much as you hope. A Fund's risk profile is largely a factor
Page 10
of the principal securities in which it invests and investment
techniques that it uses. The following pages discuss the risks
associated with certain of the types of securities in which the Funds
may invest and certain of the investment practices that the Funds may
use. For more information about these and other types of securities and
investment techniques that may be used by the Funds, see the Statement
of Additional Information (SAI).
Many of the investment techniques and strategies discussed in this
prospectus and in the SAI are discretionary, which means that the
adviser or sub-adviser can decide whether to use them or not. The
adviser or sub-adviser of a Fund may also use investment techniques or
make investments in securities that are not a part of the Fund's
principal investment strategy.
Principal Risks. Investments In Foreign Securities. There are certain
risks in owning foreign securities, including those resulting from:
fluctuations in currency exchange rates; devaluation of currencies;
political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or
restrictions; reduced availability of public information concerning
issuers; accounting, auditing and financial reporting standards or other
regulatory practices and requirements that are not uniform when compared
to those applicable to domestic companies; settlement and clearance
procedures in some countries that may not be reliable and can result in
delays in settlement; higher transaction and custody expenses than for
domestic securities; and limitations on foreign ownership of equity
securities. Also, securities of many foreign companies may be less
liquid and the prices more volatile than those of domestic companies.
With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on
the use or removal of funds or other assets of the Funds, including the
withholding of dividends.
The Fund may enter into foreign currency transactions either on a spot
or cash basis at prevailing rates or through forward foreign currency
exchange contracts to have the necessary currencies to settle
transactions, or to help protect Fund assets against adverse changes in
foreign currency exchange rates, or to provide exposure to a foreign
currency commensurate with the exposure of securities from that country.
Such efforts could limit potential gains that might result from a
relative increase in the value of such currencies, and might, in certain
cases, result in losses to the Fund.
Emerging Markets Investments. Because of less developed markets and
economies and, in some countries, less mature governments and
governmental institutions, the risks of investing in foreign securities
can be intensified in the case of investments in issuers domiciled or
doing substantial business in emerging market countries. These risks
include: high concentration of market capitalization and trading volume
in a small number of issuers representing a limited number of
industries, as well as a high concentration of investors and financial
intermediaries; political and social uncertainties; over-dependence on
exports, especially with respect to primary commodities, making these
economies vulnerable to changes in commodity prices; overburdened
infrastructure and obsolete financial systems; environmental problems;
less well developed legal systems; and less reliable custodial services
and settlement practices.
Inability To Sell Securities. Some securities usually trade in lower
volume and may be less liquid than securities of large established
companies. These less liquid securities could include securities of
small and mid-size U.S. companies, high-yield securities, convertible
securities, unrated debt and convertible securities, securities that
originate from small offerings, and foreign securities, particularly
those from companies in emerging markets. A Fund could lose money if it
cannot sell a security at the time and price that would be most
beneficial to the Fund.
High Yield Securities. Investments in high yield securities generally
provide greater income and increased opportunity for capital
appreciation than investments in higher quality debt securities, but
they also typically entail greater potential price volatility and
principal and income risk. High yield securities are not considered
investment grade, and are regarded as predominantly speculative with
respect to the issuing company's continuing ability to meet principal
and interest payments. The prices of high yield securities have been
found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic downturns or
individual corporate developments. High yield securities structured as
zero-coupon or pay-in-kind securities tend to be more volatile. The
secondary market in which high yield securities are traded is generally
less liquid than the market for higher grade bonds. At times of less
liquidity, it may be more difficult to value high yield securities.
Page 11
Corporate Debt Securities. Corporate debt securities are subject to the
risk of the issuer's inability to meet principal and interest payments
on the obligation and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
credit-worthiness of the issuer and general market liquidity. When
interest rates decline, the value of the Fund's debt securities can be
expected to rise, and when interest rates rise, the value of those
securities can be expected to decline. Debt securities with longer
maturities tend to be more sensitive to interest rate movements than
those with shorter maturities.
One measure of risk for fixed income securities is duration. Duration is
one of the tools used by a portfolio manager in selection of fixed
income securities. Historically, the maturity of a bond was used as a
proxy for the sensitivity of a bond's price to changes in interest
rates, otherwise known as a bond's "interest rate risk" or "volatility."
According to this measure, the longer the maturity of a bond, the more
its price will change for a given change in market interest rates.
However, this method ignores the amount and timing of all cash flows
from the bond prior to final maturity. Duration is a measure of average
life of a bond on a present value basis, which was developed to
incorporate a bond's yield, coupons, final maturity and call features
into one measure. For point of reference, the duration of a noncallable
7% coupon bond with a remaining maturity of 5 years is approximately 4.5
years, and the duration of a noncallable 7% coupon bond with a remaining
maturity of 10 years is approximately 8 years. Material changes in
interest rates may impact the duration calculation.
U.S. Government Securities. Some U.S. Government agency securities may
be subject to varying degrees of credit risk, particularly those that
are not backed by the full faith and credit of the United States
Government. All U.S. Government securities may be subject to price
declines in the securities due to changing interest rates.
Convertible Securities. The price of a convertible security will normally
fluctuate in some proportion to changes in the price of the underlying
equity security, and as such is subject to risks relating to the
activities of the issuer and general market and economic conditions. The
income component of convertible securities causes fluctuations based
upon changes in interest rates and the credit quality of the issuer.
Convertible securities are often lower rated securities. A Fund may be
required to redeem or convert a convertible security before the holder
would otherwise choose.
Other Investment Companies. The Fund may invest up to 10% of its assets
in other investment companies. When a Fund invests in other investment
companies, you indirectly pay a proportionate share of the expenses of
that other investment company (including management fees, administration
fees, and custodial fees) in addition to the expenses of the Fund.
Restricted and Illiquid Securities. The Fund may invest in restricted
and illiquid. If a security is illiquid, the Fund might be unable to
sell the security at a time when the adviser might wish to sell, and the
security could have the effect of decreasing the overall level of the
Fund's liquidity. Further, the lack of an established secondary market
may make it more difficult to value illiquid securities, which could
vary from the amount the Fund could realize upon disposition. Restricted
securities, i.e., securities subject to legal or contractual
restrictions on resale, may be illiquid. However, some restricted
securities may be treated as liquid, although they may be less liquid
than registered securities traded on established secondary markets.
Mortgage-Related Securities. Although mortgage loans underlying a
mortgage-backed security may have maturities of up to 30 years, the
actual average life of a mortgage-backed security typically will be
substantially less because the mortgages will be subject to normal
principal amortization, and may be prepaid prior to maturity. Like other
fixed income securities, when interest rates rise, the value of a
mortgage-backed security generally will decline; however, when interest
rates are declining, the value of mortgage-backed securities with
prepayment features may not increase as much as other fixed income
securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have
the effect of shortening or extending the effective maturity of the
security beyond what was anticipated at the time of the purchase.
Unanticipated rates of prepayment on underlying mortgages can be
expected to increase the volatility of such securities. In addition, the
value of these securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers of mortgage-related
securities owned by a Fund. Additionally, although mortgages and
mortgage-related securities are generally supported by some form of
Page 12
government or private guarantee and/or insurance, there is no assurance
that private guarantors or insurers will be able to meet their
obligations.
Interests In Loans. The Fund may invest in participation interests or
assignments in secured variable or floating rate loans, which include
participation interests in lease financings. Loans are subject to the
credit risk of nonpayment of principal or interest. Substantial
increases in interest rates may cause an increase in loan defaults.
Although the loans will generally be fully collateralized at the time of
acquisition, the collateral may decline in value, be relatively
illiquid, or lose all or substantially all of its value subsequent to
the Fund's investment. Many loans are relatively illiquid, and may be
difficult to value.
Derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the
performance of an underlying asset or assets. Some derivatives are
sophisticated instruments that typically involve a small investment of
cash relative to the magnitude of risks assumed. These may include swap
agreements, options, forwards and futures. Derivative securities are
subject to market risk, which could be significant for those that have a
leveraging effect. Many of the Funds do not invest in these types of
derivatives, and some do, so please check the description of the Fund's
policies. Derivatives are also subject to credit risks related to the
counterparty's ability to perform, and any deterioration in the
counterparty's creditworthiness could adversely affect the instrument. A
risk of using derivatives is that the adviser or sub-adviser might
imperfectly judge the market's direction. For instance, if a derivative
is used as a hedge to offset investment risk in another security, the
hedge might not correlate to the market's movements and may have
unexpected or undesired results, such as a loss or a reduction in gains.
Temporary Defensive Strategies. When the adviser or sub-adviser to the
Fund anticipates unusual market or other conditions, the Fund may
temporarily depart from its principal investment strategies as a
defensive measure. To the extent that a Fund invests defensively, it
likely will not achieve capital appreciation.
Other Risks. Repurchase Agreements. The Fund may enter into repurchase
agreements, which involve the purchase by the Fund of a security that
the seller has agreed to buy back. If the seller defaults and the
collateral value declines, the Fund might incur a loss. If the seller
declares bankruptcy, the Fund may not be able to sell the collateral at
the desired time.
Lending Portfolio Securities. In order to generate additional income,
the Fund may lend portfolio securities in an amount up to 33-1/3% of
total Fund assets to broker/dealers, major banks, or other recognized
domestic institutional borrowers of securities. As with other extensions
of credit, there are risks of delay in recovery or even loss of rights
in the collateral should the borrower default or fail financially.
Borrowing. The Fund may borrow for certain types of temporary or
emergency purposes subject to certain limits. Borrowing may exaggerate
the effect of any increase or decrease in the value of portfolio
securities or the net asset value of a Fund, and money borrowed will be
subject to interest costs. Interest costs on borrowings may fluctuate
with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market
conditions, a Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase
agreement involves the sale of a security, with an agreement to
repurchase the same securities at an agreed upon price and date. Whether
such a transaction produces a gain for a Fund depends upon the costs of
the agreements and the income and gains of the securities purchased with
the proceeds received from the sale of the security. If the income and
gains on the securities purchased fail to exceed the costs, net asset
value will decline faster than otherwise would be the case. Reverse
repurchase agreements, as leveraging techniques, may increase a Fund's
yield; however, such transactions also increase a Fund's risk to capital
and may result in a shareholder's loss of principal.
Short Sales. The Fund may make short sales. A "short sale" is the sale
by a Fund of a security which has been borrowed from a third party on
the expectation that the market price will drop. If the price of the
security rises, the Fund may have to cover its short position at a
higher price than the short sale price, resulting in a loss.
Pairing Off Transactions. A pairing-off transaction occurs when a Fund
commits to purchase a security at a future date, and then the Fund
Page 13
"pairs-off" the purchase with a sale of the same security prior to or on
the original settlement date. Whether a pairing-off transaction on a
debt security produces a gain depends on the movement of interest rates.
If interest rates increase, then the money received upon the sale of the
same security will be less than the anticipated amount needed at the
time the commitment to purchase the security at the future date was
entered and the Fund will experience a loss.
Percentage and Rating Limitations. Unless otherwise stated, the
percentage limitations in this prospectus apply at the time of investment.
Who is the Investment Advisor of Pilgrim Growth?
Pilgrim Investments, Inc. ("Pilgrim" or "Pilgrim Investments") serves as
the investment advisor to the Fund. Pilgrim has overall responsibility
for the management of the Fund. Pilgrim provides or oversees all
investment advisory and portfolio management services for the Fund, and
assists in managing and supervising all aspects of the general day-to-
day business activities and operations of the Fund, including custodial,
transfer agency, dividend disbursing, accounting, auditing, compliance
and related services.
Organized in December 1994, Pilgrim is registered as an investment
advisor. Pilgrim is an indirect wholly-owned subsidiary of ReliaStar
Financial Corp. ("ReliaStar") (NYSE: RLR). Through its subsidiaries,
ReliaStar offers individuals and institutions life insurance and
annuities, employee benefits products and services, life and health
reinsurance, retirement plans, mutual funds, bank products and personal
finance education.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors")
served as investment advisor to certain of the Pilgrim Funds. On April
30, 2000, Pilgrim Advisors, an indirect wholly-owned subsidiary of
ReliaStar, merged with Pilgrim Investments. Pilgrim Advisors and Pilgrim
Investments were sister companies and shared certain resources and
investment personnel.
As of February 29, 2000, Pilgrim and Pilgrim Advisors together managed
over $16.6 billion in assets.
Pilgrim's principal address is 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004.
Pilgrim receives a monthly fee for its services based on the average
daily net assets of the Fund. The fee paid by Pilgrim Growth is .75% of
its average daily net assets. However, at a meeting held on April 27,
2000, the Board of Trustees of Pilgrim Growth Opportunities Fund
approved an amendment to the Advisory Agreement of the Fund with Pilgrim
Investments, Inc. The amendment would have the effect of increasing the
current management fee that the Fund pays of 0.75% per annum of the
Fund's average daily net assets to 0.95% for Pilgrim Growth
Opportunities Fund. The amendment will become effective upon approval by
shareholders of the Fund. A meeting of shareholders of the Fund is
scheduled to occur in August, 2000.
The following individuals share responsibility for the day-to-day
management of the Fund.
Mary Lisanti has managed or co-managed the Pilgrim Growth Opportunities
Fund since August 1998. She joined Pilgrim in May 1998. Ms. Lisanti has
over 20 years of experience in small and mid-cap investments. Before
joining Pilgrim, Ms. Lisanti was a Portfolio Manager at Strong Capital
Management where she managed the Strong Small Cap Fund and co-managed
the Strong Mid Cap Fund. From 1993 to 1996, Ms. Lisanti was a Managing
Director and Head of Small and Mid-Capitalization Equity Strategies at
Bankers Trust Corp. where she managed the BT Small Cap Fund and the BT
Capital Appreciation Fund. Prior to Bankers Trust, Ms. Lisanti was a
Portfolio Manager with the Evergreen Funds. She began her career as an
Analyst specializing in emerging growth stocks with Donaldson, Lufkin &
Jenrette and Shearson Lehman Hutton, and was ranked the number one
Institutional Investor Emerging Growth Stock Analyst in 1989. She is a
Chartered Financial Analyst and a Member of the New York Society of
Security Analysts and the Financial Analyst Federation.
Jeffrey Bernstein has co-managed the Pilgrim Growth Opportunities Fund
since January 2000. He joined Pilgrim in May 1998. Mr. Bernstein has
over 10 years of experience in small and mid-cap investments. Before
joining Pilgrim, Mr. Bernstein was a Portfolio Manager at Strong Capital
Management where he co-managed the Strong Mid Cap Fund. From November
1995 to February 1997, Mr. Bernstein was a Portfolio Manager with
Berkeley Capital. From September 1993 to November 1995, Mr. Bernstein
was an Assistant Portfolio Manager at Bankers Trust Corp. Prior to
Bankers Trust, Mr. Bernstein was an Analyst for Cowen & Co.
Page 14
THE RULE 12B-1 FEES IMPOSED ON SHARES HELD IN THE TRUST ARE REBATED TO
THE TRUST AND ARE USED TO REDUCE EXPENSES OF THE TRUST RESULTING IN
INCREASED DISTRIBUTIONS TO UNIT HOLDERS. UNIT HOLDERS WHO ACQUIRE SHARES
OF ADVANTAGE GROWTH THROUGH REINVESTMENT OF DIVIDENDS OR DISTRIBUTIONS
OR THROUGH REINVESTMENT AT THE TRUST'S TERMINATION WILL BEGIN TO INCUR
RULE 12B-1 FEES AT SUCH TIME AS SHARES ARE ACQUIRED.
What are Some Additional Considerations for Investors?
Investors should be aware of certain other considerations before making
a decision to invest in the Trust described herein.
The Sponsor has obtained an exemptive order of the Securities and
Exchange Commission to enable it to deposit Pilgrim Growth shares
purchased for deposit in the Trust. Under the terms of the exemptive
order, the Sponsor has agreed to take certain steps to ensure that
investment in Pilgrim Growth shares is equitable to all parties and
particularly that the interests of the Unit holders are protected.
Pilgrim Growth has agreed to waive any sales charge, including any
contingent deferred sales load, on shares sold to the Trust.
Furthermore, First Trust Advisors L.P. has agreed to waive its usual fee
for acting as Evaluator of the Trust's portfolio with respect to that
portion of the portfolio comprised of Pilgrim Growth shares, since
information with respect to the price of Pilgrim Growth's shares is
readily available to it. In addition, the Indenture requires the Trustee
to vote all shares of Pilgrim Growth held in the Trust in the same
manner and ratio on all proposals as the vote of owners of Pilgrim
Growth shares not held by the Trust.
The value of Pilgrim Growth's shares, like the value of the Treasury
Obligations, will fluctuate over the life of the Trust and may be more
or less than the price at which they were deposited in the Trust.
Pilgrim Growth's shares may appreciate or depreciate in value (or pay
dividends) depending on the full range of economic and market influences
affecting the securities in which it is invested and the success of
Pilgrim Growth's management in anticipating or taking advantage of such
opportunities as they may occur. However, the Sponsor believes that,
upon termination of the Trust, even if the Pilgrim Growth shares
deposited in the Trust are worthless, an event which the Sponsor
considers highly unlikely, the Treasury Obligations will provide
sufficient principal to at least equal $1.00 per Unit (which is equal to
the per Unit value upon maturity of the Treasury Obligations) for those
individuals purchasing on the Initial Date of Deposit (or any other Date
when the value of the Units is $1.00 or less). This feature of the Trust
provides Unit holders with principal protection, although they might
forego any earnings on the amount invested. To the extent that Units are
purchased at a price less than $1.00 per Unit, this feature may also
provide a potential for capital appreciation.
Unless a Unit holder purchases Units of the Trust on a date when the
value of the Units is $1.00 or less, total distributions, including
distributions made upon termination of the Trust, may be less than the
amount paid for a Unit.
The Trustee will have no power to vary the investments of the Trust,
i.e., the Trustee will have no managerial power to take advantage of
market variations to improve a Unit holder's investment but may dispose
of Securities only under limited circumstances. Of course, the portfolio
of Pilgrim Growth included in the Trust will be changing as the
Investment Adviser attempts to achieve Pilgrim Growth's objectives.
To the best of the Sponsor's knowledge, there is no litigation pending
as of the date of this Part Two Prospectus in respect of any Security
which might reasonably be expected to have a material adverse effect on
the Trust. Litigation may be instituted on a variety of grounds with
respect to the Securities. The Sponsor is unable to predict whether any
such litigation will be instituted, or if instituted, whether such
litigation might have a material adverse effect on the Trust.
PUBLIC OFFERING
How is the Public Offering Price Determined?
Units are offered at the Public Offering Price. The Public Offering
Price is based on the aggregate bid side evaluation of the Treasury
Obligations and the net asset value of the Pilgrim Growth shares in the
Trust, plus or minus cash, if any, in the Principal Account held or
owned by the Trust, plus a maximum sales charge of 5.0% of the Public
Offering Price (equivalent to 5.263% of the net amount invested) divided
by the number of outstanding Units of the Trust.
The minimum purchase of the Trust is $1,000. The applicable sales charge
is reduced by a discount as indicated below for volume purchases:
Page 15
Percent of Percent of
Offering Net Amount
Number of Units Price Invested
_______________ __________ __________
100,000 but less than 250,000 .25% .2506%
250,000 but less than 500,000 .50% .5025%
500,000 but less than 750,000 1.00% 1.0101%
750,000 but less than 1,000,000 1.25% 1.2658%
1,000,000 or more 1.50% 1.5228%
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charge
structure will apply on all purchases of Units in the Trust by the same
person on any one day from the broker/dealer, bank or other selling
agent. Additionally, Units purchased in the name of the spouse of a
purchaser or in the name of a child of such purchaser under 21 years of
age will be deemed, for the purposes of calculating the applicable sales
charge, to be additional purchases by the purchaser. The reduced sales
charges will also be applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary
account. With respect to the employees, officers and directors
(including their immediate families and trustees, custodians or a
fiduciary for the benefit of such person) of the Sponsor and
broker/dealers, banks or other selling agents and their subsidiaries,
the sales charge is reduced by 2% of the Public Offering Price.
The Public Offering Price of Units on the date of this Part Two
Prospectus may vary from the amount stated under "Summary of Essential
Information" in Part One of the Prospectus in accordance with
fluctuations in the prices of the underlying Securities. The aggregate
value of the Units of the Trust shall be determined (a) on the basis of
the bid prices of the Treasury Obligations and the net asset value of
the Pilgrim Growth shares therein plus or minus a pro rata share of
cash, if any, in the Principal Account of the Trust, (b) if net bid
prices are not available for the Treasury Obligations, on the basis of
bid prices for comparable securities, (c) by determining the value of
the Treasury Obligations on the bid side of the market by appraisal, or
(d) by any combination of the above.
The Public Offering Price will be equal to the bid price per Unit of the
Treasury Obligations and the net asset value of the Pilgrim Growth
shares therein plus or minus a pro rata share of cash, if any, in the
Principal Account of the Trust plus the applicable sales charge.
Although payment is normally made three business days following the
order for purchase (the "date of settlement"), payment may be made prior
thereto. A person will become owner of Units on the date of settlement
provided payment has been received. Cash, if any, made available to the
Sponsor prior to the date of settlement for the purchase of Units may be
used in the Sponsor's business and may be deemed to be a benefit to the
Sponsor, subject to the limitations of the Securities Exchange Act of
1934. Delivery of Certificates representing Units so ordered will be
made on the date of settlement relating to 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?
Units repurchased in the secondary market may be offered by this Part
Two Prospectus at the public offering price determined in the manner
described above.
Secondary market sales will be made to dealers and others at prices
which represent a concession or agency commission of 3.1% of the Public
Offering Price. However, resales of Units of the Trust by such dealers
and others to the public will be made at the Public Offering Price
described in the prospectus. The Sponsor reserves the right to change
the amount of the concession or agency commission from time to time.
Certain commercial banks are making Units of the Trust available to
their customers on an agency basis. A portion of the sales charge paid
by these customers is retained by or remitted to the banks in the
amounts indicated in the third preceding sentence.
What are the Sponsor's Profits?
In maintaining a market for the Units, the Sponsor will also realize
profits or sustain losses in the amount of any difference between the
price at which Units are purchased and the price at which Units are
resold (which price includes a sales charge of 5.0%) or redeemed. The
secondary market public offering price of Units may be greater or less
than the cost of such Units to the Sponsor.
Page 16
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 shortly thereafter.
Certificates are transferable by presentation and surrender to the
Trustee properly endorsed or accompanied by a written instrument or
instruments of transfer. Certificates to be redeemed must be properly
endorsed or accompanied by a written instrument or instruments of
transfer. A Unit holder must sign exactly as his name appears on the
face of the certificate with the signature guaranteed by a participant
in the Securities Transfer Agents Medallion Program ("STAMP") or such
other signature guaranty program in addition to, or in substitution for,
STAMP, as may be accepted by the Trustee. In certain instances the
Trustee may require additional documents such as, but not limited to,
trust instruments, certificates of death, appointments as executor or
administrator or certificates of corporate authority.
Certificates will be issued in fully registered form, transferable only
on the books of the Trustee in denominations of one Unit or any multiple
thereof, numbered serially for purposes of identification.
Unit holders may elect to hold their Units in uncertificated form. The
Trustee will maintain an account for each such Unit holder and will
credit each such account with the number of Units purchased by that Unit
holder. Within two business days of the issuance or transfer of Units
held in uncertificated form, the Trustee will send to the registered
owner of Units a written initial transaction statement containing a
description of the Trust; the number of Units issued or transferred; the
name, address and taxpayer identification number, if any, of the new
registered owner; a notation of any liens and restrictions of the issuer
and any adverse claims to which such Units are or may be subject or a
statement that there are no such liens, restrictions or adverse claims;
and the date the transfer was registered. Uncertificated Units are
transferable through the same procedures applicable to Units evidenced
by certificates (described above), except that no certificate need be
presented to the Trustee and no certificate will be issued upon the
transfer unless requested by the Unit holder. A Unit holder may at any
time request the Trustee to issue certificates for Units.
Although no such charge is now made or contemplated, a Unit holder may
be required to pay $2.00 to the Trustee per certificate reissued or
transferred and to pay any governmental charge that may be imposed in
connection with each such transfer or exchange. For new certificates
issued to replace destroyed, stolen or lost certificates, the Unit
holder may be required to furnish indemnity satisfactory to the Trustee
and pay such expenses as the Trustee may incur. Mutilated certificates
must be surrendered to the Trustee for replacement.
How are Income and Principal Distributed?
The Trustee will distribute any net income (other than accreted
interest) received with respect to any of the Securities in the Trust on
or about the Distribution Dates to Unit holders of record on the
preceding Record Date. See "Summary of Essential Information" in Part
One of the Prospectus. Proceeds received from rebated Rule 12b-1 fees or
on the sale of any Securities in the Trust, to the extent not used to
meet redemptions of Units or pay expenses, will be distributed at least
annually on each Distribution Date to Unit holders of record on the
preceding Record Date. Income with respect to the original issue
discount on the Treasury Obligations in the Trust, will not be
distributed currently, although Unit holders will be subject to Federal
income tax as if a distribution had occurred. See "What is the Federal
Tax Status of Unit Holders?"
The Record Dates and Distribution Dates were established so as to occur
shortly after the record dates and the payment dates of Pilgrim Growth.
Pilgrim Growth normally pays quarterly dividends of its net investment
income. Net realized capital gains, if any, will be distributed at least
annually.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of any distribution made by
the Trust if the Trustee has not been furnished the Unit holder's tax
identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and
may be recovered by the Unit holder 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
Page 17
the Unit holder's tax identification number from the selling broker.
However, a Unit holder should examine his or her statements from the
Trustee to make sure that the Trustee has been provided a certified tax
identification number in order to avoid this possible "back-up
withholding." In the event the Trustee has not been previously provided
such number, one should be provided as soon as possible.
Within a reasonable time after the Trust is terminated, each Unit holder
will, upon surrender of his Units for redemption, receive: (i) the
number of shares of Pilgrim Growth attributable to his Units, which will
be distributed "in-kind" directly to his account, rather than redeemed,
(ii) a pro rata share of the amounts realized upon the disposition of
the Treasury Obligations and (iii) a pro rata share of any other assets
of the Trust, less expenses of the Trust, subject to the limitation that
Treasury Obligations may not be sold to pay for Trust expenses. Not less
than 60 days prior to the termination of the Trust, Unit holders will be
offered the option of having the proceeds from the disposition of the
Treasury Obligations in the Trust invested, at the net asset value on
the date such proceeds become available to the Trust, in additional
shares of Pilgrim Growth at net asset value. Such shares will not be
subject to a sales charge or a contingent deferred sales load but such
shares will incur Rule 12b-1 fees as do all other shares held directly
by investors in Pilgrim Growth. Unless a Unit holder indicates that he
or she wishes to reinvest such amounts, they will be paid in cash, as
indicated above. A Unit holder may, of course, at any time after the
shares are distributed to his or her account, instruct Pilgrim Growth to
redeem all or a portion of the shares in his or her account. Shares of
Pilgrim Growth, as more fully described in its prospectus, will be
redeemed at the then current net asset value. If within 180 days of the
termination of the Trust a registered owner of Units has not surrendered
the Units, the Trustee shall liquidate the shares of Pilgrim Growth held
for such owner and hold the funds to which such owner is entitled until
such Units are surrendered.
The Trustee will credit to the Income Account of the Trust any
dividends, distributions or rebated Rule 12b-1 fees received on the
Pilgrim Growth shares therein. All other receipts (e.g. return of
principal, etc.) are credited to the Principal Account of the Trust.
The Trustee may establish reserves (the "Reserve Account") within the
Trust for state and local taxes, if any, and any governmental charges
payable out of the Trust.
How Can Distributions to Unit Holders be Reinvested?
Each Unit holder of the Trust will have distributions of principal or
income automatically invested in Pilgrim Growth shares (if Units are
properly registered in the name of the Unit holder) deposited at such
share's net asset value next computed, unless he or she indicates at the
time of purchase, or subsequently notifies the Trustee in writing, that
he or she wishes to receive cash payments. Shares of Pilgrim Growth
obtained through reinvestment will not be subject to a sales charge or a
contingent deferred sales load, although such shares will incur Rule 12b-
1 fees as do all other shares held directly by investors in Pilgrim
Growth. Reinvestment by the Trust in Pilgrim Growth shares will normally
be made as of the payable date of the Trust after the Trustee deducts
therefrom the expenses of the Trust.
Additional information with respect to the investment objectives and the
management of Pilgrim Growth is contained in its prospectus, which can
be obtained from the Sponsor or any broker/dealer with a currently
effective sales agreement with Advest, Inc.
Unit holders who are receiving distributions in cash may elect to
participate in the automatic reinvestment feature by filing with the
Trustee an election to have such distributions reinvested without a
sales charge. Such election must be received by the Trustee at least ten
days prior to the Record Date applicable to any distribution in order to
be in effect for such Record Date. Any such election shall remain in
effect until a subsequent notice is received by the Trustee.
Exchange Privilege. THE EXCHANGE PRIVILEGE DOES NOT APPLY TO PILGRIM
GROWTH SHARES IN THE TRUST'S PORTFOLIO, ONLY TO A UNIT HOLDER'S
REINVESTMENT ACCOUNT.
A Unit Holder may exchange shares of the Fund for shares of the same
class of any other Pilgrim Fund, without paying any additional sales
charge, except that Class A shares of the Money Market Fund for which no
sales charge was paid must pay the applicable sales load on an exchange
into Class A shares of another Fund. In addition, Class T shares of any
Fund may be exchanged for Class B shares of the Money Market Fund.
Shares subject to a CDSC will continue to age from the date that the
original shares were purchased.
Page 18
The total value of shares being exchanged must at least equal the
minimum investment requirement of the Fund into which they are being
exchanged. Exchanges of shares are sales and may result in a gain or
loss for federal and state income tax purposes. There is no specific
limit on exchange frequency; however, the Fund is intended for long-term
investment and not as a short-term trading vehicle. The advisor may
prohibit excessive exchanges (more than four per year). The advisor also
may, on 60 days' prior notice, restrict the frequency of, otherwise
modify, or impose charges of up to $5.00 upon exchanges. The Fund may
change or cancel its exchange policies at any time, upon 60 days'
written notice to shareholders.
A Unit holder who wishes to make an exchange should first obtain and
review a current prospectus of the fund into which he or she wishes to
exchange. All exchanges shall be governed by the then current prospectus
of The Pilgrim Funds. Broker/dealers who process exchange orders on
behalf of their customers may charge a fee for their services. Such fee
may be avoided by making requests for exchange directly to the Transfer
Agent of Pilgrim Growth.
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 1,000 Units. Within a reasonable time
after the end of each calendar year, the Trustee will furnish to each
person who at any time during the calendar year was a Unit holder of the
Trust the following information in reasonable detail: (1) a summary of
transactions in the Trust for such year; (2) any Securities sold during
the year and the Securities held at the end of such year by the Trust;
(3) the redemption price per 1,000 Units 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.
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 corporate trust office in the City of New York of
the certificates representing the Units to be redeemed, or in the case
of uncertificated Units, delivery of a request for redemption, duly
endorsed or accompanied by proper instruments of transfer with signature
guaranteed as explained above (or by providing satisfactory indemnity,
as in connection with lost, stolen or destroyed certificates), and
payment of applicable governmental charges, if any. No redemption fee
will be charged. On the third business day following such tender the
Unit holder will be entitled to receive in cash an amount for each Unit
equal to the Redemption Price per 1,000 Units 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 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.
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 Principal Distributed?" In
the event the Trustee has not been previously provided such number, one
must be provided at the time redemption is requested.
Any amounts paid on redemption representing income shall be withdrawn
from the Income Account of the Trust to the extent that funds are
available for such purpose. All other amounts paid on redemption shall
be withdrawn from the Principal Account of the Trust.
The Trustee is empowered to sell Securities of the Trust in order to
make funds available for redemption. To the extent that Securities are
sold, the size and diversity of the Trust will be reduced. Such sales
may be required at a time when Securities would not otherwise be sold
and might result in lower prices than might otherwise be realized.
Shares of Pilgrim Growth will be sold to meet redemptions of Units
before Treasury Obligations, although Treasury Obligations may be sold
if the Trust is assured of retaining a sufficient principal amount of
Page 19
Treasury Obligations to provide funds upon maturity of the Trust at
least equal to $1.00 per Unit.
The Redemption Price per Unit (as well as the secondary market Public
Offering Price) will be determined on the basis of the bid price of the
Treasury Obligations and the net asset value of the Pilgrim Growth
shares in the Trust plus or minus cash, if any, in the Principal Account
of the Trust. The Redemption Price per 1,000 Units is the pro rata share
of each Unit determined by the Trustee by adding: (1) the cash on hand
in the Trust other than cash deposited in the Trust to purchase
Securities not applied to the purchase of such Securities; (2) the
aggregate value of the Securities (including "when issued" contracts, if
any) held in the Trust, as determined by the Evaluator on the basis of
bid prices of the Treasury Obligations and the net asset value of the
Pilgrim Growth shares next computed; and (3) dividends receivable on
Pilgrim Growth shares trading ex-dividend as of the date of computation
and amounts accrued, if any, for rebated Rule 12b-1 fees; and deducting
therefrom: (1) amounts representing any applicable taxes or governmental
charges payable out of the Trust; (2) an amount representing estimated
accrued expenses of the Trust, including but not limited to fees and
expenses of the Trustee (including legal and auditing fees), the
Evaluator, the Supervisor and counsel fees, if any; (3) cash held for
distribution to Unit holders of record of the Trust as of the business
day prior to the evaluation being made; and (4) other liabilities
incurred by the Trust; and finally dividing the results of such
computation by the number of Units of the Trust outstanding as of the
date thereof.
The right of redemption may be suspended and payment postponed for any
period during which the New York Stock Exchange is closed (other than
for customary weekend and holiday closings) or during which the
Securities and Exchange Commission determines that trading on that
Exchange is restricted or any emergency exists, as a result of which
disposal or evaluation of the Securities is not reasonably practicable,
or for such other periods as the Securities and Exchange Commission may
by order permit. Under certain extreme circumstances, the Sponsor may
apply to the Securities and Exchange Commission for an order permitting
a full or partial suspension of the right of Unit holders to redeem
their Units. The Trustee is not liable to any person in any way for any
loss or damage which may result from any such suspension or postponement.
How May Units be Purchased by the Sponsor?
The Trustee shall notify the Sponsor of any tender of Units for
redemption. If the Sponsor's bid in the secondary market at that time
equals or exceeds the Redemption Price per Unit, it may purchase such
Units by notifying the Trustee before 1:00 p.m. in the City of New York
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.
How May Securities be Removed from the Trust?
The portfolio of the Trust is not "managed" by the Sponsor or the
Trustee; their activities described herein are governed solely by the
provisions of the Indenture. The Indenture provides that the Sponsor may
(but need not) direct the Trustee to dispose of a Security in the
unlikely event that an issuer of a Security defaults in the payment of
dividends or interest or there exist certain other materially adverse
conditions described in the Indenture.
The Trustee may also sell Securities designated by the Sponsor, or if
not so directed, in its own discretion, for the purpose of redeeming
Units of the Trust tendered for redemption and the payment of expenses;
provided, however, that in the case of Securities sold to meet
redemption requests, Treasury Obligations may only be sold if the Trust
is assured of retaining a sufficient principal amount of Treasury
Obligations to provide funds upon maturity of the Trust at least equal
to $1.00 per Unit. Treasury Obligations may not be sold to meet Trust
expenses.
Page 20
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, The First Trust Special Situations Trust, The First Trust
Insured Corporate Trust, The First Trust of Insured Municipal Bonds and
The First Trust GNMA. First Trust introduced the first insured unit
investment trust in 1974 and to date more than $27 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, 1999, the total partners' capital of Nike Securities L.P.
was $19,881,035 (audited). This paragraph relates only to the Sponsor
and not to the Trust or to any series thereof. The information is
included herein only for the purpose of informing investors as to the
financial responsibility of the Sponsor and its ability to carry out its
contractual obligations. More detailed financial information will be
made available by the Sponsor upon request.
Code of Ethics. The Sponsor and each Trust have adopted a code of ethics
requiring the Sponsor's employees who have access to information on
Trust transactions to report personal securities transactions. The
purpose of the code is to avoid potential conflicts of interest and to
prevent fraud, deception or misconduct with respect to a Trust.
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 Securities. For information
relating to the responsibilities of the Trustee under the Indenture,
reference is made to the material set forth under "Rights of Unit
Holders."
The Trustee and any successor trustee may resign by executing an
instrument in writing and filing the same with the Sponsor and mailing a
copy of a notice of resignation to all Unit holders. Upon receipt of
such notice, the Sponsor is obligated to appoint a successor trustee
promptly. If the Trustee becomes incapable of acting or becomes bankrupt
or its affairs are taken over by public authorities, the Sponsor may
remove the Trustee and appoint a successor as provided in the Indenture.
If upon resignation of a trustee no successor has accepted the
appointment within 30 days after notification, the retiring trustee may
apply to a court of competent jurisdiction for the appointment of a
successor. The resignation or removal of a trustee becomes effective
only when the successor trustee accepts its appointment as such or when
a court of competent jurisdiction appoints a successor trustee.
Any corporation into which a Trustee may be merged or with which it may
be consolidated, or any corporation resulting from any merger or
consolidation to which a Trustee shall be a party, shall be the
successor Trustee. The Trustee must be a banking corporation organized
under the laws of the United States or any State and having at all times
an aggregate capital, surplus and undivided profits of not less than
$5,000,000.
Limitations on Liabilities of Sponsor and Trustee
The Sponsor and the Trustee shall be under no liability to Unit holders
for taking any action or for refraining from taking any action in good
faith pursuant to the Indenture, or for errors in judgment, but shall be
liable only for their own willful misfeasance, bad faith, gross
negligence (ordinary negligence in the case of the Trustee) or reckless
disregard of their obligations and duties. The Trustee shall not be
liable for depreciation or loss incurred by reason of the sale by the
Trustee of any of the Securities. In the event of the failure of the
Page 21
Sponsor to act under the Indenture, the Trustee may act thereunder and
shall not be liable for any action taken by it in good faith under the
Indenture.
The Trustee shall not be liable for any taxes or other governmental
charges imposed upon or in respect of the Securities or upon the
interest thereon or upon it as Trustee under the Indenture or upon or in
respect of the Trust which the Trustee may be required to pay under any
present or future law of the United States of America or of any other
taxing authority having jurisdiction. In addition, the Indenture
contains other customary provisions limiting the liability of the Trustee.
If the Sponsor shall fail to perform any of its duties under the
Indenture or become incapable of acting or become bankrupt or its
affairs are taken over by public authorities, then the Trustee may (a)
appoint a successor Sponsor at rates of compensation deemed by the
Trustee to be reasonable and not exceeding amounts prescribed by the
Securities and Exchange Commission, or (b) terminate the Indenture and
liquidate the Trust as provided herein, or (c) continue to act as
Trustee without terminating the Indenture.
Who is the Evaluator?
The Evaluator is First Trust Advisors L.P., an Illinois limited
partnership formed in 1991 and an affiliate of the Sponsor. The
Evaluator's address is 1001 Warrenville Road, Lisle, Illinois 60532. The
Evaluator may resign or may be removed by the Sponsor and the Trustee,
in which event the Sponsor and the Trustee are to use their best efforts
to appoint a satisfactory successor. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor
Evaluator. If upon resignation of the Evaluator no successor has
accepted appointment within 30 days after notice of resignation, the
Evaluator may apply to a court of competent jurisdiction for the
appointment of a successor.
The Trustee, Sponsor and Unit holders may rely on any evaluation
furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee, Sponsor or Unit holders for errors in
judgment. This provision shall not protect the Evaluator in any case of
willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties.
OTHER INFORMATION
How May the Indenture Be Amended or Terminated?
The Sponsor and the Trustee have the power to amend the Indenture
without the consent of any of the Unit holders when such an amendment is
(1) to cure any ambiguity or to correct or supplement any provision of
the Indenture which may be defective or inconsistent with any other
provision contained therein, or (2) to make such other provisions as
shall not adversely affect the interest of the Unit holders (as
determined in good faith by the Sponsor and the Trustee).
The Indenture provides that the Trust shall terminate upon the maturity,
redemption or other disposition of the last of the Treasury Obligations
held in the Trust but in no event beyond the Mandatory Termination Date
indicated under "Summary of Essential Information" in Part One of the
Prospectus. The Trust may be liquidated at any time by consent of 100%
of the Unit holders of the Trust or by the Trustee in the event that
Units of the Trust not yet sold aggregating more than 60% of the Units
of the Trust are tendered for redemption by the Underwriters, including
the Sponsor. If the Trust is liquidated because of the redemption of
unsold Units of the Trust by the Underwriters, the Sponsor will refund
to each purchaser of Units of the Trust the entire sales charge paid by
such purchaser. In the event of termination, written notice thereof will
be sent by the Trustee to all Unit holders of the Trust. Within a
reasonable period after termination, the Trustee will follow the
procedures set forth under "Rights of Unit Holders-How are Income and
Principal Distributed?"
Legal Opinions
The legality of the Units offered hereby and certain matters relating to
federal tax law have been passed upon by Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, as counsel for the Sponsor.
Carter, Ledyard & Milburn will act as counsel for the Trustee and as
special New York tax counsel for the Trust.
Page 22
Experts
The financial statements of the Trust appearing in Part One of the
Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
Page 23
CONTENTS:
The Advantage Growth and Treasury Securities Trust:
What is The Advantage Growth and Treasury
Securities Trust? 3
What are the Expenses and Charges? 3
What is the Federal Tax Status of Unit Holders? 4
Are Investments in the Trust Eligible
for Retirement Plans? 7
Portfolio:
What are Zero Coupon Treasuries? 7
What is Pilgrim Growth Opportunities Fund? 8
Selected per Share Data and Ratios for a
Pilgrim Growth Share Outstanding
throughout the Period 9
What are Pilgrim Growth's Investment
Objectives and Policies? 10
Who is the Investment Advisor of Pilgrim Growth? 14
What are Some Additional Considerations
for Investors? 15
Public Offering:
How is the Public Offering Price Determined? 15
How are Units Distributed? 16
What are the Sponsor's Profits? 16
Rights of Unit Holders:
How is Evidence of Ownership Issued
and Transferred? 17
How are Income and Principal Distributed? 17
How Can Distributions to Unit Holders
be Reinvested? 18
What Reports Will Unit Holders Receive? 19
How May Units be Redeemed? 19
How May Units be Purchased by the Sponsor? 20
How May Securities be Removed from the Trust? 20
Information as to Sponsor, Trustee and Evaluator:
Who is the Sponsor? 21
Who is the Trustee? 21
Limitations on Liabilities of Sponsor and Trustee 21
Who is the Evaluator? 22
Other Information:
How May the Indenture be Amended
or Terminated? 22
Legal Opinions 22
Experts 23
___________
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)
The Advantage Growth and Treasury Securities Trust
Prospectus
Part Two
July 31, 2000
First Trust(registered trademark)
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
1-630-241-4141
Trustee:
The Chase Manhattan Bank
4 New York Plaza, 6th floor
New York, New York 10004-2413
1-800-682-7520
THIS PART TWO MUST BE
ACCOMPANIED BY PART ONE.
PLEASE RETAIN THIS PROSPECTUS
FOR FUTURE REFERENCE
Page 24
CONTENTS OF POST-EFFECTIVE AMENDMENT
OF REGISTRATION STATEMENT
This Post-Effective Amendment of Registration Statement
comprises the following papers and documents:
The facing sheet
The prospectus
The signatures
The Consent of Independent Auditors
S-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant, Advantage Growth and Treasury Securities Trust,
Series 1, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment of its Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized
in the Village of Lisle and State of Illinois on July 31, 2000.
ADVANTAGE GROWTH AND TREASURY
SECURITIES TRUST, SERIES 1
(Registrant)
By NIKE SECURITIES L.P.
(Depositor)
By Robert M. Porcellino
Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment of Registration Statement has been
signed below by the following person in the capacity and on the
date indicated:
Signature Title* Date
David J. Allen Sole Director of )
Nike Securities )
Corporation, the )
General Partner ) July 31, 2000
of Nike Securities L.P. )
)Robert M. Porcellino
) Attorney-in-Fact**
* The title of the person named herein represents his capacity
in and relationship to Nike Securities L.P., Depositor.
** An executed copy of the related power of attorney was filed
with the Securities and Exchange Commission in connection
with the Amendment No. 1 to Form S-6 of The First Trust
Combined Series 258 (File No. 33-63483) and the same is
hereby incorporated herein by this reference.
S-2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated July 9, 2000 in this
Post-Effective Amendment to the Registration Statement and
related Prospectus of Advantage Growth and Treasury Securities
Trust dated July 26, 2000.
ERNST & YOUNG
Chicago, Illinois
July 25, 2000
